SEA CFO Agenda 2023
Decoding the CFO’s trilemma: Volatility, value, and capabilities
Findings from our latest research – comprising a survey with 46 SEA CFOs based in Malaysia, Philippines, Singapore, Thailand, and Vietnam, and a series of one-on-one interviews with 15 SEA CFOs – revealed that SEA CFOs have become highly adept at leveraging the lessons of the pandemic to contend with volatility.
Beyond volatility, however, SEA CFOs are also facing growing expectations to better manage their talent, technology, as well as environmental, social, and governance (ESG) strategies. These are challenges that are not confined to finance, or any particular function for that matter; they are multi-disciplinary and multifaceted in nature, and require the orchestration of organisation-wide, cross-functional collaboration.
Amidst the hype around artificial intelligence (AI) technologies, the value of AI and what it means for talent are also top-of-mind considerations for SEA CFOs. Nevertheless, while their organisations possess varying levels of digital ambitions, what was clear across the board was that most SEA CFOs are only in the exploratory phases of AI and data.
${buttonText}
Beyond volatility, however, SEA CFOs are also facing growing expectations to better manage their talent, technology, as well as environmental, social, and governance (ESG) strategies. These are challenges that are not confined to finance, or any particular function for that matter; they are multi-disciplinary and multifaceted in nature, and require the orchestration of organisation-wide, cross-functional collaboration.
Amidst the hype around artificial intelligence (AI) technologies, the value of AI and what it means for talent are also top-of-mind considerations for SEA CFOs. Nevertheless, while their organisations possess varying levels of digital ambitions, what was clear across the board was that most SEA CFOs are only in the exploratory phases of AI and data.
${tileLinkLabel}
The SEA CFO’s trilemma
Three broad, recurring themes – contending with volatility; creating long-term value; and transforming capabilities – together comprise what we believe to be the SEA CFO’s trilemma:
${type1}
Contending with volatility
${description1}
Survival of the fittest
Given that many regional economies have less of a domestic hinterland and are much more export-driven in nature, top concerns cited by SEA CFOs in our conversations with them include geopolitical tensions and conflicts, interest rates and inflation, import sanctions, a slowdown in domestic consumption, and slower-than-expected post-COVID recovery in China – a finding that was also consistent with our survey results (see below).
But above all, the question of geopolitical stability looms large in the minds of SEA CFOs. It is perhaps for this reason many SEA CFOs view the ongoing volatility as a ‘survival of the fittest’ test – and indeed, we have noticed an overwhelming frequency with which SEA CFOs are now preparing for worst-case ‘Armageddon’ scenarios.
A conservatively opportunistic mindset
While revenue growth and cost control continue to remain the top two priorities for many SEA CFOs (see below), our observations suggest that they have since shifted towards a much more proactive footing than before. To manage the ongoing volatility, many SEA CFOs are now actively considering various forms of diversification strategies, and adopting forward-thinking and opportunistic approaches to managing the impacts of volatility on their cost of capital.
Overall, what we observed across the board was a similar overarching philosophy in SEA CFOs’ approaches to managing volatility. Such an approach – one that is informed by a highly sophisticated and nuanced view of volatility, and which seeks to capitalise on the upsides of volatility with a conservatively opportunistic mindset – can be said to be characteristic of many SEA CFOs’ strategies to contending with volatility.
Given that many regional economies have less of a domestic hinterland and are much more export-driven in nature, top concerns cited by SEA CFOs in our conversations with them include geopolitical tensions and conflicts, interest rates and inflation, import sanctions, a slowdown in domestic consumption, and slower-than-expected post-COVID recovery in China – a finding that was also consistent with our survey results (see below).
But above all, the question of geopolitical stability looms large in the minds of SEA CFOs. It is perhaps for this reason many SEA CFOs view the ongoing volatility as a ‘survival of the fittest’ test – and indeed, we have noticed an overwhelming frequency with which SEA CFOs are now preparing for worst-case ‘Armageddon’ scenarios.
A conservatively opportunistic mindset
While revenue growth and cost control continue to remain the top two priorities for many SEA CFOs (see below), our observations suggest that they have since shifted towards a much more proactive footing than before. To manage the ongoing volatility, many SEA CFOs are now actively considering various forms of diversification strategies, and adopting forward-thinking and opportunistic approaches to managing the impacts of volatility on their cost of capital.
