Converting Financial and Economic Risks into Opportunities

COGEREF’s El Hassen TAKTAK provides some fascinating insight into the background of economic life in Tunisia, and the integration of the Tunisian economy into European countries and particularly to France.

CIARAN RYAN: Today’s podcast is sponsored by Draftworx, which provides automated drafting and working paper financial software to more than 8000 accounting and auditing firms and corporations. CFO Talks is a brand of the South African Institute of Business Accountants. What a pleasure it is today to welcome El Hassen TAKTAK, who is an astonishingly qualified accountant. He has a list of qualifications that has taken him from Tunisia to Canada, the United States, France, Belgium, and Malaysia. In fact, his accounting qualifications are actually too long to mention. He also has an MBA from the Mediterranean School of Business. Now, he’s currently financial controller for a major Tunisian bank, the largest private sector bank in Tunisia, which is listed on the Tunisian Stock Exchange. First of all, welcome TAKTAK, you work for a major financial institution in Tunisia, can you start by giving us a little bit of background on this and give us some idea of the size of the bank and its role in the Tunisian economy.

EL HASSEN TAKTAK: Thank you very much for the interview and for giving me the opportunity to discuss some current topics and to share some ideas. I’m El Hassen TAKTAK the co-founder of the Tunisian Association of Management Control and Finance, known as COGEREF. I have been working since 1990 in a Tunisian financial private institution which does have an important role in local economy with a market share of around 19%. I started working in the management control department. I ensured budget management activities and I was the Budgeting Director for long consecutive years; and since 2017 I’m working in the investor pole in which I help in managing and developing the activities of financial subsidiaries of the financial group. I think it is an opportunity to work in a big company because we have the possibility to evolve in many departments, do various activities and work with many people. This represents an important enrichment in the career. So I have a long experience in the banking sector and I managed some internal strategic projects such as cost killing projects with the assistance of big international consulting firms. Working in the management control department is very interesting and challenging because we have the opportunity to contribute in all the main activities of the company, such as big projects. We work with all stakeholders including top managers and first [unclear] of the institution in preparing budgets, preparing, updating and analysing dashboards and reporting, conducting financial and economic studies, and so on. What helps a lot in these kinds of activities are the support of the management and the existence of an internal culture favourable to management control.

CIARAN RYAN: Now is the bank where you’re working involved in financing projects outside Tunisia, such as in other African countries?

EL HASSEN TAKTAK: Currently, the presence of Tunisian financial institutions is not significant in African countries. In general, financing projects outside Tunisia depends on the strategy and orientations fixed by stakeholders. Some banks have branches in Libya. For instance, STB (Société Tunisienne de Banque) which is the oldest and largest public bank have a financial subsidiary in Niger. I’m personally convinced there is a huge investment potential in various African regions and countries. Financing projects outside Tunisia is an important leverage of development and profitability. We can take as an example the success of the multinational Attijari Wafabank which is implanted in most African countries to support Moroccan companies in their development and projects. Some African countries have many particularities such as social and economic risks and political instability. On the other hand, African countries have huge natural resources and need socio-economic stability to build their economy on solid bases starting by achieving social and educational objectives. What we observe for many years is the migration of highly qualified and talented African doctors, engineers, to developed countries. This represents, in my point of view, an important loss of competencies for our continent. In addition to the financial sector, we notice the presence of many solid Tunisian companies in African countries such as EPPM, COMETEE ENGINEERING and SOUROUBAT. These three Tunisian companies manage major projects and represent a good example of success stories. We can also mention the success of COMAR insurance in Ivory Coast. The sales of this firm increase significantly year by year. COMAR is the first Tunisian private insurance in terms of profitability and performance and had in 2019 the second market share with about 12% after the first insurance STAR.

‘The government must assist companies, in particular small and medium firms, to overcome the current circumstances.’

CIARAN RYAN: Give us a bit of a background on the Tunisian economy and how it has performed this last year in light of the Covid lockdown?

