- SMEs may face challenges of scale but, as the backbone of economies, they are well positioned to show the way forward in
sustainable and responsible practices.
- COVID-19 has unveiled the importance of relationships not only to do business but also to focus on how businesses can create
impact beyond maximising profits.
- Digital transformation amongst businesses across all industries is the only way forward to survive this pandemic.
Survival in unprecedented times: When asked by Daud Vicary as to how Small and Medium-sized Enterprises (SMEs) should navigate through these unprecedented times, Stella Cox’s advice was to focus on the necessities of doing business and maintaining undisrupted operations to ensure that service provision to clients and customers is as consistent as possible. Added to this, Cox discussed the importance of maintaining adequate liquidity and short term working capital within a business, ensuring minimal supply chain disruptions to customers and providing for maximum staff engagement with the strategic delivery of impact by a business to facilitate change within the organisation.
Outside of the organisational factors, Cox stated that top down policy formation and input from governments and regulators to bring focus and consistency to developing sustainable and responsible financing frameworks were also crucial. Touching on the concepts of value-based intermediation (VBI), sustainable development goals (SDGs) and the Principles for Responsible Investment (PRI), Cox noted the importance of developing methodology to measure the impact of an organisation’s activities in order to assess value creation, pointing out that a sole focus on profit maximisation for shareholders was increasingly misaligned with momentum to create impact within today’s business and economic environments, although she stated that the drivers and speed of change were more apparent in some industry sectors and geographies than others. The importance of building on relationships and value networks within industries was also listed as a key factor facilitating sustainability given the challenges imposed upon pandemic-driven economies.
Cox touched on the ways in which DDCAP defines sustainable and responsible financing, stating that it was in the way that the Company chose to develop and operate its business, not only in terms of delivery but also with regards to creating a supporting infrastructure from which to evolve the products and services, too. A key focus area of the socially responsible investing (SRI) agenda according to Cox, was in upholding the values and principles upon which the Company has been built, planning for the long-term and notwithstanding the different market cycles it would encounter.
Leading by example: In response to Vicary’s request for an introductory note on the nature of DDCAP’s operations and its evolution over more than two decades, Cox explained how DDCAP has moved from being a more traditional Islamic financial sector intermediary, providing asset facilitation services for a broad range of Shariah-compliant financial products in both the primary and secondary markets, to the development of DDCAP’s proprietary financial systems solutions and, particularly, its automated trading and post trade services platform ETHOS AFP™. More recently, as the business keeps diversifying, DDCAP has ventured into direct investment in halal economy businesses with unique and exceptional fintech strategies and a focus on sustainable and responsible business practices.
Cox stated that over two decades in the industry has led to sound organic growth for DDCAP, supporting the company’s strategic intention to embrace sustainable and responsible approaches in its business and transactions with clients. According to Cox, this is the way forward as market intermediaries in the Islamic finance space, regardless of size and capacity, need to seek strategies that go beyond merely the delivery of financial results to stakeholders. Using DDCAP as an example, Cox explained how internal developments allowed for the establishment of an internal Shariah supervisory Board in 2013, working closely and co-operatively with DDCAP’s clients’ Shariah supervisors as well as the firm’s executive. Thereafter this progressed to the development of internal policy and strategic planning for DDCAP’s broader sustainable and responsible actions, with an increased focus on social and environmental outcomes. Cox noted that what started out over ten years ago as an acknowledgement of evolving global regulatory and governance requirements, in the aftermath of the global financial crisis, has gradually been remodelled by DDCAP so that it has become embedded in the culture of the organisation and now forms a complete and strategic pillar encompassing its entire business and operational infrastructure.
DDCAP has developed a diverse client base across a broad range of geographies and this according to Cox, has allowed DDCAP to create its targeted strategies around the SRI agenda and embed and execute these ideas across the group in a short time period. In particular, within a span of two years, DDCAP was able to incorporate sustainable and responsible action-focused language into its client agreements, integrate sustainability screening more widely across the ETHOS AFP™, as well as set up a more robust asset-review process, demonstrating the agility and responsiveness of an SME that could present more of a challenge to larger organisations. Cox also highlighted the importance of change agents within the organisation to permeate and bring change strategies to life, focusing on SMEs as market-movers and influencers through collaborations, value demonstration and thought leadership. Speaking on Islamic finance, Cox noted that the foundations of Shariah compliant financing have been built on an ethos of faith and responsible financing, impact investing and sustainability, which in her view are crucial areas that the wider banking and finance industry today cannot ignore.
Digital adoption in Business: Vicary then went on to discuss the importance of technological investments as a tool to managing crises and navigating through challenging business environments. Cox was conclusive in her views that the power of technology is what has saved many smaller and newer businesses operating within different markets and economies during the on-going COVID-19 pandemic. That has again proven the potential agility of an SME and the potential for rapid adaptability to change, simultaneously highlighting inefficiencies in certain traditional and more established offerings.
When asked about any specific technologies that were deemed essential or important in the current economic context, Cox highlighted that it was important to ensure that whatever technology businesses choose, it needs to fit their business and operating environments, and is geared towards what clients and customers wanted and thereby able to bring or support scale. There was no purpose in an SME embracing technologies that were unresponsive to demand or for which there was limited, proven appetite unless the support and supply of patient capital was available to do so.
In concluding remarks, Cox noted that digital adoption was crucial for the survival of the banking industry and that by and large, there seemed to be a new-found understanding, awareness and appreciation of how digital transformation amongst businesses across all industries was the only way forward as well as the priority with which it should be addressed.
Published by – Islamicmarkets.com