Today, I visited CFO Innovation Asia Forum in Singapore. The topic was Future Ready: How to Master Business Forecasting and part of a world speaking tour on behalf of IBM. The event provided an interesting perspective that contrasts to the economic concerns faced in the U. S. The key points I noted include:
1. Most Asia Pacific countries are experiencing what they describe as a moderate growth of 5% to 9% while most US companies long to return to those levels. The exception is Japan which is still suffering the effects of power shortages due to shutdowns in capacity caused by the earthquake and related tsunami that hit the Fukushima nuclear plant. But even Japan expects growth in the second half on 2011 as government infrastructure spending is released to help rebuild the north of Japan’s devastated areas.
2. CFOs face a mind-boggling number of challenges and opportunities – currency fluctuations, commodity price swings, geopolitical unrest and related supply chain implications, acquisition options and threats, etc. This multitude if issues scream for the need to move to roll forecasts instead of static annual budgets.
3. Cost reductions and productivity improvements are a key focus to keep their businesses grow profitably.
4. Inflation is a key concern in most economies. Currently, rising commodities based inflation introduces large pressures to grant corresponding wage increases. These increases, in turn put, fuel more inflation which works against cost reduction goals.
5. As commodity prices fluctuate, the cost of basic food stuff continue to rise. Increasing prices for basic needs is putting heavy pressure on unskilled workforces and the disadvantaged segments of the population who struggle to meet basic needs such as food and medical care. In some economies, this is creating a dual economy of has (with skilled jobs and rapidly rising wages) and have nots which must deal with rising cost without any compensating offsets.
6. Governments in many countries are working to head off the social conflicts these dual systems present. Social unrest and revolution are the potential political results. Ironically, that unrest also contributes to more cost pressures as supply chain production inputs, related disruptions, and general uncertainty all work to further drive up costs.
7. Given all the uncertainty, Asia CFO’s are a remarkably upbeat and optimistic group. Growing faster than your peers certainly contributes to that outlook.
I provide more insights as June travels take me one and half times around the world.