EL HASSEN TAKTAK: It is really a very critical context; many sectors are in a difficult situation; for example, hotels, travel agencies, restaurants, aeronautical sector. We have to include in the map all related activities which work directly or indirectly with these sectors. To illustrate the situation, we can take the example of Tunisian hotels’ revenues, which recorded at the end of December 2020, a 60% revenue drop. This represents a significant decrease more than the half. Hotels risk major layoffs in the coming months and a significant reduction of their investment budgets during coming years. On the other hand, and in order to draw a complete picture of the situation, many sectors have had an important growth such as digital services, healthcare, food & agriculture, e-commerce, textile, etc. These sectors represent an investment opportunity in the short and long terms. CFOs should engage studies on such opportunities. Globally, and according to official statistics, it is expected that Tunisia’s economy growth will decrease by 9% in 2020. According to the International Monetary Fund, most OCDE economies observed in 2020, and for the first time in decades, a hard economic recession with rates varying between -5% to -10%. I think that the economy is observing a reconfiguration between many sectors. The government must assist companies, in particular small and medium firms, to overcome the current circumstances. Since April 2020 many measures were decided by the Tunisian government to help those firms to support them in the Covid period, and the real problem is to know the end of this exceptional period. Continuing in the same situation represents a big social and economic risk. Another concern is to know if the vaccine announced and adopted by many countries is really effective and if it will help or not to restore the post-Covid situation. In this context, many tools are offered to CFOs to face uncertainty such as using scenario techniques, updating forecasts, if needed of course, if the gap between initial forecasts and updated forecasts is high. CFOs should also reduce the period usually covered by business plans and forecasting because they haven’t got visibility even in the near future. The availability of information becomes a necessity to help CFOs and other managers to decide. And the question is to know whether CFOs have developed in the previous years a relevant and a reliable system to give them the required information: in the right time, right form and the right level of details.

CIARAN RYAN: So that’s interesting. So about a 9% drop in economic growth. In concrete terms, how are Tunisian firms facing this challenge?

EL HASSEN TAKTAK: It is really a VUCA context. VUCA means volatility, uncertainty, complexity and ambiguity. First of all, volatility: CFOs are facing many challenges which are unexpected or unstable and may be for an unknown duration, but it’s not necessarily hard to understand. Example: important price fluctuations. Second, an uncertain context. CFOs should, in order to face the situation, collect, interpret and share information. They should invest in information systems with deep and structural improvements. Third, the context is complex. The current situation has many interconnected parts and many variables. In this context, CFOs should do restructuration and build up adequate resources to address complexity. We can take the example of CFOs managing business in many countries with different regulatory environments, tariffs and cultural values.

Finally, ambiguity, which means that the context is ambiguous where causal relationships are completely unclear. CFOs face in multiple situations the unknown. They should do more experimentation to understand causes and effects by generating hypothesis and testing them in order to take relevant decisions.

‘I firmly believe in lifelong learning.’

CIARAN RYAN: I’m quite astonished by the number of qualifications that you’ve managed to accumulate over the years. I guess it’s fair to say that you believe in lifelong learning. Am I correct in saying that?

EL HASSEN TAKTAK: Yes, I firmly believe in lifelong learning. I’m continuously in a learning situation, considering the permanent change in the external environment and consequently in management tools and techniques. I have the chance that the company I work for encourages associates to take advantages of training and long learning programmes as part of continuing education. Also, during the first lockdown I attended some free virtual courses delivered by international e-learning organisations such as EDX and COURSERA. I think it is essential to update and improve knowledge particularly in most important fields such as project management, problem solving and decision-making, agility, data analysis. Taking into consideration the current context and future economic and social needs. These competencies are identified by experts and recent studies as major topics. Enhancing knowledge is important, it helps to face and manage the new context and the new requirements. I’m also a certified trainer providing courses in banking and project management to ABF students, ABF is the Tunisian Banking and Financial Academy.

CIARAN RYAN: In your opinion, do academia and universities adequately prepare accountants for the roles that they’re expected to perform as CFOs?

EL HASSEN TAKTAK: I think it is very interesting to launch a survey to study this important problem in Tunisia and other Maghreb and African countries. It is very important to continuously adapt programmes to meet real companies’ needs not only in accounting but also in other CFO skills such as purchasing, human resources, IT skills and so on. I’m also convinced that a CFO must improve their soft skills in addition to technical skills. They represent for them real added value, particularly to develop, manage, engage and motivate teams in order to handle emergencies imposed by the current context. Also, to help them in managing transformation projects.

CIARAN RYAN: One gets a sense that Tunisian institutions lean quite heavily towards France and Europe more than they do towards Africa. Is that correct?

EL HASSEN TAKTAK: Yes, that’s right. In fact, around 75% of Tunisian imports and exports and more than 85% of Tunisian foreign exchange earnings are made with European countries. Tunisia has concluded partnership agreements with the European Union. This is justified by geographic proximity and historical links with this dynamic economic and financial zone. Thus, it means lower transportation costs and, consequently, better control of costs and prices. Currently, we observe the migration of thousands of highly qualified and experienced competencies from Africa, especially from North Africa, to European countries. I think this situation may represent in the long term an important leverage to support African countries in highly qualified skills such as technology, medical skills and in general developing exchanges. I think Tunisia should develop in priority exchanges with near African Maghreb countries and more dynamic African regions with a great and high potential such as Rwanda, Ethiopia and other Anglo-Saxon countries, which observe a significant rate of economic growth even in the Covid context. Many African countries represent a huge market, for example, Nigeria with more than 200 million habitants, Ethiopia with more than 110 million habitants, Egypt with more than 100 million habitants, Democratic Republic of Congo with more than 85 million habitants.

