By Andy Sambidge
New report says downturn has posed key challenges but firms are responding.
The majority of companies across all sectors of the Kuwaiti economy have shown resilience to the effects of the global financial crisis and are beginning to revisit their performance goals, Ernst & Young has said.
While the economic downturn has posed key challenges and created a hugely changed business landscape, companies are responding, senior partners at Ernst & Young, Kuwait added.
Their assessment was based on interactions with and regular feedback from leading local businesses, the company said in a statement.
Launching Ernst & Young's global study Lessons from Change, Waleed Al Osaimi, office managing partner, Kuwait, said: "The global economic downturn has had strategic implications for the regional economies and for businesses based in Kuwait.
"One of the key lessons learnt is the need for renewed focus on core competencies, stakeholder confidence and corporate governance. From an operations point of view, companies recognise the continued importance of cash during this period of low liquidity.
"Tighter working capital management, alternative or new sources of capital and bringing in new strategic investors are being pursued."
The report found that companies based in Kuwait were working towards improving responsiveness, flexibility of operations and staff productivity, as well as optimising business support functions to drive down cost, enhance efficiency and adapt quickly to changes.
"Companies are restructuring their finances to reduce cost of capital and renegotiate debt. In addition, active communications with creditors to improve long-term funding and realigning the balance between debt and equity are other key areas of focus in Kuwait," Al Osaimi added.
"Companies still need to take concrete steps to improve corporate governance to a higher level and improve frequency of corporate communication."
The report said developing and building management talent and seeking strategic hires to fill skill gaps were areas that businesses still needed to address, in addition to retaining existing talent.
Waleed lauded the efforts of the oil sector, which has created a leadership development centre to assess and address leadership requirements for the future.
"Compensation programs, especially for senior executives, need to be transparent. Therefore, active board level remuneration committees need to be formed to ensure independence and governance. However, knee-jerk pay freezes can demotivate and disengage employees," he added.