Senior finance executives worldwide, including Singapore, are generally hopeful about the prospects of economic growth over the next twelve months. Chief Financial Officers in Singapore are relatively upbeat, with 77% anticipating economic expansion, which is significantly higher than last year’s figure of 47%.
Emerging markets are seen as a driver for continued growth prospects, with an uptrend in companies spending and investing more to stimulate growth. In light of these trends, the role of the CFO is also fast gaining in importance. The ascending influence of CFOs is supporting economic growth, with a resounding 84% of finance executives expecting CFOs to demonstrate more effort in improving their company’s ability to continue to deliver value to customers.
These findings were released in the sixth annual American Express/CFO Research Global Business and Spending Monitor, a global survey of 519 senior finance executives from the U.S., Europe, Canada, Latin America, Asia and Australia.
“With the gradual recovery and moderate expansion in the economy, finance executives in Singapore have indicated that their companies are willing to spend more and dip into their cash stockpiles”, said Jennifer Berthold, Vice President & General Manager, Global Corporate Payments, American Express Singapore. “This bodes well for Singapore’s economic future, as local companies will reap the fruits of their investments in coming years.”
Moderate Economic Expansion
In terms of spending and investment, optimism is reflected in the spending behaviour of businesses in Singapore. Almost all (90%) Singapore respondents are looking to increase real spending and investment over the next year, with more than half (48%) willing to increase spending by 10% and more.
Hiring in Singapore is also on the rise: 81% of respondents express that their companies are likely to spend the same amount or more on labour and headcount, with more than half of respondents (55%) looking to increase headcount over the next year, an increase from 50% in 2012.
A majority of respondents (88%) in the Asia/Australia region also expect to maintain or increase spending on labour and headcount, with respondents from Australia (69%), China (94%), Hong Kong (94%), India (78%), Japan (67%), and Singapore (77%) all saying that they are expecting their countries’ economies to expand over the next year.
Emerging Markets a Bright Spot
Engagement with emerging markets continues to be a priority for senior finance executives in Singapore: 42% of Singaporean respondents regard exports to emerging markets as a primary focus over the next year. Worldwide, Singapore is the second highest ranked (42%) in prioritising emerging markets in its growth outlook, below China (55%) and ahead of India (25%).
Singaporean companies say they will most likely expand activities in China (65%), India (48%), Indonesia (42%), Vietnam (32%) and the Philippines (23%).
There is also a shift in how companies will work with these emerging markets: 45% of respondents say they expect to carry out more production activity (manufacturing or service delivery), up from 31% in 2012. 39% of companies also indicate a commitment to continue to invest in sales and distribution activity, showing a slight decrease from 44% in 2012.
“CFOs in Singapore are recognising the vast opportunities present in these emerging economies as strategic means to bolster and sustain growth. The survey result indicates that there will be more new entrants and companies looking to increase their distribution channels and production activities in key markets like China, India and ASEAN,” says Berthold.
Uptick in Spending and Investment
With a reasonably brighter outlook on the horizon, senior finance executives are increasing their spending and investment to energise growth and preserve profitability. 74% of respondents say they are willing to spend modestly (55%) or aggressively (19%) over the next year, up from 59% in 2012.
In addition, most respondents in Singapore say they will invest more or the same amount over the next year in expanding market access (100%); improving production-process efficiency (93%); investing in new product or service development (93%); investing in new production capacity (87%); and investing in mergers and acquisitions (80%).
More companies say they will be dipping into their coffers: 87% say they spent down as much or more of their cash reserves as they had planned in the past fiscal year, and almost half (45%) are planning to spend down a portion of their cash reserves in the next 12 months, an uptick compared to 32% in 2012.
In 2013, cash will be spent on areas such as acquisitions (77%); increased capital spending (84%); expanded operations and headcount (74%); and increased research and development (87%).
In terms of business travel expenses, three-quarters (74%) of Singapore respondents state that spending in this area is likely to stay the same or increase. In fact, 35% of companies are now willing to spend more to meet with suppliers or vendors, a 23% increase since 2012. Willingness to travel in order to meet with current or prospective customers (39%) and for internal meetings (27%) have also demonstrated an increase by 15% respectively compared to 2012.
Expenditure in other areas is also increasing across the board, with more finance executives in Singapore planning to boost spending on indirect line items, transportation/logistics services, and advertising, marketing and public relations.
CFOs a Strategic Influence
In light of current economic trends, CFOs have started to wield a growing influence in companies across the globe. For example, 67% of Singaporean respondents say the recent economic downturn enhanced their finance function’s profile and influence.
Executives in Singapore view strategic thinking, risk management acumen and analytic thinking as the three most important assets that CFOs will need to work on in the coming years.
The report finds 33% feel that the role of their company’s CFO has become more of a strategist – someone responsible for analysing and interpreting financial data to guide decision making.
The report also finds that 27% say that their CFO has become more of a catalyst, who spurs the wider organisation to execute necessary changes.
Meanwhile, 17% describe their CFO as more of a steward, overseeing organisational assets, directing risk management efforts, and making sure the company meets its compliance obligations.
These factors will allow CFOs to better alert management to new markets (47%) and encourage innovation (43%), the two contributions Singaporean respondents feel are most important to enabling growth at their companies over the next two years.
“Strategic thinking” and “risk-management acumen” (48%) were both voted as the most important attributes that CFOs should possess in order to help companies remain competitive amid a tough business landscape.
“CFOs see themselves no longer as just excellent ‘number crunchers’,” said Berthold. “The ability to identify new opportunities, break barriers for product expansions, and steer their companies toward new markets will be the defining hallmarks of CFOs today.”