CIARAN RYAN: Give us some background about yourself and your career journey. Where did you start, did you grow up in Tunisia? Did you study there? Tell us about your life.

EL HASSEN TAKTAK: Originally, I obtained in 1990 a master’s degree in High Commercial Studies from IHEC Carthage. Then I obtained two professional masters in applied foresight studies and in banking, a research master in management and an executive MBA. I obtained also many certifications in project and quality management. I am also a PECB certified trainer, PECB is an accredited certification body, and I give courses to high school of banking – France as part of the ITB diploma, carried out in 25 French-speaking countries around the world. My areas of expertise are: management control, project management, quality management and entrepreneurship. During my career, I ensured, for a long period, budget management activities in the management control department in the financial institution in which I work. Among the challenges that I try to defend every day is to present budget management as an activity of development and improvement of performance and not as a control in the police sense of the term. This reminds us of the important role played by the management controller as a business partner. The aim is to help our colleagues in improving the performance of their organisational units. Currently, I work in the investor pole particularly on subsidiaries projects to help them improving their performance and develop their activities and profitability.

‘This helps CFOs and companies to become more efficient and reduce the seven sources of waste.’

CIARAN RYAN: We’re running out of time here. A quick couple of questions. One that I ask everybody, are there any books that you would recommend to CFOs and finance executives?

EL HASSEN TAKTAK: Yes, I recommend the book The Toyota Template: The Plan for Just-In-Time and Culture Change Beyond Lean Tools by Phil Ledbetter. This book highlights Toyota Production System techniques; for example how to plan the just-in-time method, how to manage successful cultural change and in general how to implement lean tools. These tools are very important to eliminate waste and improve productivity. This helps CFOs and companies to become more efficient and reduce the seven sources of waste known as the seven mudas, which represents tasks without added value and aren’t accepted by the customer, such as unnecessary treatments, waiting time, underutilisation of skills. The Toyota Production System has been developed over many years through problem-solving, trial and error. The implementation of this system evolved as problems were encountered and solutions put in place. The result of many years of work was the growth of a problem-solving culture within Toyota. This is considered as a unique case in the business world. Today, the Toyota Production System is well established. The question that many managers have tried to answer for their own companies is “How to achieve world-class efficiency?”

So the book explains important elements of the Toyota Production System, analyses the sequence of implementation as the system developed, and put these elements in a logical order of implementation based on history and current knowledge. Additionally, it addresses the effect of each element on the company’s culture. What is also important in this model is having all the elements together as a system It must be practiced and improved every day in a very consistent manner. In many similar business environments, the pieces have not been put together “as a system” and “put into practice daily in a very consistent way”. Many attempts have focused just on pieces of elements or tools which explain the limited success of the projects implemented.

CIARAN RYAN: Final question for you, are there any recommendations that you’ve got for other finance executives before we close?

EL HASSEN TAKTAK: I would like to point out the importance of agility in an exceptional socio-economic context. It is important to adapt the existing system quickly and effectively. Furthermore, we have to explore the possibility of converting financial, social, economic risks into opportunities. For example, several insurance companies have taken advantage of the context by offering new services to cover health or business-operating risks. The second point that I would like to emphasise is the need to initiate cost optimisation projects for an enhanced cost rationalisation. Thus, optimisation does not mean lowering charges in order to systematically increase the profitability. It is necessary to take into account different factors related to the good functioning of the company such as social and customer constraints. Thus, the necessity of anticipating different impacts of each cost optimisation initiative to take relevant decisions and make resources more efficient. For the success of transition and transformation projects, I would like to stress the importance of the change management, which must be integrated as a transversal phase throughout all different steps of the project. The aim is to guarantee the transition for the new configuration within most convenient conditions. Finally, I would like to underline the need to have the required perspective to remodel existing practices, creative and innovative thinking, in order to improve it. To reach these objectives the management should demonstrate real leadership practices aligned with efficient training, development and continuous improvement culture.

CIARAN RYAN: That was El Hassen TAKTAK. Thanks very much for coming on and talking to us from Tunisia and what a fascinating insight into the background of economic life in Tunisia, 9% drop in the economy last year, due to the Covid lockdown. Also, some very interesting insights about training and the integration of the Tunisian economy into European countries and particularly to France. Tunisia does seem to be looking more towards Africa, as is Morocco and other Maghreb countries as well. So thank you very much El Hassen TAKTAK for coming on and talking to us on CFO Talks.

EL HASSEN TAKTAK: Thank you very much, sir. I wish you a good day. Have a wonderful day. Thank you very much.

Ciaran is a seasoned journalist and podcast host. He has a back-ground in finance and mining, having pre-viously headed up a gold mining operation in Ghana.In this podcast he interviews various CFOs, get-ting more detail on the role of the CFO and their daily challenges and solutions.


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