Ali H. Khalil

Although there is a significant risk, especially for conventional and static business models — both for business growth and sustainability — it is also a unique opportunity for growth and differentiation depending on the company readiness, agility of the business model and strategy, and country-level policies; mainly, how adept it is at incorporating new technology into its operations. 

In my view, the sources of risk are making incorrect technological bets, acquiring technology that is incompatible with the company’s internal resources, or choosing technology that is inadequately suited to the client’s needs. 

This can cause lengthy delays and exhaustion, which might result in failures. Companies often embark on an over-ambitious program without considering the internal upskilling required, especially when it comes to staff training programs to thoroughly prepare the teams. 

The adoption of artificial intelligence is eminent in our industry. Most asset managers have integrated Robo advisory, enabling them to scale up the business and enhance and standardize quality. As new disruptive technologies become more frequent, the challenge is constantly reviewing and realigning the strategy with such technologies to capture new and relevant trends. 

Companies with a solid and dynamic strategy with business models capable of adapting to and adopting new technologies are best fit to mitigate such risks.

Strategic alliances have been a cornerstone of Markaz’s business model and a critical strategic enabler since its founding 50 years ago. We continue to develop our core strengths in our field of expertise and leverage them through strategic alliances. This reinforces Markaz’s leading position across the three strategic pillars: product and services manufacturing, wealth management, and distribution and operating model, which are the backbone of our growth strategy. 

Collaborating with others allows us to undertake more significant transactions or execute complex mandates. It benefits the business as a whole because it will enable us to scale our operations, improve the quality of our offerings, and lower our execution and concentration risk. It also serves our operating model well, as strategic alliances are a great source of knowledge sharing, a means of importing global best practices into our operations, and a valuable benchmarking tool.

From a Product Manufacturing perspective, Markaz built legacy investment programs across various markets and asset classes over the years. This is demonstrated by Markaz’s leadership in its US and Europe real estate investment program, with decade-long partnerships with leading sector-focused developers and operators. In addition, we were regional pioneers in launching a private equity program more than 25 years ago by establishing strategic alliances with leading fund managers. 

Regarding Wealth Management and Distribution, we have partnerships with leading financial institutions to distribute our products to a broader client base. We continuously seek to grow these relationships and expand our client reach beyond Kuwait through the ‘strategic alliances’ approach. 

In investment banking, we closely collaborate with banks and other investment companies to underwrite and execute larger, more sophisticated equity and debt capital markets mandates. Recently, our Wealth Management division transitioned to an open platform. As a result of our collaboration with top-tier investment managers, we can now diversify our offering to cover different asset classes, such as private equities and private debt.

As Kuwait relies more on private-public sector collaboration for soft and hard infrastructure projects, the financial and technical capabilities required will be sizeable and beyond the capabilities of a single entity. We will see broader strategic alliances between developers, financial institutions, and technical partners locally and internationally, ultimately serving the overall growth of Kuwait as a nation.

I firmly believe they go hand in hand. Adopting new technology will only succeed if the workforce is appropriately trained to work with it. In my years, I have witnessed many occasions where implementing and working with new technologies failed or were endlessly delayed because the assigned staff needed to be properly trained. It is important to invest in new technologies and equally important to invest in staff; otherwise, the overall value of the investment made will be substantially impaired. Adopting new technologies within a healthy and modern operational framework is a key differentiator in making such a technology a growth enabler rather than a risk.

Taking ChatGPT as an example, it can be considered as a threat or an opportunity, depending on whether the individual develops the right skills to best leverage the tool. 

I expect our expenditure on new technology to become the center of our attention as our industries undergo substantial development. We are in a race for digitization across all sectors. 

Time is of the essence, and it would be more effective to recruit fresh talents who are trained and capable of being immediately operational. However, this may not always be possible in a tight talent market, and hence staff development becomes the safer and more favored route.

Today, leading businesses in Kuwait place more emphasis on ESG, particularly following the Kuwait National Development Plan (KNDP) themes and the ESG guidelines announced by Boursa Kuwait. Additionally, we have seen a significant step by the Kuwait Investment Authority (KIA) in adhering to being 100% compliant with the ESG standards. This trend encourages companies to adopt ESG values conducive to a higher quality of work while being socially and environmentally responsible.

ESG in Kuwait is evolving and becoming part of boardroom discussions, with board members motivating corporates to embed ESG into their goals and practices. ESG is about the long-term survival of individuals, companies, societies, economies and countries. Accordingly, at Markaz, integrating ESG principles into investment decisions improves risk-adjusted returns over the course of an economic cycle. ESG, in our opinion, is essential to fostering customer loyalty and marketplace excellence. Integrating social and environmental concerns in business operations and interactions with stakeholders enables us to balance between adhering to ESG standards and fulfilling the needs of clients and stakeholders. 

We maintain a robust corporate governance framework by applying ESG principles across our institution, and we are confident of the advantages such an effort will bring to Markaz and society at large. 

Our CSR strategy at Markaz focuses on three key pillars: building human capacity, aligning our business environment with the principles of sustainable development, and promoting good governance in the business environment.

I believe that digital transformation is not merely a buzzword; but a fundamental conviction that a company needs to automate its processes and client experience to provide high-quality services efficiently and accurately. However, the main issue is choosing the right digitization platforms, fast enough to adopt, and estimating the time to obsolescence.

Moreover, digitization requires high upfront costs and capex and adversely impacts margins. It is also imperative to realize that digital transformation is not a destination but an ongoing journey and should not be looked at as a one-off investment. 

A key approach is to break this journey down into smaller value-additive projects, properly prioritized while considering the nature of the transformation project, the success and efficiency of implementation, and the readiness of the organization to accept the change.

Businesses may find it difficult to assess the ROI considering the lag between the costs incurred and the benefits associated with it.  For the implementation to succeed, we should adequately assess the project‘s requirements, goals, and associated risks by formulating a clear and detailed road map from the onset. 

Moreover, digital transformation should certainly not be a response to current economic conditions but rather viewed as an integral part of the long-term strategy to ensure competitiveness and resilience.