Business | General
Corporate failure in Dubai likely
Dubai is in line for a major corporate failure in the next three years, according to some of the emirate's top business people.
- By Robert Ditcham, Staff Reporter
- Published: 00:00 March 13, 2007
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- Experts say expanding wealth and "lagging" internal auditing controls make them prone to factors which brought down Enron and Barings Bank.
Dubai: Dubai is in line for a major corporate failure in the next three years, according to some of the emirate's top business people.
Officials at Dubai Holding, Emirates, Majid Al Futtaim and HSBC said companies' breakneck growth, expanding wealth and "lagging" internal auditing controls make them prone to factors which brought down Enron and Barings Bank.
Both companies were crippled by either weak corporate governance or a desire to bend the rules to achieve business success, according to the people at the centre of each scandal.
"The atmosphere here is right for such an event to happen. Dubai is growing too fast and too big," said Basel Hantouli, head of internal audit at Dubai-based Majid Al Futtaim.
"There is general consent that fraud is acceptable and it's okay to pay commission on every deal. It's part of doing business here and is a mindset we must change."
Neeraj Kumar, senior vice-president for internal audit at Emirates Group, said Dubai companies' aim to succeed at all costs makes them susceptible to taking dangerous risks.
Nick Leeson, the rogue trader whose illegal trading brought down UK merchant bank Barings, said "fear of failure" encouraged him to gamble huge amounts on Singapore's futures exchange to cover his losses. "A culture or regime that does not tolerate mistakes is very dangerous."
Drawing comparisons between Dubai and the rapid growth of Singapore in the mid-1990s, Leeson urged local businesses to invest heavily in their auditing infrastructure.
According to speakers at this week's Gulf Regional Audit Conference, Dubai companies are well aware of the need for strong auditing controls.
"Dubai companies are on the right track, but many causes of corporate failure are beyond their control, such as market forces. However I think the economy is solid enough to absorb such events," said Abdul Rahman Al Hareb, chief of group audit and risk management at Dubai Holding.
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