Asia, by 2040, is anticipated to be contributing 42% of global GDP, showing how the region is on the cusp of a new era and is on its way to expanding its global influence, according to McKinsey & Company.
The global management consulting firm's analysis found that Asia could be home to 60% of the Fortune Global 500 companies and have 55% of the world’s total workforce.
As Asian economies boost domestic investments, organisations are posed with the challenge of rethinking and reimagining their financial strategies to align with the economic shift.
McKinsey recommends four approaches business leaders can look into to optimise capital allocation toward high-return prospects, where growth outpaces risk.
Move beyond FDI reliance. Take a proactive approach to capital deployment. Rather than wait for external investments, direct internal capital into rapidly growing sectors such as logistics automation and renewable-energy parks in India or Southeast Asia.
Simplify existing portfolios. In an era in which productivity gains are critical, enhanced financial discipline is essential. McKinsey analysis shows that from 2012 to 2022, 64% of companies that increased focus on their core business outperformed companies that increased their portfolio complexity.Â
Prioritise and simplify investment profitability. Shape future portfolios for enduring profitability. For example, companies can consider establishing dedicated investment divisions—such as a venture capital fund—to target high-growth sectors aligned with regional megatrends such as green hydrogen. This strategy could help large logistics companies capitalise on transformative infrastructure developments by deploying automated solutions along vital trade routes for sustained returns.
Strengthen corporate governance, communications, and investor relations. As domestic investment grows, focus on strengthening governance, improving transparency, and building a strong public relations and communications function. Foster trust, enhance your organisation’s reputation, and attract long-term investors by articulating the rationale behind investments, highlighting long-term value potential, and sharing success stories.
