Risk And Reward: How The UAE's Smart Entrepreneurs Are Putting Their Money To Work (Even Amid A Crisis) A protracted period of unprecedented market instability did very little to dampen the appetites of those willing to hold their nerve, and stay focused on the long-term goal.

By Mufazzal Kajiji

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It may seem counterintuitive, but instead of putting their money under the mattress, shrewd business owners, entrepreneurs, and seasoned investors maintained a sharp focus on putting their assets to work during COVID-19. A protracted period of unprecedented market instability did very little to dampen the appetites of those willing to hold their nerve, and stay focused on the long-term goal.

One of the key shifts has been a widespread willingness to adapt to digital wealth management. In business, many owners have moved entirely to digital banking, and are unlikely to return to bricks and mortar habits. Digital platforms have freed up the entrepreneur to work remotely and to manage operations independently– and many used the restrictions of lockdowns to put their working capital to good use. New operational technologies, automated inventory management, and cloud computing solutions have been many entrepreneurs' capital expense of choice.

These investments reflect a readiness to adapt and a willingness to change– key characteristics for the UAE's most successful entrepreneurs, and a clear trend amongst the new generation of leaders of independent or family-owned businesses. More than ever, as GCC companies hand over the reins to the next generation, we are seeing a new style of leadership and a hunger for change.

The most successful are those that seek new ideas to diversify, who are more open minded, and much more willing to try a new approach. A great many of the new generation also tend to be better informed about the wider socio-economic environment, and the issues impacting their wealth and their business' prospects.

This new mindset reflects a curiosity to investigate new asset classes, particularly those in the sphere of environment, society, and governance (ESG). ESG has grown as a proportion of portfolios over recent years– a shrewd attitude that reflects a desire to reap the rewards of sustainable business practices and a growing concern amongst younger entrepreneurs of their own impact on the natural world and our communities.

Ultimately, we know that sustainable businesses are those that act responsibly. Entrepreneurs with a low-to-medium risk appetite may find long-term stability in ESG. However, despite the dynamics of COVID-19, very few entrepreneurs have changed their risk appetite. Volumes may have fallen– but the risk-reward paradigm remains relatively unchanged.

Those that have historically taken a higher-risk approach have continued to do so, and, despite the challenges of COVID-19, there has been little change in spending habits. Those that have historically been drawn to high-end real estate investments and other high-end assets have continued to focus on these irrespective of the immediate dynamics.

Their success comes from having a very clear goal. It is clear that those entrepreneurs that are very organized in terms of where they want to go, and they tend to be very clearly aware of their risk profile. They tend to stick to a plan, they are more focused on the long-term, and they are also more stable, less likely to shift, and less volatile.

There has also been very little change in attitudes towards savings, which is not surprising in an era of historically low base rates across most markets. Rather than park capital in crisis, entrepreneurs have a very strong desire to see that their capital is gainfully employed: smart entrepreneurs in the Gulf have continued to put their money to work.

Cutting through the noise

One of the key contributors to growth is equity markets, particularly in companies that are focused on information technology, or those in infrastructure development, digital, and technology indices, where growth has been stable and sustained. However, there is concern related to large fintech valuations. This is where the role of the wealth manager comes in.

Despite the clear readiness to shift towards the sole of hybrid use of digital platforms, the dynamics of social media and a 24-hour rolling news cycle makes it harder than ever for entrepreneurs to cut through to what is really happening on the ground. Wealth managers are helping business owners to understand how to feel and act in the age of instant digital information.

Fake news, geopolitical spats between the world's superpowers, and emerging trade wars have served to muddy the waters, making it much more difficult for entrepreneurs and investors to gain a grip on what is really happening across markets and asset classes. In these times of information overload, it's imperative that we find solutions to curate the right information for the right investor. In other words, a combination of technology and a trusted advisor can help entrepreneurs avoid knee-jerk reactions and remain focused on what really matters.

For GCC investors, this means maintaining a deep understanding of how asset classes are acting and responding to the events of the day. It is clear that –despite COVID-19 – the region continues to provide accessibility to high-end, luxury, highly desirable, aspirational assets. These are very often underpinned by robust governance and governmental planning that helps investors to navigate the ebb and flow of key sectors like real estate development. Strong, steady economic management from GCC governments, alongside all-important infrastructure spending, provides a stable platform for regional asset growth.

As we look ahead, it is likely that entrepreneurs will shift their spending habits in one way: by increasing their appetites. But this will not be at the expense of risk. Artificial intelligence and other digital solutions will inevitably play a growing role in trading and high-frequency algorithms, but the role of the advisor is more important than ever and here to stay.

Growing wealth still requires the age-old principles of knowing your long-term objectives, securing relevant and curated data from trusted advisors, and staying invested for the long-haul. For the immediate term, entrepreneurs are likely to continue to spend and invest in operational enhancements and the digital transformation. From there, all signs point towards higher volumes and a return to even greater growth.

Related: Go Big Or Go Home: More Middle Eastern Boldness Is Needed To Break "The Scale-Up Ceiling"

Mufazzal Kajiji

Chief Executive Officer, Zurich International Life

Mufazzal Kajiji is Chief Executive Officer of Zurich International Life (Zurich), part of strategy in the Middle East region, aimed at diversifying the existing business verticals and delivering an exceptional customer experience. A banking and finance expert with over 25 years of experience, Mufazzal has held several leadership positions in wealth management and retail banking.

Prior to joining Zurich in June 2022, Mufazzal was Head of Mashreq Gold, Mashreq Bank’s wealth management practice. Before that, he was Head of Retail Banking at Noor Bank where he was in charge of the bank’s retail banking franchise, including the wealth management business, branch network, retail products and segments as well as the marketing function. Mufazzal also previously served as Executive Vice President and Global Head of Wealth Management and Affluent Banking at First Gulf Bank and held other leadership positions with multinationals such as Citibank, Standard Chartered and Alliance Capital (Bernstein).

He holds an MBA from the University of Mumbai, India, a Chartered Financial Analyst (CFA) Certification, a Financial Risk Manager Certification from the Global Association of Risk Professionals (GARP) and Chartered Alternative Investment Analyst (CAIA) Certificate designation. With a keen interest in the environment and climate change impact, he is currently pursuing his certification in climate risk.

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