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Facing down regional risks

ARTICLE | June 21, 2023

Facing down regional risks

New research uncovers what enterprise leaders from Australia, India, Japan, and Singapore, can learn from each other.

By Mark Yeow, Workflow contributor

New research uncovers diverse responses to macro uncertainty across the Asia Pacific region and what regional enterprise leaders can learn from each other

Asia Pacific’s business leaders remain upbeat about their prospects even as they face the triple threat of climate change, global conflict, and financial instability. However, our latest research shows how leaders’ responses to these regional and global challenges differ substantially between countries - as do the risks they perceive and the priorities they’re setting.

In the report Rising with the tide, our research partners ThoughtLab and Dabster surveyed a range of enterprise leaders across Australia/New Zealand, India, Japan, and Singapore on how they’re facing macro uncertainties and environmental, social, and governance (ESG)-related risks. Most expressed cautious optimism about the future, stressing the importance of using technology to regain ground in affected areas like customer loyalty and talent shortages. Yet when we delved deeper, we found a diversity of strategies and priorities that leaders could learn from.

Report

From Adversity to Advantage Special Report 

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Most business leaders in Asia Pacific are responding to macro uncertainty by refocusing on the fundamentals, from speeding up digital transformation to strengthening balance sheets. This proves especially common in Singapore, where 37% of business leaders are focusing on increasing liquidity and cash flow. At the same time, 33% expressed a keenness to take advantage of lower valuations in tough times by ramping up their mergers and acquisitions.

Australian and New Zealand enterprises are betting they can trade short-term hits to market share for longer-term profitability by taking traditional cost management measures. This comes despite local enterprises facing an erosion of customer loyalty similar to what’s happening in other Asian markets. Their leaders are more likely than those in other countries to raise prices to customers (29% versus 25% in Japan, 21% in Singapore, and 12% in India) while also cutting back on costs like marketing (31% versus 23% in Singapore, 20% in Japan, and 14% in India) creating a “margin sandwich” with an increasingly large space between, for profits.

ANZ leaders are more likely than those in other countries to raise prices to customers while also cutting back on costs like marketing, creating a “margin sandwich”.

Japanese executives face significantly higher pressure on ESG than those in other markets, ranging from more stringent government regulations to more highly involved community groups. Unsurprisingly, they were also the most likely to have difficulty keeping up with new ESG regulations and reporting standards (38% versus 30% in Australia/New Zealand, 27% in Singapore, and 23% in India).

Yet in Japan business leaders were also more likely to associate ESG programs with stronger financial results—with half agreeing that ESG programs help them attract and retain talent. The difference seems to stem from a mindset that defines business success more broadly than simply profit and economic growth. Just 18% of Japanese business leaders said they would prioritise profits over good ESG performance as their main goal. With business leaders across Asia Pacific uniformly expecting ESG pressures to increase, Japan’s more-than-profits model may offer a powerful lesson to those in less ESG-mature markets.

Japan, business leaders were more likely to associate ESG programs with stronger financial results—with half agreeing that ESG programs help them attract and retain talent. 

In India, business leaders were far more concerned about domestic political issues than those in other Asia Pacific market we surveyed. In fact, 42% expect to experience negative impacts in the next two years because of domestic politics—more than double the number who are experiencing negative effects today. Nearly a third of India’s corporate leaders already anticipate a severe market downturn, one that could force them to rethink their fundamental business models.

In response, executives are doubling down on digital innovation. Almost all respondents reported plans to ramp up investment in digital along with cybersecurity. Yet our findings suggest that leaders need to build the necessary talent and skills to power this digital acceleration while also aligning with fundamental goals like improving customer experience and trust.

In the full report, we identify crucial areas of similarity across Asia Pacific—including leaders’ ongoing struggle to sustain customer loyalty—as well as some potential risks to their digital-first strategies for doing so. Over the next two years, leaders will need to balance the demands of employees and customers with efficiency and innovation to propel growth and increase profits.

 Find out more in the full report.

Nearly a third of India’s corporate leaders already anticipate a severe market downturn, one that could force them to rethink their fundamental business models 

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Author

Mark Yeow's first foray into the world of journalism and content was in high school, writing articles about antique furniture that he patched together between studying and video games. Since then he's written about everything from environmental science to wireless technology to trends in global trade, alongside citizen video journalism for social impact causes around Southeast Asia. Raised in Australia, he currently resides in his birthplace of Singapore but struggles to say which is truly home.

Articles by Mark Yeow