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Corporate Governance as a Strategic Advantage

Date: 28 Dec 2017
Author: Annan, Rayan
  Governance and Integrity Assessment (GIA) Case Study   Rayan Annan is a driven entrepreneur who came to Lebanon and saw potential in the trading industry, so he ambitiously started working in an effort to help it grow.   His challenge has been different. With the creation of the CMA and ETP regulations along with regulatory pressures, Rayan had to grow his balance sheet by diversifying his service offerings to his existing clients, as well as to attract new investors.   His implementation of corporate governance started at a time where it was required to provide oversight in order to sustain an existing business in a very challenging and changing regulatory environment, locally and regionally, while at the same time answering to customers and prospects’ needs for new services.   *The below case study was written by Mr. Rayan Annan, CEO of ROYAL Forex Trading, and does not reflect the opinions of Capital Concept sal.   Over a decade ago Rayan Annan’s entrepreneurial journey began with the launch of ROYAL Forex Trading (RFXT) in the U.S. as an online trading solution. The company attained an impressive track record as an online financial brokerage long before the digital trading revolution. In mid-2008, Rayan made a strategic decision to move operations to his home country, Lebanon, and launched ROYAL Forex Trading sal (RFXT) as a financial brokerage firm licensed by Banque du Liban (BDL), at a time when Electronic Trading Platforms (ETPs) were still not widely recognized in the country. As the CEO and Chairman, his leadership over a team of experienced traders and nance specialists reinforced the company’s business services as one of the top brokerage firms in Lebanon and the go-to firm for electronic trading.   Looking back at ROYAL’s journey, history and success, where Rayan single-handedly led a startup with one employee to become a full-fledged financial institution with currently 70 employees, and a brand being operated and regulated in 3 continents, it is undeniable that being the sole decision maker was the right call at the time. However, this had to change to project improved corporate governance processes. Facing many challenges as a 27-year-old entrepreneur doing his best to attain public trust, he was able to establish what turned out to be a very successful brokerage firm 10 years later.   As any business owner, Rayan had his fears and worries of losing control of his dream and vision, but he went through a self-learning process of evaluating risks and acknowledging his own weaknesses. He realized that real power lies in investing in corporate governance at the early stages and not worrying about losing power.   One of the key struggles was challenging the public perception that a company structure where the owner has major control over the general assembly is considered a family business. Altering this perception required exceptional efforts to enforce the institutionalized nature of ROYAL. The biggest challenge was fighting his greatest enemy, himself. As a Lebanese, emotions run high and he had to draw the line, starting with his own family, between his emotional connection to his firm and the logical decision to structure it and separate family from business affairs.   ROYAL’s board was limited to three members, giving Rayan the upper hand and full control over voting. With the implementation of corporate governance, one of the main objectives was to change this situation where anyone can vote him out and board members can independently give their opinion and make their own decisions for a healthier decision making process for ROYAL.   By 2016, Rayan stepped down as the Chairman while remaining as CEO, and appointing Dr. Zeina Zeidan as ROYAL’s Chairwoman, making history as the first woman in Lebanon to be elected to the position in a financial institution. Many people wondered why a Chairwoman was chosen. Through the past 10 years Rayan had worked with very smart female executives at ROYAL and had come to realize that female team members are a great asset for any firm as the level of diligence and details that they come equipped with are higher than those of men in general. Besides building a very successful financial firm, he wanted to contribute to a greater cause in Lebanon by assigning a female in the highest position at a financial firm in the history of Lebanon. He was convinced and confident that this is a great move for ROYAL and would lead the way for more intelligent and competent females to take leadership roles in financial institutions in Lebanon. Unfortunately, and although this is the first time in history Lebanon has a ministry representation for women affairs, it is disappointing how the ministry did not give any recognition to ROYAL for this bold move and set a good example for other Lebanese firms to follow suit.
  ROYAL took the step of expanding its board to five members to satisfy the three basic and required committees (audit, risk and compliance). This meant a much stronger control on the operation and a better decision-making process on a board level. Each committee is feeding the board with the proper studies and recommendations to collectively make the right decisions for ROYAL. Adding independent non-executive board members with complementary experience and knowledge in finance, auditing and regulatory compliance, will project the proper confidence in the public and regulator’s eyes. To enforce this move, Rayan let go off his sole signatory rights for ROYAL and made it a joint required signatory so as to maintain transparency and proper safe-guarding of funds over ROYAL as an entity. His plan is to expand the board of directors further to enable ROYAL’s board to enhance its strategic visions by providing the opinion of more expertise on our board.
  The primary objective remains for ROYAL to maintain a leading position among Lebanese financial institutions and financial brokerage firms, while simultaneously maximizing shareholder value and offering the best services to their clients. By implementing the highest standards of sound corporate governance practices, maintaining full compliance with laws, rules and regulations governing operations, we advance ROYAL’s long-term interests of clients and shareholders.   Rayan’s current role as CEO is limited to working with his executive committee on proposing strategies and business lines to the board, get the board approval and directive, then execute as per the board approvals. His operations are monitored through control functions, to make sure that as a major shareholder he does not impose his vision and ideas anymore. There is a complete structure that is compliant with international corporate governance standards that ensures ROYAL is being operated in an institutionalized mindset only.   Today we stand very proud of ROYAL’s accomplishments. All the efforts towards a healthy corporate governance environment are definitely paying off which is evident through the decision-making process, effective policies and procedures and a robust reporting structure that keeps the board abreast of all strategic matters. At ROYAL we believe that it is never too late to invest in sound corporate governance structure and not be afraid of losing power because having power over a firm that is not guided by independence is a destructive power.

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