Businesses turn to digital to weather tough economy

By Jonathan Ng

COVID-19-related uncertainties and economic headwinds such as a global recession have weakened business confidence in Mainland China, Hong Kong and Malaysia, according to two CPA Australia surveys on business sentiment in 2021 and a survey by Monash University Malaysia conducted with the support of CPA Australia.

Through the surveys, CPA Australia gathered the views of members on business prospects in 2021, and collected views on technology trends, skillsets in demand and employers’ key strategic areas of focus in a fast-changing environment.

Business confidence declines

The combination of the pandemic and a weak global economy dampened business prospects in 2021 in all three markets surveyed, although business confidence appears strongest in members in Mainland China.

Members surveyed in Mainland China and Hong Kong were more likely to expect their business to decrease their headcount in 2021 than they were in 2020. However, highlighting the more severe and longer negative effects COVID-19 has had on Hong Kong businesses, the percentage of respondents expecting their employer to decrease headcount in Hong Kong (41 per cent) is higher than in Mainland China (32 per cent).

Forty six per cent of respondents in Hong Kong forecast their employer’s revenue to decrease by 2 per cent or more in 2021. Among those who expect such a decrease, 24 per cent believe that revenue will decrease by 30 per cent or more, representing an increase of 11 percentage points from 2020.

In Mainland China, 24 per cent of respondents estimate that their company’s profit in 2021 will decline by 2 per cent or more, up 4 percentage points from the survey conducted the year before.

In Malaysia, business leaders expect 2021 to be a more difficult year than 2020, with the percentage expecting a negative business environment increasing from 16 per cent in 2020 to 24 per cent in 2021.

Malaysian respondents are also less confident in their company’s prospects in 2021 as compared to the year before, and the percentage of firms that lacked confidence increased from 10 per cent to 15 per cent. Likewise, the percentage of respondents who expect their company’s revenue to decrease more than doubled, from 15 per cent in 2020 to 31 per cent in 2021.

Main areas of business focus

Reflecting both a proactive attitude and a focus on managing their financial position in the face of expected headwinds, Mainland Chinese businesses have chosen digital transformation, cost management and exploring new markets for potential expansion as the top three areas of focus for their employer in 2021.

Given expected tough business conditions in 2021, businesses in Hong Kong are more likely to indicate that they will focus on a more defensive strategy, with cost reduction, improving business efficiency, improving cash flow and digital transformation the top areas of focus.

Similarly, the most important focus areas for Malaysian businesses are business recovery and reinvention, growth in profits and digital transformation, indicating that tougher economic conditions have compelled many businesses to undertake major changes to maintain profitability and ensure sufficient cash flow.

Technology trends

Illustrating a strong culture of innovation and technology adoption in Mainland China, as well as changes to consumer behaviour and work arrangements, 57 per cent of businesses expect to increase their investment in technology in 2021, representing a rise of 7 percentage points from the survey conducted the year before.

In Malaysia, the percentage of firms that have started to implement, have partially implemented or have fully implemented Industry 4.0 technologies, such as cloud computing and artificial intelligence, increased from 74 per cent in 2019 to 79 per cent in 2020.

Skills in demand

The results from all three surveys suggest that, as firms increase their focus on digital technologies, there is a growing demand for talent with skills related to digitalisation and technology adoption.

In Malaysia, information and communication technology skills surpassed personal confidence and teamwork capability to become the second most important skill – after critical thinking – that respondents believe university graduates should possess.

Similarly, in Mainland China, digital and technical skills are the most important skills members believe employees should possess, followed by flexibility and adaptability, creativity and innovation.

In Hong Kong, creativity and innovation, critical thinking and analytical skills, as well as digital and technical skills are the employment skills most in need, as chosen by members.

Suggestions for businesses

In the face of persistent economic uncertainties and challenges, it is important businesses focus on maximising efficiency, ensuring financial health and cautiously identifying growth opportunities.

Businesses could consider the following suggestions:

• Review operations to look for improvements, such as through digitisation and automation.
• Encourage a company-wide innovative culture through training programs that develop and improve employees’ digital and technical skills.
• Control costs to a level consistent with the firm’s needs rather than just cutting costs. Longer-term and recurring savings are better than short-term wins.
• Cautiously explore opportunities to diversify and expand in domestic and overseas markets.