Overall, what we observed across the board was a similar overarching philosophy in SEA CFOs’ approaches to managing volatility. Such an approach – one that is informed by a highly sophisticated and nuanced view of volatility, and which seeks to capitalise on the upsides of volatility with a conservatively opportunistic mindset – can be said to be characteristic of many SEA CFOs’ strategies to contending with volatility.
${type2}
Creating long-term value
${description2}
If you want to go far, go together
Without exception, our conversations with SEA CFOs have revealed that growing expectations and responsibilities weigh heavily on their minds (see below). With the spotlight on digital transformation and ESG in recent months, key stakeholders cited by SEA CFOs included the Chief Procurement Officer (CPO), Chief Technology Officer (CTO), Chief Information Officer (CIO), and Chief Sustainability Officer (CSO).
This is a marked contrast from previous years, where the conversations had centred primarily around select individual stakeholders, such as the Board, CEO, and COO. Furthermore, there was also greater emphasis this year on the role that the CFO needs to play in supporting the broader C-suite as they exercise their collective responsibility – that is, the shared responsibility that the C-suite team holds to its Board, shareholders, and organisation beyond their individual areas of functional responsibility.
Data as the language of the CFO
Data is not only the most important thread connecting SEA CFOs to their traditional finance and reporting responsibilities, but also the primary basis of their engagement with external partners and internal stakeholders (see below).
Recognising this, SEA CFOs are making conscious efforts to improve their data processes to better support the various business units in making more informed strategic decisions, not only by providing more accurate data but also improving the timeliness and relevance of the data that is being provided.
Doing well by doing good
SEA CFOs appear to be relatively prepared to fulfil their ESG mandates, with the majority of them indicating that they have adequate processes in place or plan to implement processes to comply with climate reporting requirements, and feel prepared or somewhat prepared to tackle ESG priorities (see below).
However, common challenges cited by SEA CFOs included the lack of harmonisation across global ESG standards, as well as the uncertainty around sustainability-related financial instruments such as green bonds.
Without exception, our conversations with SEA CFOs have revealed that growing expectations and responsibilities weigh heavily on their minds (see below). With the spotlight on digital transformation and ESG in recent months, key stakeholders cited by SEA CFOs included the Chief Procurement Officer (CPO), Chief Technology Officer (CTO), Chief Information Officer (CIO), and Chief Sustainability Officer (CSO).
This is a marked contrast from previous years, where the conversations had centred primarily around select individual stakeholders, such as the Board, CEO, and COO. Furthermore, there was also greater emphasis this year on the role that the CFO needs to play in supporting the broader C-suite as they exercise their collective responsibility – that is, the shared responsibility that the C-suite team holds to its Board, shareholders, and organisation beyond their individual areas of functional responsibility.
Data as the language of the CFO
Data is not only the most important thread connecting SEA CFOs to their traditional finance and reporting responsibilities, but also the primary basis of their engagement with external partners and internal stakeholders (see below).
Recognising this, SEA CFOs are making conscious efforts to improve their data processes to better support the various business units in making more informed strategic decisions, not only by providing more accurate data but also improving the timeliness and relevance of the data that is being provided.
Doing well by doing good
SEA CFOs appear to be relatively prepared to fulfil their ESG mandates, with the majority of them indicating that they have adequate processes in place or plan to implement processes to comply with climate reporting requirements, and feel prepared or somewhat prepared to tackle ESG priorities (see below).
However, common challenges cited by SEA CFOs included the lack of harmonisation across global ESG standards, as well as the uncertainty around sustainability-related financial instruments such as green bonds.
${type3}
Transforming capabilities
${description3}
Making sense (and cents) of AI
Despite the excitement around emerging technologies such as AI, the top three most used technology enablers remain basic automation tools, such as electronic invoicing, robotic process automation (RPA), and intelligent documentation (see below).
The primary reason for this phenomenon was clear: SEA CFOs frequently lamented the lack of clean and consistent data as by far the largest impediment to their organisation’s uptake of advanced AI technologies.
Talent as the off-balance sheet asset
While SEA CFOs are no doubt highly concerned about potential disruptions in products, markets, and demand amidst the ongoing volatility, it appears that there is one concern that looms larger: their ability to secure and retain key talent (see below).
