South-East Asia’s financial behemoths have embraced innovation in a bid to stave off the worst of COVID-19’s economic impact. The region’s financial leaders, CFOs and CPAs, tell us how.
COVID-19 is no longer just a health crisis, it’s an economic one. With more than 100 countries and over a third of the world’s population put under full or partial government-imposed restrictions, the effects of the coronavirus will be felt long after the lockdowns are lifted.
Globally, corporate leaders are strategising to protect their businesses, while also looking to reposition them for the future.
Wayne Treeby FCPA is the CFO and chief strategy officer of Maxis, Malaysia’s largest communications service provider. He has experienced four significant financial crashes during his career but never has he seen a global hit this instantaneous.
After reviewing every business line, marketing plan and investment, and holding discussions with economists and financial market experts across Asia, Europe and the US, Maxis has prepared itself for a U-shaped recession.
Treeby is working on the assumption that the economy won’t rebound for a couple of years. They’ve built their plans around multiple scenarios so they can react quickly to changes in the economic environment.
“If it recovers more quickly that’s great, we will start spending more, but I think it’s too risky not to take a fairly conservative approach,” says Treeby.
Malaysia’s tourism trade is significant for the economy and, like Australia, it has a big SME sector. Many of those small enterprises only hold enough cash flow for two to three months, and Treeby believes many won’t re-open. Until there’s a vaccine, he expects the restart to be patchy.
“The global economy has borrowed a lot of money,” says Treeby. “I think they have done the right thing stimulating the economy and it has propped up the financial markets, but that’s got to be paid back at some stage so I think the economic impacts are yet to be really felt.”
He says the GDP crash in Europe, Australian banks not paying dividends and Shell cutting its dividends for the first time since World War II are all warning flags for what could lie ahead.
Brace for global economic impact
Adapting to a new way of doing business in the era of COVID-19 comes with its challenges. The constantly evolving situation means hopes can fall as quickly as they were raised.
Singapore drew international praise for its efforts to contain the virus in the early stages of the outbreak but had a second wave of infections in mid-April. While other Asian and South Pacific nations were easing restrictions, Singapore had to tell its people restrictions were not just being tightened but extended.
“The near-term economic outlook for many countries, including Singapore, is fraught with uncertainty,” says Chng Law Chew, CFO Singapore Exchange (SGX). “Stringent containment measures imposed by governments globally are likely to further constrain economic growth.”
With 90 per cent of staff working from home, Chng says the SGX, like many organisations around the world, has successfully embraced innovation. He predicts this will be vital in the effort to curtail further financial loss.
“One behavioural change that we can expect to see is an increased appetite for technology,” says Chng.
“The argument for digital transformation has never been stronger. This will bring with it both challenges and opportunities which all of us in the ecosystem will have to adapt to.”
In Malaysia, the Movement Control Order mandated in mid-March interrupted supply chains, dried up cash flows, slowed productivity and shelved business development activities.
Gark Chee Jin FCPA is managing director and director controller of Cypress Semiconductor Malaysia, a subsidiary of an American semiconductor design and manufacturing company. He’s also deputy president of the CPA Divisional Council of Malaysia.
While Cypress has made necessary adjustments to its workforce and operations, its been fortunate the effects on its supply chains and cash flow have been minimal. However, Gark says forecasting has become more difficult as there are now many ambiguities and uncertainties.
“We are living in a situation where certain things are not controllable within the entities so the best we can do is reduce the risks,” he says.
Protect and stabilise businesses
Maxis’ priority was to protect the health of its employees and customers, then stabilise the business and protect its core. This included managing liquidity, planning for risk as well as opportunity, having open communication with stakeholders, rigorously reviewing all lines of business (from bottom up as well as top down) and adjusting the risk management framework.
Treeby deployed measures to strengthen Maxis’ network capabilities in response to the surge in traffic, accelerated digital adoption for its customer service teams and executed initiatives to uphold data privacy and security.
He warns of an increased cybersecurity risk from trolling and phishing scams as people move to working from home and says it’s prudent for businesses to invest in tighter security measures in the current climate.
Cypress shifted some production to regional subcontractors where access was limited. Gark says the extra cost is worth it to preserve market share.
Chng, the CFO of the SGX, says his priority remains to take care of his clients, albeit in a new and unique environment. To remain as accessible, fair, orderly, and transparent as ever, he has overseen plenty of change.
“We have had to make a number of adjustments to our operations,” Chng says. “Such as implementing stringent measures to safeguard everyone’s wellbeing, operating with minimal employees onsite, changing our processes to minimise face-to-face interactions, amongst others.”
Seize the day
While some businesses will not survive this period, many have strong foundations and contingencies that will see them through. Others, such as Potboy Groceries, an online grocery shop in Malaysia founded in 2016 by Eddie Chew CPA, are able to capitalise on the change of circumstances and expect to emerge from the crisis stronger than ever.
Lockdown rules and a general fear of public places has seen a three-fold spike in demand for Potboy’s grocery services. People who previously baulked at the concept of buying online are now giving it a try – and coming back as repeat customers.
“This is a very good time to convert them from buying offline to online,” says Chew, who has upped expenditure and employed more permanent and temporary staff to increase his order processing capacity. He says it’s important to ensure the customer experience is a positive one.
“People are very appreciative and we publish that within the company to harness the morale and motivation to all staff at all levels so they can see why we have to continue to do this at this difficult time,” Chew says.
In addition to growing his market share, Chew identified new business opportunities with smaller, local suppliers joining the big-name brands on the grocery site. He’s also developed an online take-home meal ordering service created in response to demand from small food outlets needing a digital way to reach their customers.
In this together
Amid all the challenges COVID-19 has thrown, a sense of unity has risen. Now is not the time to get political, or to panic, says Chew. What’s needed is for businesses to abide by the rules and let governments focus on the health and economic interests of their countries.
Maxis has provided additional data and service to clients and critical government services including health, police, and education. The Singapore Exchange spared no cost in supporting employees, most notably with its S$5 million SGX Care Package which goes towards supporting Singapore-listed companies as well as SGX employees and contract staff, in particular frontline staff such as cleaning and security crew.
“Amid the challenges, we also have to be proactive in pursuing opportunities, while maintaining a community mindset such as taking care of our colleagues and supporting our staff emotionally,” says Chng.
“We need to keep our spirits high and remain optimistic. This storm, while formidable, will pass.”
KPMG audit partner and Malaysian Divisional CPA Council member, Koh Ree Nie CPA, says it’s now more important than ever to be a good corporate citizen.
The company has made its KPMG website accessible to the public, providing guidelines and insights to help businesses understand their exposure from COVID-19. It has also run a series of free webinars for clients on the complexities of the pandemic for businesses.
Koh hopes a study being conducted by KPMG on the impacts of working from home on social wellbeing will provide valuable insights for business leaders and policy makers.
Prepare for recovery
As someone who has guided various businesses through numerous economic crises in his career, Treeby says it’s important to keep looking forward. There will be businesses going cheaply and new avenues to explore but these can pass you by if you haven’t been planning for recovery at the same time as planning for the crisis.
“Prepare for bounce back,” he advises. “You can miss incredible opportunities in hindsight. Things will recover and you can leverage off that and pivot in the right way, but nothing is going to be the same, so start with a clean sheet and look at everything.”