Deloitte’s latest study reveals that Chief Financial Officers in Southeast Asia are preparing for heightened challenges amidst ongoing volatility

BANDAR SERI BEGAWAN, 7 March 2024 – A recent Deloitte study has found that relative to their Asia Pacific counterparts, Chief Financial Officers (CFOs) in Southeast Asia (SEA) are significantly more concerned about the global economic outlook. When surveyed about their top-of-mind external risks for the next 12 months, 80% of SEA CFOs report global economic slowdown as their top external risk – significantly higher than the overall Asia Pacific average of 57%.

Findings from the research consolidated into a report titled “SEA CFO Agenda 2023: Decoding the CFO’s trilemma”, revealed an overwhelming frequency with which SEA CFOs are preparing for worst-case scenarios amidst the ongoing volatility. To avoid being caught off guard by unexpected events, SEA CFOs have been scrutinising every line item in their financial statements and doubling down on financial planning and analysis (FP&A) and forecasting activities.

However, while SEA CFOs 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 SEA respondents expressed optimistic sentiments, a figure comparable to the overall Asia Pacific average of 49%. This suggests that SEA CFOs 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 SEA, 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,” commented Mr HO Kok Yong, CFO Program Leader, Deloitte Southeast Asia.

“What is unique about SEA CFOs is a certain savviness in terms of capitalising on the upsides that volatility presents. 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,” he added.

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 SEA CFOs. 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, our 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,” said Kok Yong.

“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 added.
 
Talent as the off-balance sheet asset

Although much has been said about the age of AI and automation, it is noteworthy that nearly three-quarters, or 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. 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,” said Kok Yong.

“This year, we observed that SEA CFOs are beginning to recognise that these two types of talent are likely to require highly tailored 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 added.

Methodology
Between June and September 2023, Deloitte Asia Pacific surveyed 276 CFOs in the region to better understand their challenges and priorities. The survey was conducted across five economies in Asia Pacific – namely, Australia, China, India, Japan, and Southeast Asia (SEA).

Within SEA, a total of 46 responses were received from CFOs based in Malaysia, the Philippines, Singapore, Thailand, and Vietnam. A significant majority, or 70%, of this sample was composed of CFOs from companies with annual revenues of more than US$100 million, with wide sector coverage across the consumer; energy and resources; financial services; life sciences and health care; manufacturing; public sector; and technology, media and telecommunications industries, as well as diversified conglomerates.

To inform the analysis, Deloitte Southeast Asia also conducted a series of one-on-one interviews with 15 SEA CFOs within the same timeframe to obtain a more granular understanding of the unique nuances and perspectives of SEA CFOs.

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