It is worth noting, however, that there is a slight nuance to this. The majority of SEA CFOs we spoke to this year emphasised that there is no one-size-fits-all strategy for talent development, even within an individual organisation; rather, they advocated for the need to put in place differentiated talent strategies to cater to the developmental needs of high-value and high-potential finance talent.
Despite the excitement around emerging technologies such as AI, the top three most used technology enablers remain basic automation tools, such as electronic invoicing, robotic process automation (RPA), and intelligent documentation (see below).
The primary reason for this phenomenon was clear: SEA CFOs frequently lamented the lack of clean and consistent data as by far the largest impediment to their organisation’s uptake of advanced AI technologies.
Talent as the off-balance sheet asset
While SEA CFOs are no doubt highly concerned about potential disruptions in products, markets, and demand amidst the ongoing volatility, it appears that there is one concern that looms larger: their ability to secure and retain key talent (see below).
It is worth noting, however, that there is a slight nuance to this. The majority of SEA CFOs we spoke to this year emphasised that there is no one-size-fits-all strategy for talent development, even within an individual organisation; rather, they advocated for the need to put in place differentiated talent strategies to cater to the developmental needs of high-value and high-potential finance talent.
${type4}
${title4}
${description4}
${popup4}
${type5}
${title5}
${description5}
${popup5}
${type6}
${title6}
${description6}
${popup6}
${type7}
${title7}
${description7}
${popup7}
${type8}
${title8}
${description8}
${popup8}
${type9}
${title9}
${description9}
${popup9}
${type10}
${title10}
${description10}
${popup10}
${type11}
${title11}
${description11}
${popup11}
${type12}
${title12}
${description12}
${popup12}
When the going gets tough, the tough get going
Our conversations with SEA CFOs have revealed that they are adopting a wide range of savvy approaches to tackle the different challenges presented by the trilemma:
To avoid being caught off guard by unexpected events, the CFO at a Singapore-based technology company has developed a proactive resource management strategy centred around financial planning and analysis (FP&A) and forecasting activities. Briefly, their approach entails incorporating additional stress parameters into the FP&A process to provide leeway for uncertain and unpredictable scenarios, while closely scrutinising both revenue and cost drivers.
One CFO at a Philippines-based food and beverage company shared with us how they have put in place both in-house and outsourced specialist teams – the latter of which includes partners in the banking community and economists – who are responsible for analysing a constant influx of news to identify impacts on the company’s risk management, funding, and profitability. The analysis they generate is then used as inputs to develop tailored strategies to address specific regional risks in strategic markets or opportunistically bolster capital and accelerate market expansion.
While every CXO has their individual domain of functional expertise, one Philippines-based CFO stressed the importance of the C-suite coming together to deliver on their collective responsibility. To illustrate this point, they shared with us several examples of how they are stepping up to support their C-suite counterparts in navigating the business’ most critical issues:
- Providing strategic counsel to the CSO
Following the recent appointment of a new CSO, the CFO initiated a series of extensive discussions with them to establish the direction of the organisation’s ESG initiatives. Given that the CSO did not possess a prior background in ESG and sustainability – whereas the CFO had previously been at an organisation where ESG was a constant topic – the CFO was able to play a pivotal role in providing strategic counsel to the CSO. - Exercising influence in support of the CPO
Recognising responsible sourcing as a critical linchpin of sustainable procurement strategies, the CPO had recently advocated for five additional headcounts in this domain; however, they encountered pushback due to budgetary concerns. Exercising their influence over the organisation’s purse strings and numbers, the CFO supported the CPO by committing to the C-suite that they would formulate the necessary budget to support the five headcounts. - Acting as the backstop for the C-suite
Although not the favourite aspect of their role, the CFO also recognised the importance of acting as a backstop for the C-suite when challenges or risks emerge. Many of these risks – for example, those related to labour unions or wrongful dismissals – are non-financial in nature, but could have significant financial impacts when they materialise on the profit and loss (P&L) statement as legal or other expenses.
For the CFO at a Singapore-based conglomerate, the human tendency to resist change may sometimes come across as “resistance for the sake of resistance”. Their experience, however, has shown that that the resistance to change could at least in part be attributed to the fact that certain individuals and teams may have been favoured due to their historically positive reporting, and exposing the fact that their performance may not have been as favourable makes it hard for them to embrace the change.
