Singapore CEOs less bullish on revenue growth than global peers
Revenue growth is expected by 28% of CEOs in Singapore and 46% globally.
The proportion of Singapore CEOs confident in the global economy dropped from 77% in 2018 to 64% in 2019, KPMG revealed in its Global CEO Outlook report. Moreover, only 28% of CEOs expect a revenue growth of 2% and above. However, 92% of bosses still believe in the growth prospects of their companies.
On a global scale, 94% of global CEOs are bullish about their company’s prospects and 62% feel the same way about the global economy. Meanwhile, 46% expect a revenue growth of 2% and above.
Ong Pang Thye, managing partner at KPMG in Singapore, said, “There are expectations that the quantum of growth for companies in Singapore are lower as compared to global peers because trade is the key driver of growth for Singapore. The initial rounds of uncertainty from the trade tensions have dampened Singapore CEOs’ confidence in the global economy and their expectations of top-line growth.”
In the medium term horizon, however, the trade tensions could result in a significant number of US, China and other multinational corporations increasing their presence in ASEAN, KPMG said. “Singapore could therefore become an even more attractive regional or global headquarters as compared to its traditional Asia Pacific rivals, Hong Kong and Shanghai.”
Threat from operational risks
CEOs have identified operational risks as the top threat to their growth. Companies are now concerned if they can sustain their operations in their current form and would need to consider multiple scenarios to address the uncertainty, KPMG said.
Other major risks cited by Singapore CEOs this year include cyber security risk, emerging technology risk, territorialism (protectionism) and environmental risk.
In the area of cyber security, over two-thirds of global CEOs (69%) indicated that a strong cyber security strategy is critical to driving trust with their key stakeholders. These cyber resilient CEOs are projecting stronger revenue growth (over 2% or more) over the next three years.
Along with these risks, the need for Singapore companies to align their tax function to support corporate strategy has emerged as the most important performance metric for the tax department, KPMG added. 32% of Singapore CEOs understand the mandate to do so, and highlighted that taxation is no longer limited to management by the finance and tax team.
Amidst growing risks, Singapore CEOs seek merger and acquisition (M&A) deals to grow their companies and scale quickly. A third (32%) cited M&A as the most important strategy for achieving their organisations’ growth objectives over the next three years. This is almost double compared to CEOs globally (at 17%).
M&A as growth strategy
67% of Singapore CEOs say that taking advantage of favourable valuations is the primary driver for this M&A appetite, compared to 39% globally. “With a small domestic market where there is a need to scale up through inorganic growth in ASEAN and other global markets, we see M&A being the key driver of growth,” KPMG added.
In terms of where growth will come from and the strategies that CEOs are using to build resilience, 63% of global CEOs are targeting the emerging markets for geographical expansion in the next three years, with the Belt & Road Initiative (BRI) at the forefront of their ambitions.
Ong said, “China knows that they need to work on the BRI projects with an additional partner, and Singapore is beginning to fill that role from a position of trust and skill. Firstly, Singapore has a longer history of working with China and other global infrastructure players and is often viewed as a skilled partner in negotiation. Secondly, Singapore has a developed legal system and is favoured as a mediation and arbitration hub for cross-border disputes.”
Globally, a majority of CEOs (84%) believe a “fast-fail” culture is required in today’s marketplace, in which lessons from failures are learned quickly. Yet, only 56% say that kind of culture is in place in their organisation. Eight out of 10 CEOs (84%) are looking to change the makeup of their leadership teams to disrupt the status quo.
This disconnect in innovation is even greater for Singapore organisations, KPMG said. Whilst 92% of CEOs said they want their employees to feel empowered to innovate without worrying about the possibility of negative consequences, only 40% said their organisation currently has a culture where “fast-failing” innovation is celebrated.