According to The Economist Intelligence Unit’s long-term economic forecast, the region is on track to account for more than 50% of the global economy by 2050, up from less than a quarter in the 1980s.
This growth potential is also reflected in a new global survey of 800 CFOs and other senior executives, conducted by The Economist Intelligence Unit and sponsored by SAP. A clear majority (82%) expect their companies to grow in revenue by 10% or more in fiscal year 2018/19, a degree of confidence beaten only by their peers in Latin America (83%).
And if that was not enough to be envious of, 88% of respondents from the Asia-Pacific region agree that they personally feel empowered to drive strategic decisions across business functions in their organisation.
This sense of empowerment, the survey reveals, is underpinned by a uniquely decentralised approach to cross-departmental collaboration and a bullish approach to technology.
88% of respondents from the Asia-Pacific region agree that they personally feel empowered to drive strategic decisions across business functions in their organisation.
Peer-to-peer planning
Compared with their counterparts in the rest of the world, the survey reveals, finance executives based in Asia-Pacific are substantially less likely to collaborate with a central management or strategy function on key financial management functions, and are more likely to engage with peers in other units and regions.
This is evident in cost management, for example. To help manage raw material costs, 14% of the 200 survey respondents from Asia-Pacific collaborate with the management or strategy function, compared with 28% in Latin-America, 19% in North America and 18% in Europe. But 13% will work with another business unit on managing these costs, compared with 7% in both Latin-America and EMEA and just 5% in North America. Similar patterns are seen when it comes to marketing costs, inventory costs and capital expenditure.
Respondents value this peer-to-peer approach to collaboration: the region has the highest proportion of respondents who believe that their collaboration with other departments is effective.
That doesn’t make cross-company collaboration trouble free, however, and the decentralised approach may put extra pressure on the relationships between department heads. One in five respondents from Asia-Pacific say unwillingness on the part of other department heads is their top collaboration challenge, the most commonly cited challenge in the region.
When faced with such resistance, a CFO’s communication skills must come to the fore, says Lalit Malik, CFO at Dabur, an Indian consumer goods manufacturer headquartered in New Delhi. “Sometimes, the finance role is not to be pleasant, but to be firm. Whenever there are conflicts or contradictions, finance plays a very important role because it controls compliance, consistency and continuous, improvement. It is finance that should ensure that there are no deviations,” he says.
“Whenever there are conflicts or contradictions, finance plays a very important role because it controls compliance, consistency and continuous improvement. It is finance that should ensure that there are no deviations” - Lalit Malik, CFO, Dabur
“Having said that, there are also times and areas where different views emerge in different functions. Now that is where, as a finance head, we need to work together with all the functions, understand both sides of an argument and drive a collective decision by keeping in mind the main goal of sustainable, profitable growth.”
The age of automation
There is evidence that the Asia-Pacific region will be especially susceptible to the widely anticipated oncoming wave of intelligent automation—and not just in manufacturing. According to the 2017 Global Services Location Index compiled by management consultancy AT Kearney, the kinds of repetitive clerical tasks on which Asian business process outsourcing providers have built their success are highly automatable, and the economic impact could be substantial.
Even senior finance executives in the region believe they are exposed: nearly six out of ten (58%) believe at least 30% of the CFO role will be automated in the next one to three years, compared with 47% globally. The figure rises when respondents are asked to consider the next five to ten years (81% v 72% globally).
How will finance executives in the region capitalise on this automation? Not by putting their feet up: fewer respondents from Asia- Pacific expect to reduce working hours as a result of automation (17%) than from the rest of the globe (23%). Instead, they would focus the time freed up by automation on matters of business enablement, such as marketing strategy development (36%) and supply-chain development (27%).
For Mr Malik at Dabur, automation offers the opportunity to provide more qualitative analysis to support business decisions. “With automation, instead of spending lots of time on quantitative, repetitive tasks, it will be spent on qualitative analysis, helping the business to take decisions that are more backed up by factual data and providing that analysis faster, so that decisions can be taken sooner,” he explains.
Given their sense of impending automation, it is not surprising that Asia-Pacific finance executives place a high value on proficiency in emerging technologies: 44% identify it as a crucial future skill for finance professionals, compared with 41% globally. By contrast, Asia-Pacific finance leaders are less likely to prize critical thinking (37%, compared with 46% on average elsewhere).
This technology focus is echoed in the finding that Asia-Pacific respondents spend the most time collaborating with IT, compared with their peers in other regions. It is also reflected in their desired involvement in operations: 57% say they would like to have greater involvement in the digitalisation of processes in future.
A recent tax reform in India served as a reminder that technology underpins financial transformation, Mr Malik at Dabur reports. The Good and Services Tax (GST), introduced in July 2017, replaced over 20 overlapping indirect taxes and unites India’s 29 states in a single regime. The reform triggered a wave of technology investments to effect the changes, he says. “It’s been a useful reminder of the role that technology plays in making big changes feasible for businesses of all sizes,” he says.
This focus on technology has not distracted Asia-Pacific’s finance leadership from business realities, however. Indeed, 55% identify an understanding of business strategy as an important future skill, more than in any other region. While Asia has much that makes it unique, the basics of doing business are universal.
