Australian and Asian CFOs prepared to risk more – AMEX

New research reveals that 60% of CFOs in Asia/Australia agree that their companies will tolerate high risks in pursuit of high returns in the long term, compared with only 16% of CFOs in the United States and 22% in Europe.
 
These are among the major findings released today in the third annual American Express/CFO Research Global Business & Spending Monitor, a survey of 479 senior finance executives from the United States, Europe, Canada, Mexico, Asia and Australia.
 
According to the research, senior finance executives report growing optimism about economic recovery but are proceeding with caution, investing in categories that will boost growth such as sales and product development while selectively increasing discretionary spending in areas like marketing and technology.  
 
“We’re seeing a significant shift to a more positive outlook among finance executives as companies have moved from simply surviving to investing for the future,” said Lisa Vehrenkamp, Senior Vice President and General Manager, Global Commercial Card, American Express, Japan, Asia Pacific and Australia.
 
“Despite the positive outlook, most companies continue to maintain the strong financial discipline that was established during the GFC,” she added.
 
Asia and Australia lead in optimism and renewed focus on growth
Executives worldwide report a more positive economic outlook, indicating that a sustained recovery is taking hold. Nearly three-quarters of all respondents (71%) anticipate economic expansion for their countries over the next 12 months.  
 
In the three years the American Express/CFO Research study has been running, this is the highest percentage of respondents indicating that they expect economic expansion in their countries – in 2008 it was 56% and only 18% in 2009.
 
The brightest outlook for economic recovery comes from Australasia – 83% of
executives in Australia, 87% from Hong Kong, 82% from Singapore and 78% from India expect growth in the year ahead.
 
As the economic outlook brightens, a majority of respondents in Asia/Australia (76%) say their companies plan to maintain or increase capital spending compared to last year, and 78% say their companies plan to increase headcount in 2010.
 
Connection between increased spending and growth a must 
While financial discipline remains a major focus for finance executives, companies are loosening their purse strings and investing in areas that will help increase revenues.
 
•  49% of respondents in Asia/Australia plan to increase investment in the
development of new products and services.
•  49% of respondents in Asia/Australia aim to expand through increased sales and marketing activities.
•  30% of respondents in Asia/Australia expect to increase investment in M&A activity to drive growth. 
 
The majority of finance executives in Asia/Australia plan to maintain current levels of discretionary spending.  However, some are planning increases in areas that will support growth and productivity, including:

•  Advertising, marketing and PR (35%);
•  Enterprise-level IT systems (35%);
•  Labour (34%); and
•  Computer hardware (30%).  
 
Business travel spending is also beginning to stabilize after experiencing a dramatic slowdown during the GFC.  

•  The majority of executives in Asia/Australia(70%) plan to maintain or increase business travel spending compared to last year.
•  More than a quarter of respondents in Asia/Australia (34%) plan to loosen policies for travel to meet with new clients or for business development.
 
Seeking efficiency, maintaining discipline

Finance executives continue to focus on financial discipline and protecting the bottom line, even as companies look to capitalise on increasing demand.  
 
A large majority of respondents in Asia/Australia (88%) expect that over the long term their companies will focus closely on cost control and 79% of respondents in Asia/Australia expect their companies will maintain a long-term focus on their core operations.
 
When asked to look ahead over the next two years, most executives in Asia/Australia expect their companies’ recession-driven management rigor to remain in place in critical finance areas:
 
•  Cash and working capital management discipline– 74%
•  Focus on profitability – 64%
•  Balance sheet scrutiny – 60%
•  Administrative discipline – 64%
•  Project and investment ROI requirements – 66%
 
To help maintain this discipline, executives plan to invest in process improvements – 41% of respondents in Asia/Australia say they will invest more to improve production by streamlining manufacturing or upgrading technology systems, and 43% of respondents in Asia/Australia will invest more to improve administrative processes such as finance, accounts payable, and procurement. 
 
Highlighting the balancing act that finance executives face, one survey respondent noted his company would have a “much tighter focus on working capital management, expense control and building strategies to drive growth in down markets.”  Another respondent remarked that “the recession has caused my company to look at processes differently with the goal of improving efficiency.”

(Sources: Sydney, TDA)