The lessons and challenges of 2020: Saudi Arabia

What changed in your business and what stayed the same this year? What was the impact of the pandemic and/or the economic slowdown?

The fundamentals have remained the same in our business. We continue to serve corporates in their efforts to raise capital – the needs here have clearly increased – and support Investors in their search for investment opportunities. What 2020 brought to us though, is a different perspective on how we can deliver these services. We have experienced, in concrete terms, our ability to operate remotely a substantial part of our business without incurring any disruption. This shows the resilience of our operating model as well as the efficiency of the infrastructure built over the last decade. The pandemic led 90% of the company population to work from home without impact on the plan of activity of the company. Markets have opened and operated in normal conditions every single day reassuring investors and issuers of the proper functioning of capital markets.

What has the pandemic taught you that you didn’t know pre-Covid 19? What’s the most lasting change that 2020 has brought?

One of the lessons learned from the pandemic is that investor behaviour has changed; although people have reduced their spending during the crisis and the economic slowdown has significantly impacted the turnover and revenues of many businesses, retail investors have actually paid more attention and spent more time managing their savings. Not only in the Kingdom of Saudi Arabia (KSA) or in the Middle East, but in major economies in general, retail investors have made a significant come back. This has been translated in increased and sustained retail volumes on the equity markets. Not only were more savings possible, but equally more time was available for investors to explore the opportunities, and to make choices and decisions.

I do also observe a recent acceleration in the adoption of ESG investment strategies; the increased consciousness with the Covid-19 of environmental issues as well as the economic and social damage that could result in the longer run, have pushed further the ESG agenda with multiple initiatives from index providers, institutional investors and exchanges. I believe this is a long-lasting change that we need to embrace and support.

What was your most important project this year (regulatory or otherwise) and did it change due to Covid-19?

We had a number of significant projects 2020 plan and we managed to deliver them. The two most important were the launch of a derivatives market and the establishment of a CCP. During the Covid-19 lockdown period, we managed to obtain Capital Market Authority approval for a complete new framework of regulation related to the clearing house as well as the derivatives market, following a public consultation that triggered significant comments as these activities are new in the Kingdom and the region. We launched an index future contract – MSCI-Tadawul 30 (MT30), soon to be followed by single stock futures and options in 2021.  

Covid-19 required us to postpone the launch by a couple of months to give more time for investor education and awareness, as well as allow brokers to properly on-board their customers after performing a thorough know-your-customer (KYC). Many other projects have progressed according to plans and some have been delivered on time as they did not require any physical interaction with customers.

What was the biggest challenge for the leadership team? 

The biggest challenge for the leadership team in such situations is to find the right – virtual – attitude to keep the business and operational teams motivated. In a normal environment, leading by example, by attitude, is much easier as individuals can physically see and observe leadership behaviour; that becomes more crucial but also more difficult when the only available tool is the phone or the video conferencing. Reaching out to the individual team member and being inclusive is paramount in such cases. Another challenge that came up during this specific period of “work from home” is the difficulty to differentiate between team members on holiday and team members working from home. A physical presence in office used to be associated with being at work and being absent meaning being on holiday. This distinction was no longer available.

What were your (personal) best and worst moments of 2020?

I wouldn’t say they were “worst” moments, but I admit to having experienced critical moments during 2020 where, as a CEO, I had to make decisions about people, their working environment and the risks people would take to operate the exchange as a whole. Defining the core team members to operate the business implies that you are taking conscious decisions of selecting and exposing some of your team members to an unknown risk – at the beginning of 2020 there was a lot of speculation about how Covid 19 was transmitted as well as the potential therapies available. From a human perspective these are crucial moments to face and tough decisions have to be made. The matter is much clearer now and appropriate measures have been implemented.

The best moments are when you realise that your management and team members are anticipating events and going the extra mile to make sure everything is operating smoothly. It took less than 48 hours to get all 450 employees of the company connected and able to work remotely, and every individual access checked. It is a moment of pride also to observe the solidarity and leadership of management taking care of their teams. 

What do you see as the key themes for 2021?

From a macroeconomic point of view, I definitely see 2021 as the year of recovery, with a few more Covid 19 waves but with lesser impact on the global economy. The two major sectors that performed well during this crisis period are the tech sector and the financial sector, and this will very likely continue over the coming period.

The key issues and challenges we are going to face as an industry will be around our ability to fund the recovery and our share of this funding. Some businesses have and will go bankrupt due to this crisis, some were meant to disappear anyhow because of a weak business case, while others were viable businesses that simply faced a unique economic situation. Private equity, governments and the banking sector are our competitors in this recovery phase and we have to make sure the role of exchanges as capital-raising platforms is recognised and promoted. The winners will be those able to quickly and efficiently fund viable businesses.