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| 18 January, 2018

Corporate governance law to attract more investors to Saudi market -- KPMG

Saudi CMA’s new regulations of corporate governance are designed to protect the rights of shareholders and stakeholders

Arabic business people working in office

Arabic business people working in office

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RIYADH — Amid all the fast-paced procedures taken by the Kingdom’s different authorities to create an attractive atmosphere for investors, one of these steps taken was the issuance of the new “corporate governance regulations” by the CMA in April 2017 and is legally binding on listed companies. To shed some light on that topic and to know more about the significant implications on the Saudi economic growth and future expectations, Saudi Gazette interviewed three representatives from KPMG.

Kholoud Mousa, a partner in KPMG in Saudi Arabia, said, “Corporate governance are rules designed to guide the company on how to regulate the various relationships between the Board, executive directors, shareholders and stakeholders. It supports the decision-making process and adds transparency and credibility to the company.

The CMA’s new regulations of corporate governance are designed to protect the rights of shareholders and stakeholders and achieving fairness, competitiveness and transparency on the exchange market and the business environment.”

She added that there is generally a lack of awareness among the companies regarding the significance of corporate governance practices and the new CMA requirements. For example the Board of a listed company should report on new requirements such as the internal control effectiveness, risk management, and going concern.

“KPMG Saudi Arabia conducted a CEO outlook survey in 2017 according to which “85% of the CEOs in the Saudi Arabia and the GCC states say that they expect high level of investment towards governance and risk management. Managing risks and complying with regulations will underpin the long term growth of the company,” she stressed.

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Shahid, senior director and leader for corporate governance and risk compliance services at KPMG in Saudi Arabia, said, “In today’s economic climate, risk management and corporate governance are concepts that, for a host of reasons, are high on the priority of boardrooms in private and public organizations alike across the world. Effective corporate governance can determine the sustainability of any listed company. That will definitely carry significantly positive implications on the Saudi exchange market.

“Though the Vision 2030 reforms are wide-ranging and carry significant positive implications for the Saudi economy in the longer run, they have also sped up the process of opening the Saudi market to international investors, which require companies to comply with local and global regulations. The CMA governance regulations are entirely consistent with the OECD principles and therefore it represents the best practice as globally recognized.

“We have seen different practices globally in different countries such as: the US, UK, and Germany and it is very similar to what we are doing. Surely we are still in the beginning stages but we are focusing more about compliance and we want to go beyond compliance by applying and implementing effective corporate governance which has many elements,” he told Saudi Gazette.

“Our role now is to raise awareness about corporate governance and educate the board of directors’ executive management, audit committee members to be aware of these regulations and the best practices locally and internationally because we know that it will affect the value and sustainability of the company,” Kholoud emphasized.

Dr. Jan Grandiger, partner – governance & assurance services at KPMG Germany, said that corporate governance rules are very significant for the company and for business environment in any country. Corporate governance practices can boost the company's reputation and maintain stakeholders’ confidence. It will ensure a company’s success and long term economic growth.”

“In the long term, corporate governance provides proper inducement to the company’s stockholders: there will be more people who want to work for the company, there will also be more people wanting to use their services or products because they TRUST the company. There will be more investors who want to invest in these companies. There will be more opportunities of expanding in different markets and products,” he said.

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