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AFTF 2019: short-term thinking doesn’t work

The downside to a period of economic growth is how it can affect collective business focus. Complacency is the enemy of excellence – and in the current environment will catch businesses out.

Throughout the last decade many chief executives, chief financial officers and treasurers, having enjoyed a period of healthy returns, have increasingly set their strategies around quarterly results.

That short-term outlook won’t work in the new global environment, Ian Bremmer, Eurasia Group & GZERO Media President & Founder, told ANZ Institutional at the ANZ Finance and Treasury Forum 2019 in Singapore.

To better understand why this is a problem in an environment in which globalism is being reshaped by movements both within and between nations, according to Bremmer, executives should look to logistics.

“Right now it looks like supply chain for manufacturing companies and services companies is continuing to globalise,” he said. “I think that’s going to look very different after the next downturn, because so many of these CEOs have comparatively expensive labour footprints in countries like China.”

“If they could snap their fingers and change them, they would. But they can’t snap their fingers, and don’t want to make those changes right now. They will when they have to, and they’ll all be doing it together.”

Eventually there will be no choice, Bremmer said.

“What’s going to happen is suddenly there’ll be a downturn, and suddenly they’ll actually need to make difficult choices in their companies to make those [high] returns,” he said.

Competition

This kind of strategic shift will be a lot more problematic when every other business is attempting the same thing, Bremmer says.

It’s important for business leaders to alter their focus and make the necessary changes early, before they are forced to do so.

 

ANZ Finance & Treasury Forum 2019

At the ANZ Finance and Treasury Forum earlier in October, Professor Mahbubani and Bremmer were among a host of international though leaders who discussed the challenges of doing business in a global environment, as well as the opportunities.

ANZ’s forum brought together business, political and industry leaders to share their perspectives on trends shaping the region and the practical implications they will have on finance professionals.

The forum showcased practical experiences, transformation journeys and successes shared through real-life case studies which brought new technologies, business models and solutions to life.

ANZ Institutional will be bringing you highlights of the event over the coming weeks.

 

What is causing the seismic shift in the global economic environment?

According to Bremmer, it’s a unique mix of various forces, including populations feeling let down by leaders, growing economic inequality, anti-immigrant trends, the relatively recent influence of China and the ease with which ideas are able to spread via new media.

To cope in this environment, businesses must be centralised, with “a one-company mentality”, Bremmer said.

“There are an awful lot of companies out there that say … ‘We’re going to decentralise a lot of decision making, let the business units make sure that they make money in their individual businesses’,” he said.

“That is great when it’s all about growth. When suddenly you need to focus on stability and risk avoidance, and you need to make decisions that are going to be challenging for the whole company over the long term - that really hurts you.”

 

Direction

Kishore Mahbubani, Distinguished Fellow, Asia Research Institute, National University of Singapore and keynote speaker at AFTF 2019, said businesses must turn their attention to China for future direction.

“The one fundamental question [non-Chinese] companies have to ask is, is this return of China a flash-in-the-pan that is just going to come for a while and disappear?” he said. “Or is China going to be around in strength for the next 1000 years?”

Mahbubani has “absolutely no doubt” China would remain a powerful global player for a long time.

“I think over time, if you assume that people will eventually make rational decisions, there is room for synergy between Chinese business and American business and European business,” he said.

 

Unified

In the current and near-future climate, Bremmer said, it’s important to ensure leaders within a company have a unified approach across the entire business.

Rather than looking toward traditional markets for guidance around upcoming trends and challenges, Bremmer said it’s more important than ever to look to Beijing.

Volatility and inconsistency is dominating large markets such as the United States, United Kingdom and Europe. But the long-term strategic behaviour of China brings greater certainty in an unstable environment, Bremmer said.

“If you look at the last several years, who’s [had] more…impact on the global markets? Trump or Xi Jinping? Overwhelmingly it's Xi Jinping,” he said.

“He’s the guy that did anti-corruption. He’s the guy that’s doing Made in China 2025. He’s the guy that says China is going to lead the world in AI by 2030. He’s the guy that’s doing Belt and Road.”

“That is so much more profoundly consequential.”

Chris Sheedy is a contributor at ANZ institutional

AFTF 2019: in uncertain times, look to China

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