At the height of global downturn, Flip Media, the digital communications agency, lost one of its biggest customers.
Not only was it without a major client, but money was also due.
Stringent corporate governance framework and financial discipline helped keep the agency afloat.
Flip Media, which was acquired by Publicis Groupe in February, is audited annually by KPMG. The company has a succession plan in place, and keeps a close eye on cash flow with day to day financial planning, says Yousef Tuqan Tuqan, the chief executive of Flip Media, who joined the company in 2005, two years after it was formed.
Many companies in the Middle East and North Africa (Mena) region are at an early stage of implementing corporate governance codes and the practice is picking up. Micro and small to medium enterprises (SMEs), in particular, could benefit from implementing certain codes to help access funds such as bank loans and private equity investments, experts say.
Banks often charge higher interest rates on loans to SMEs because of their high-risk factor.
A 2010 report from the Organisation for Economic Co-operation and Development (OECD) about corporate governance framework in Mena pointed out several reform priorities, including explicit board-member duties, especially in terms of shareholder protection, as well as the ability of directors to obtain timely and accurate information. The report also noted the importance of creating guidelines to address the skills of board members among companies in the GCC.
The last financial crisis has placed a spotlight on the importance of effective corporate governance, and with SMEs comprising 95 per cent of Dubai enterprises, it is even more important for this sector, experts say. About 45 per cent of mature SMEs in Dubai do not keep proper accounting books, says Alexander Williams, the director of strategy and policy at Dubai SME.
Dubai SME is an agency under the emirate's Department of Economic Development, and it has created voluntary corporate governance codes that businesses here could adopt.
"If SMEs do not to grow, economy doesn't grow," Mr Williams said at a recent panel discussion in Dubai about corporate governance.
While critics of corporate governance argue there are high compliance costs and poor regulation, proponents say it helps companies obtain funding and provides other advantages as well.
Corporate governance builds trust and makes sure a company is well governed, says Nick Nadal, director of the Hawkamah Institute for Corporate Governance in Dubai. "You need controls," he adds.
"If you hire executives, you have to make sure that they are doing their job. You need to have checks and balance, to make sure no one has unfettered powers over the decision making of the company," says Mr Nadal.
To implement corporate governance codes, an SME needs to create a corporate framework that will share responsibility, hold its employees accountable and be fair to stakeholders and shareholders. This can entail examining internal controls, communicating financial reporting and setting up an advisory board, among other measures.
Mr Nadal suggested regulatory action to give codes more teeth, including fines for non-complying companies and awards for those that do adhere to the codes.
For Flip Media, incorporating a corporate governance framework was voluntary. But taking action helped the Dubai business grow from a two-person firm in 2004 to a 150-member operation today, Mr Tuqan says.
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