“These results are concerning as our research has consistently found that companies with an above average level of Asia capability in their senior leadership generate a greater proportion of their revenues from Asia,” AsiaLink Business chief executive officer Mukund Narayanamurti says in the report.
The report found that larger Australian companies that are internationally diversified create more value for shareholders than companies that are domestically focused. Seven of Australia’s top ten trading partners are now Asian countries, but there is still a lack of cultural awareness towards the region on boards and in executive teams.
“Asia-capable is not just about being able to speak a particular language, it is about being able to navigate the local system and being comfortable with dealing with people from that system,” Nicola Wakefield Evans, non-executive director of Macquarie Group, Lendlease, BUPA and Australian Institute of Company Directors said.
The report predicts that international cooperation will become even more important in a post-COVID-19 world, rather than a retreat to protectionist measures many expect.
It points to Australian researchers working on a vaccine for the virus with their Asian, European and US counterparts, the growth of e-commerce, the need to diversify markets beyond China and the need to learn from Asian multinationals, technology companies and universities. “As Asian markets recover from the COVID-19 pandemic, business leadership that understands the need to build knowledge and skills relevant to operating in Asian markets is more urgently needed than ever.”
Most Australian companies operating in Asia only have a limited external relations presence in the region, and their teams are often smaller than those of their US or European counterparts. “Building adequate strength and quality in external affairs teams is essential to managing critical risks related to matters such as bribery and corruption,” the report says.
The entire board of retail giant Wesfarmers visited Asia twice when assessing market opportunity and what their supply chain presence should look like in Asia.
Non-executive director Diane Smith-Gander said Wesfarmers still has significant offices in Bangladesh, China and India. “Wesfarmers continues to rotate their Australian staff through those offices for leadership experiences,” she said in the report. “Wesfarmers’ investment in Asia is continuing to grow.”
ASX 200 companies generate 34 per cent of their revenue from foreign sources, largely driven by the mining and materials sector. In 2019 the materials, healthcare and information technology sectors all generated 70 per cent or greater of their revenues offshore.