10 September 2020

Winning in Asia's 'new normal': three steps to success

The COVID-19 crisis represents an unprecedented challenge for societies and corporations across the globe. Asia is no exception. But how are the region’s leading companies seeking to reset for long-term growth in what will likely be a permanently more volatile context, post-pandemic? What steps are they taking to reconfigure business operations, both now and in the future?

To answer these questions, HSBC recently sought the views of some of Asia’s most senior business leaders. The group, which participated in a virtual roundtable in August 2020, included a cross-section of CEOs and CFOs from global companies, across sectors as diverse as legal services, recruitment, construction, manufacturing, technology and trade. The paper below captures the highlights of their discussion.

The August 2020 panel

  • Martin Hill, ASEAN CFO, Allen & Overy
  • Chong-Win Lee, APAC CEO, Logicalis
  • Alexander Melchers, MD, Melchers Group
  • Lee Coleman, Group Finance Director, NES Global Talent
  • Paul Boudre, Group CEO, Soitec
  • Mathias Diehl, CFO, Tialoc
  • Rae Eun Sung, President and CEO, Youngone Holdings Corporation
  • Tony Cripps, CEO, HSBC Singapore

Preserving business continuity

The roundtable participants agreed that they have had to be especially agile and adaptive in their decision making to preserve enterprise resilience during the crisis. That has been the case for Youngone, for example, one of global leading manufacturers of outdoor gear, clothing, textiles and footwear. Initially, its operations were severely disrupted as its factories were forced to close. However, with robust business continuity plans (BCPs) in place, the company was able to quickly adapt once normal activities resumed.

President and CEO Rae Eun Sung described how, when the lockdowns in Youngone’s manufacturing locations eased, the company picked up production and rapidly pivoted to the lines of business where it were seeing increased demand, such as yoga wear and cycling wear. Today, with productivity starting to recover, Youngone continues to review and assess its BCP arrangements to ensure these remain up to date. It is also considering new opportunities beyond high-intensity manufacturing and diversifying its portfolio.

At the same time, participants agreed that the adoption of remote working amid stay-at-home orders for all nonessential roles and businesses has proved largely successful for preserving business continuity, with workforce productivity remaining steady. As Tony Cripps, CEO, HSBC Singapore noted, organisations are finding that members and partners can still be served with extraordinary care with a large portion of team members working from home.

Adapting business strategies to meet customer needs

Participants also discussed how they have needed to evolve their strategies for both the short- and longer-term as they navigate through the COVID-19 crisis.

For retailers, for example, the pandemic has highlighted a fundamental change in what and how consumers buy. As lockdowns paused travel and travel-related shopping, sales of high-quality goods plummeted. In response, companies have needed to offer more products through online channels.

That has been the case for Melchers, which markets and sells premium products in Asia, However, as Managing Director Alexander Melchers explained, many luxury brands have traditionally been cautious about venturing into e-commerce because it is perceived as not easily fitting consumer expectations of a high-end shopping experience. Now, though, luxury retail has had to quickly adapt.

For Melchers, luxury brands whose products are perceived as timeless will fare better in an online environment than those dependent on fashion fads or trends. In addition, companies that carefully build up their platform’s credibility and ensure that they deliver a superior – and generally mono-brand – customer experience will be in a better position to rebound. Since April 2020, Melchers has applied this approach to selling Steinway pianos online, with great success.

The crisis is also accelerating changes in the way services are delivered. That has been the experience of NES Global Talent, which specialises in supplying technical and engineering contractors to a range of sectors, including the oil and gas industry.

Lee Coleman, Group Finance Director, described how the pandemic has resulted in a new trend where instead of seeking to fly contractors around the world for assignments, clients are looking to employ people more from their domestic market – whether that is locals or well-established expatriates. In his view, this will be a lasting shift as far as manpower needs are concerned and the company will be adjusting its strategy to reflect that.

Accelerating digital adoption

Participants also pointed out that in many sectors, they are seeing companies that began deploying digital solutions during the crisis – remote working capabilities, for example – continue to invest in more sophisticated technologies to help them adjust to the ‘new normal’.

The construction industry is no exception, according to Mathias Diehl, CFO of Tialoc, which provides environmental technology solutions across a range of industrial sectors.

Diehl explained that previously, clients might have expressed an interest in industrial IoT solutions for an area like piping, for instance, where embedded sensors measure pressure and temperature and send daily readings to a network of receivers. But now that visiting construction sites in person is so much more difficult, there is a growing willingness to actually implement this kind of technology. In short, the COVID crisis is acting as a significant digital accelerator.

For Paul Boudre, Group CEO of Soitec, a manufacturer of semiconductor materials, the pandemic is also advancing the business case for 5G technologies in a future in which more aspects of business, healthcare, shopping and everyday life will be conducted virtually.

As he pointed out, the global deployment of 5G networks is set to rapidly expand over the next five to ten years, evoking profound change as it – in his words – “connects everything that is connectable.” As a result, the switch to virtual operations that COVID has forced many companies to adopt will not only continue but significantly speed up in pace.

Managing liquidity challenges

With many businesses shuttered or cutting back their operations during the crisis, one area that has been affected is mergers and acquisitions (M&A). Martin Hill, ASEAN CFO for leading law firm Allen & Overy described a lull in M&A deal-making across markets as strategic and private equity buyers adjust to the uncertainty and take the opportunity to fine tune their portfolio businesses.

Nevertheless, the effect on deal pricing has not been uniform. As Hill pointed out, industries hard hit by the pandemic, such as travel, have been very significantly impacted. But by contrast, others – those in online technologies, for example – have not just survived, but even thrived during the crisis. More generally, Hill expects to see a larger amount of activity return in the medium term. As he noted, many private equity funds have plenty of cash on the sidelines and can generally afford to bide their time to find the right acquisition targets at the right price.

During the discussion that followed, Tony Cripps expanded on Hill’s point, commenting that money supply growth in the US has reached some very significant highs since April 2020 in the wake of quantitative easing, central bank asset purchases and various governmental stimulus packages. In his view, the amount of US dollar liquidity being created will continue to support listed equity markets, at least in the short- to medium-term. At the same time, global central banks are continuing to take decisive action to help preserve economic stability during the crisis.

Three steps for success in the ‘new normal’

Participants agreed that despite the challenges that certain sectors are facing, 2021 will likely lead to a slow recovery of growth.

In the meantime, responding strategically to the crisis requires an openness to challenging assumptions and a willingness to look beyond the obvious in addressing the threats created by COVID-19.

Chong-Win Lee, APAC CEO of digital technology advisory service Logicalis, underlined the fact that change and uncertainty are now a permanent part of the business landscape in Asia. As he put it, if companies are not agile enough to embrace that, then they may run the risk of being left behind.

Lee and his fellow business leaders identified tangible actions organisations can take to help them achieve that agility. These actions include:

  • Continuously reviewing business continuity planning and become more agile to better manage risk
  • Adapting business strategies where necessary to quickly respond to new opportunities
  • Accelerating digital adoption and innovating through technology to unlock productivity and allow for better connections with suppliers, customers and employees.

By boosting business resilience in these ways, companies can succeed in the ‘new normal’ even as circumstances continue to change.

Disclaimer

This article was prepared by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch.

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