Chief financial officers in Southeast Asia are bracing for "heightened challenges" amid ongoing volatility, according to a latest study by Deloitte.
The SEA CFO Agenda 2023: Decoding the CFO’s trilemma report found that financial chiefs in the region are looking into the global economic slowdown as a major concern, with 80% of respondents marking it as their top external risk for the next 12 months.
Findings from the research revealed an overwhelming frequency with which CFOs in Southeast Asia are preparing for worst-case scenarios amidst the ongoing volatility.
Deloitte says that CFOs in the region have been scrutinising every line item in their financial statements and doubling down on financial planning and analysis (FP&A) and forecasting activities to avoid being caught off guard by unexpected events.
Optimism on financial prospects
While CFOs in Southeast Asia are more concerned about the economic outlook, they are just as optimistic about their company’s financial prospects as their Asia Pacific counterparts: 50% of respondents in Southeast Asia expressed optimistic sentiments, a figure comparable to the overall Asia Pacific average of 49%.
This suggests that CFOs in Southeast Asia are confident in their ability to manage operational and cash flow disruptions, with many having undergone an intense period of accelerated learning on the back of the COVID-19 pandemic.
“While volatility is by no means a challenge that is unique to Southeast Asia, CFOs in the region are feeling the heat a lot more because many of our economies have less of a domestic hinterland and are much more export-driven in nature,” says Ho Kok-Yong, CFO Program Leader at Deloitte Southeast Asia.
“What is unique about Southeast Asia CFOs is a certain savviness in terms of capitalising on the upsides that volatility presents," he adds. "Often informed by either in-house specialist data teams or external economist networks, they are able to leverage micro-developments in the economic landscape to adaptively bolster capital or accelerate market expansion."
Making sense (and cents) of AI
When it comes to protecting or increasing their enterprise value, the adoption of technology automation and bolstering of predictive capabilities are two top-of-mind priorities for CFOs in Southeast Asia.
According to the report, 74% and 59% of SEA respondents said they were adopting technology automation and predictive capabilities respectively, significantly above the Asia Pacific averages of 51% and 30%.
However, regardless of their level of digital ambition, the research shows that SEA CFOs are only in the exploratory phases of artificial intelligence (AI) and data.
Consequently, basic automation tools, such as electronic invoicing (74%), robotic process automation (63%), and intelligent documentation (57%) remain the top three most used technology enablers.
“The primary reason for this phenomenon is clear: in our interviews with them, SEA CFOs frequently lamented the lack of clean, consistent, and consolidated data as by far the largest impediment to their organisation’s uptake of advanced AI technologies,” says Ho.
“Above all, when it comes to emerging technologies such as AI, the more fundamental question that SEA CFOs are considering is: what is the return on investment (ROI) for AI? The answer to this question of ROI is likely to guide their decision as to whether to pursue early adopter or fast follower strategies in the years ahead,” he adds.
Talent as the off-balance sheet asset
Although much has been said about the age of AI and automation, it is noteworthy that 72%, of SEA CFOs cited their ability to secure and retain key talent as one of their top concerns – the highest amongst all Asia Pacific markets included in the survey.
This observation indicates that the emergence of these technologies has, in fact, increased the focus on talent for SEA CFOs.
In terms of their strategies to skill, reskill, and upskill their workforce for the future of work, SEA CFOs place greater emphasis on more practical strategies, such as employee reward and recognition programs (63%) and on-the-job experiences (63%).
SEA CFOs recognise that there is no one-size-fits-all strategy for talent development, even within an individual organisation. Thus, they advocate for the use of differentiated talent strategies to fulfil the needs of their diverse talents.
“In our conversations with SEA CFOs, we found that many of them are advocating for differentiated developmental pathways for high-value and high-potential finance talent," says Ho. "High-value talent refers to those with critical skillsets – such as those with the ability to comprehend systems, perform programming, and automate processes – that differentiate them from traditional finance professionals."
"High-potential talent, on the other hand, refers to those with the potential to become the next generation of finance leaders or even successor to the CFO.”
“This year, we observed that SEA CFOs are beginning to recognise that these two types of talent are likely to require highly tailoured retention and development strategies. This is an interesting finding for us, and it is the first time since we started conducting this study three years ago that we have noticed such a pronounced trend,” he adds.
