Survey: Global recession major risk for Asia-Pacific CFOs

Asia

Chief financial officers (CFOs) and group treasurers in Asia-Pacific from leading global companies have flagged the prospect of a global recession as the main risk for their business in the next six to 12 months, according to a JP Morgan survey.

Some 30% of the more than 150 respondents from 130 global corporations rank a potential global recession as the top risk to business, followed by 27% expressing concern over the impact of global trade tariffs and 24% worrying over an emerging markets slowdown, according a survey conducted at the 2019 JP Morgan Asia-Pacific CFO and Treasurers Forum.

Concerns over cybersecurity (10%) and the outcome of Brexit (9%) round out the top five risk concerns among global companies.

CFOs and group treasurers are undertaking different approaches in response to the global supply chain disruptions.

A full 34% of respondents said they are exploring pricing options with suppliers, followed closely by 32% of respondents who are sourcing alternative suppliers.

Some 19% of respondents have passed on operation costs to customers, with another 15% saying they are shifting production from China to other countries.

“Clearly, concerns over the impact of headwinds in the global environment are front and centre in the minds of the top CFOs and treasurers of global corporations. While JP Morgan’s view is not for a recession, growth is expected to slow in the coming quarters, with global growth for 2019 forecast at 2.7% and dipping to 2.5% in 2020,” said Oliver Brinkmann, head of corporate banking for Asia-Pacific at JP Morgan.

“We still see growth opportunities, especially in emerging Asia, but the geopolitical events are somewhat clouding sentiment.”

Like most of emerging Asia, the Thai economy has been impacted by the US-China trade tensions.

“The country’s recent weakening exports data suggest a slowing investment cycle. Private investment, after holding up well in early 2019, has also fallen in tandem, weighed down by capital goods imports,” said Chayotid Kridakon, senior country officer for Thailand at JP Morgan.

Thailand’s GDP growth is expected to be 2.9% this year and slightly increase to 3% in 2020, said JP Morgan.

TECH CHALLENGES

Regarding disruption by technology in the finance and treasury space, CFOs and treasurers point to inefficient processes (25%), lack of technology (25%) and shortage of resources (24%) as the top three challenges they face in future-proofing their organisations, the survey showed.

Half the respondents single out artificial intelligence (AI) as the emerging technology that will play the biggest role disrupting traditional finance, followed by blockchain (28%), cryptocurrencies (15%) and quantum computing (7%).

“There has been a desire by finance practitioners to better harness data for predictive analytics and the advances in AI technologies in recent years have been a game-changer,” said Mr Brinkmann.

“AI has the ability to deliver meaningful insights and prescribe future actions in real time, and has been helpful for CFOs and group treasurers in optimising liquidity, increasing efficiencies and preventing fraud.”

Respondents appear ready for e-commerce, with 45% stating they have an e-commerce strategy in place and 21% saying they are in the planning phase.

They cite the multiple collection channels, cybersecurity, incoming reconciliation, and processing chargebacks and disputes as key challenges in managing e-commerce transactions.

“There is no question the e-commerce space continues to grow at a rapid pace. Asia-Pacific already comprises more than half of the global e-commerce volume and is expected to increase its share to 70% by 2022,” said Mr Brinkmann.

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