In the broader context, the current realm of volatility and job security also appears to have created greater resistance to change, as many individuals and teams become more focused on safeguarding their livelihoods and positions. Other people-related concerns cited by this CFO also included fragmented teams, as well as the lack of consistent internal communication and unified approaches to judgement-based decisions such as accruals and valuations.
To address these issues, the CFO is currently focusing on the implementation of accounting software to standardise processes not only within the finance team, but also across other functions such as ESG and treasury – and having these common tools in place is expected to go some way in helping to align mindsets across the different teams.
In the broader context, the current realm of volatility and job security also appears to have created greater resistance to change, as many individuals and teams become more focused on safeguarding their livelihoods and positions. Other people-related concerns cited by this CFO also included fragmented teams, as well as the lack of consistent internal communication and unified approaches to judgement-based decisions such as accruals and valuations.
To address these issues, the CFO is currently focusing on the implementation of accounting software to standardise processes not only within the finance team, but also across other functions such as ESG and treasury – and having these common tools in place is expected to go some way in helping to align mindsets across the different teams.
The CFO at a Singapore-based technology company believes that achieving cost competitiveness while offering environmentally friendly products is a challenging endeavour because it necessitates rigorous cost-benefit and risk-reward analyses, and the balancing of affordability with functionality.
To achieve this, the CFO adopts a highly analytical approach to the development of their product innovation strategy, focusing in particular on the high fixed costs of each investment decision – for example, capital expenditure on high-value proprietary technology equipment – in the formulation of their assumptions and analysis of returns on investment (ROI).
To achieve this, the CFO adopts a highly analytical approach to the development of their product innovation strategy, focusing in particular on the high fixed costs of each investment decision – for example, capital expenditure on high-value proprietary technology equipment – in the formulation of their assumptions and analysis of returns on investment (ROI).
In the adoption of emerging technologies, SEA CFOs often find themselves confronted with the strategic question of whether to pursue early adopter or fast follower strategies. Here are three examples of the different strategies that SEA CFOs are adopting across the entire spectrum:
- An early adopter with the ambition of becoming an AI-first organisation
The CFO at a Thailand-based financial technology group has an unambiguous strategic ambition for AI: they must charge ahead of the pack to become an AI-first organisation. One key roadblock that they are facing, however, is the existence of differing interpretations of AI across teams and individuals. Communication and collaboration are key to overcoming this challenge, and the CFO believes that it is necessary to generate momentum from an initial group of early adopters to encourage gradual uptake by the rest of the organisation. - A fast follower piloting AI use cases
While the CFO at a Singapore-based health care service provider recognises the transformative potential of AI technologies, they believe that they do not necessarily need to be early adopters. Instead, they prefer to adopt a fast-follower approach by gradually embracing and incorporating proven use cases into their operations and investing judiciously in pilot programs that provide clear benefits, cost savings, and ROI. - A late follower adopting a ‘wait-and-see’ approach
The CFO at a Thailand-based conglomerate shared with us that while most AI applications currently in the market are “good-to-have”, the output they produce largely do not have game-changing implications. For them, it is not about going with the hype, but understanding the true value and benefit of the investments they are making and how that fits in with the business.
Across our conversations with SEA CFOs this year, we have noticed a palpable trend towards the development of differentiated developmental pathways for high-value and high-potential finance talent:
- High-value talent
SEA CFOs we spoke to had made a distinction between what they consider to be “critical roles” and “everyday roles” in the finance function. The CFO at a Singapore-based technology company, for example, explained that they consider individuals who can comprehend systems, perform programming, and automate processes to be critical talent – not only because they possess skillsets that differentiate them from traditional finance professionals, but also because the organisation’s strategy emphasises the development of in-house digital capabilities and self-sufficiency rather than a reliance on external technology consultants. - High-potential talent
SEA CFOs recognise the need to cultivate a second-level leadership team to ensure the continued operational stability of the finance function, with the result that succession planning is becoming an increasingly important consideration – and in certain cases, even a key performance metric for the CFO. The CFO at a Singapore-based diversified conglomerate, for example, recently hired individuals with the expressed intention of preparing them to take on future leadership roles; this CFO also deliberately invests a substantial amount of their time in the grooming, exposure, and advancement of these individuals, personally mentoring and coaching them over an extended period.
${panelContent8}
${panelContent9}
${panelContent10}
${panelContent11}
${panelContent12}
