Industry experts at Dubai Computer Group’s business symposium and networking event shared insights on the burgeoning issues in the regional channel.
At its recently held business symposium and networking evening at JW Marriot Marquis, Dubai Computer Group (DCG) brought together key players from banking and insurance sectors to address challenges in the channel.
DCG President, Shailendra Rughwani said, “The networking event is increasingly gaining popularity within members and non-members alike. We expect it to become one of the most important events for people in the IT industry to attend. We invite prominent personalities from different sectors to interact with our members to enhance business for the computer group.”
The 100-plus attendees had an opportunity to raise concerns around issues of trade finance, credit risk, compliance, credit re-structuring, credit insurance management, project financing and converging organisation governance.
Some of the most discussed issues were around credit management, profitability, and resellers fleeing the market leaving behind huge debts.
Mahan Bolourchi, Regional Head Financial Risks Middle East, Howden Dubai, said it is critical for resellers to have the right insurer as their partner and sound internal credit management.
He added, “However the current developments within this region have prompted the insurers as well as the distributers to review how they approve and extend credit facilities.”
Bolourchi believes going forward, any distributer who looks for healthy profitability need the right set up and infrastructure such as an excellent procurement for sourcing from the right suppliers and a committed insurer who is mitigating the risk of potential losses.
He added, “A superb CFO who is generating the required cash flow and working capital with a modest interest rate is also a must.”
A panel member at the event, Raghuvir Mehra, Managing Director, Credit and Assets, Retail Banking, RAK Bank, advised partners to operate only in their area of expertise to remain profitable.
He said, “Many resellers get into multiple product trading and spread their cash flows into areas that are only used as additional income or investments. They need to have their financial model reviewed regularly, whether through a bank or through their accountants. “Often, we have seen that the owners have little idea about their cash flows and get trapped into a crunch environment.”
Mehra also underlined supplier identification and management as another big area that customers tend to ignore. “Having few suppliers but with good credentials is definitely key to a vibrant cash flow model thereby reducing chances of imbalance in payments. Low operational costs are also key for maximising profits – in a challenging market you need to think smart and execute fast,” he added.
According to Mehra, to prevent resellers fleeing the market comes down to managing their cash flows appropriately. “That is so vital,” he said. “Managing suppliers, debt and getting your business model and income statements reviewed regularly can prevent overburdening and mismanagement of funds. Customers should approach banks as their partners, banks have invested money in them they should take advice from banks and not get overleveraged and borrow to the extent they can’t manage.”
He added that in adverse circumstances when the business is going through a low phase, resellers should approach banks to look at their business model and ask for help, rather than exiting the country unlawfully.
“Early warnings are always aspects that a businessman can sense. That is the time to approach banks, not when they are already in heavy debts and there’s no way out for help. The mantra is to manage your cash flows effectively, although it sounds quite simple, it is not.”
When a reseller flees the market, it could be either of the two – intended fraud or genuine debts and tight cash liquidity.
Bolourchi said, “In the past we have seen several such cases within SMEs and not all were related to a fraudulent activity. Tight cash liquidity is the major issue which lead the firms into serious cash flow issues. Banks are not lending and a typical insolvency is that last act.
“Thankfully the insolvency law will be implemented soon and this will change the market behaviours significantly. But this will take time. In the meanwhile, one needs to monitor the market closely. It is important to have the right mix of finance and insurance partners who are advising you with whom to deal with.”
Although over the course of the coming year, the risks will remain as there will be more global, political and business challenges affecting the regional market directly, it is up to the players to stay vigilant.
The association’s General Secretary Dharmendra Sawlani said, “DCG Business Symposium and Networking is the third event in our series on the concept of ‘Bridging Business – Connecting Ideas’. The objective is to pass on to the industry via this event that for us to succeed in this rapidly changing world of technology, we have little choice but to evolve and innovate. These events are opportunities for our members to brainstorm and tackle impediments to their growth and progress.”
The Business Symposium was supported by Huawei Enterprise in partnership with FDC Provalue and New Trend Computer Networks.
