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NBTA : November 2008
American Express CFO Research Global Business and Spending 08 Monitor Report 00 xx by Tracy Bowra Financial leaders in Asia are optimistic about the economic future and determined to drive their companies’growth. Despite increased costs, they knowthey are going to have to travel to achieve that growth – its just that these days it’s all about travelling smart. We live in uncertain economic times. No surprises there. More surprising perhaps is that, despite economic uncertainty, financial executives across Australia and Asia are still planning to invest in their companies’growth. That’s the message from first ever American Express/CFO Research Global Business & Spending Monitor. Earlier this year, CFO Research Services surveyed 370 senior finance executives from companies around the globe with revenues above US$500m. The survey explored companies’ investment priorities and spending plans over the next 12 months, as well as how their strategic priorities have shifted in the current economic environment. Cautious Optimism The big picture taken from the survey is that executives in Australia and Asia-Pacific are much more optimistic about their companies’prospects than their North American and European counterparts. Of the Asia-Pacific companies surveyed, 26% expect a substantial economic expansion for their country compared to only 15% globally. Excluding the United States – where the domestic credit crisis hit hardest – not one company surveyed expects a substantial economic expansion, while 56% expect some kind of economic contraction. In our region, a mere 12% of executives surveyed expect a contraction. In short, companies in the region are bullish. Having avoided the direct impact of the American sub prime mortgage crisis and the subsequent credit crunch, and with consumer confidence at higher levels than in the US and Europe, they plan to invest in growth. Executives across the region actively seeking to expand their market reach, invest in new production capacity and product and service development. In the primary sector, for example, eight out of ten respondents from Asia and Australia expect their industry to grow. Asia Pacific Corporate Traveller Volume 1 Issue 1 “While it’s hard to deny the uncertainties of today’s economic climate,companies in Asia and Australia are looking for ways to maintain their growth momentum,” says Tracey Bowra, Senior Vice President, Global Commercial Card at American Express Japan, Asia Pacific and Australia. “They are more optimistic than their counterparts in the US and Europe, and they are pursuing investments that will allow them to reach more customers in new and better ways – all in an effort to preserve the bottom line while promoting top- line growth.” Lessons Learned One of the key factors in navigating treacherous economic waters is the lessons learned from previous downturns. Among the executives surveyed, there were long corporate memories. Many felt battle hardened but wiser from the difficult conditions in 1991/92 and the Asian economic crisis of 1997/98. Now, companies are looking back to their actions during those darker times – not only to help them weather current economic vicissitudes, but to come out the other end of the cycle bigger and stronger. Executives realise that bunkering down during a crisis is not the road to success. Of those surveyed, 35% said they should have invested more in product and service development during the last economic downturn, 40% said they should have invested more in market access and 39% said they should have invested more in administrative process efficiency. Planning For Growth Naturally the cautious optimism displayed by companies in the region is tempered by concerns centred around supply and demand. Outstripping all other supply worries is, of course, rising energy costs, with 40% of respondents believing this issue constitutes an ‘urgent concern’. Other worries include the cost of capital, inhibiting government policy and regulation, currency exchange rates, access to financing and unfamiliar political systems/business customs. On the demand side, foreign exchange rates, interest rates and consumer price inflation have tempered expectations. While these concerns are not crippling the way companies plan to pursue growth, they differ quite significantly in Asia and Australia in comparison to the US. While companies in the US anticipate growth through consolidation, companies in this region are more likely to try to increase turnover over the next 12 months, with technology purchases and investments to expand production and market access especially strong. To support growth, companies also plan on investing in staff, with 63% of companies surveyed planning to increase headcount. “The research results seem to indicate that Asian companies are comfortable with their ability to grow organically with their investments and purchases focused on supporting this,”says Bowra. “The US differs in that companies seem more focused on mergers and acquisitions to support their growth.” Still Travelling The anticipated high level of corporate travel is another strong indicator of regional optimism. The survey found that 35% of regional executives expect domestic travel among employees to increase while 38% expect international travel to increase. Although globally executives expect travel levels to increase, Asia and Australia are the only regions where they expect travel spend to increase over the next 12 months. A substantial 40% expect travel spend to increase, with 22% expecting it to remain the same. Business executives clearly believe that business travel will be an important factor in addressing expanding markets and driving growth. However one of the more enlightening findings from the survey is that companies think they will have to be smarter about how they manage corporate travel. “While it’s hard to deny the uncertainties of today’s economic climate, companies in Asia and Australia are looking for ways to maintain their growth momentum,”