Asia’s Main Financial Center Poised for Growth, But Facing Risks

This age is variously being called the "Asian Century" and with right. Much of the global growth is being fuelled by the region’s markets, led by China, and Hong Kong, with its vibrant business center, is uniquely positioned to benefit from all this activity. Mike Smith, CEO of ANZ bank, recently commented: "I am convinced the coming Asian century is real, that China will drive it, and Hong Kong will remain in a unique position. But Hong Kong will also face new challenges to its status as Asia’s major financial center." These challenges are equally real, and many of them revolve around regulation, fraud, and exposure. In addition, disruptive technologies, the impact of social media on diverse stakeholder groups, and increased regulation across Asian markets have all resulted in a bewildering landscape, through which today’s Finance leaders are carefully navigating a path. Add to this the increase in complexity resulting from acquisitions, and the risk exposure is multiplied. Many Finance leaders have reacted by spearheading a transformation of their function to address the unique risks of their expanding role. It’s imperative to look out for weaknesses in the system, and to leverage all the tools at your disposal – including data analytics – to protect your operations. We’ve compiled leading risk factors that Finance executives should be aware of. External Market Risk: Outside Your Control Though the external environment is largely outside your control, you can factor in the risks it poses to hedge your downside: Fluctuating markets – risk of uncertain costs and revenue Uncertain credit availability – potentially limiting opportunities to expand Shifting customer expectations – you risk losing your customers if you’re not close enough to understand their changing demands (if you don’t adapt, your competitors will) Emerging technologies are disrupting the world as you know it – offering opportunities, but also risks. If you’re not first out of the gate someone else might be Shareholders and stakeholders are demanding frequent access to data and increased transparency – you’ll need to learn to communicate more via the channels they prefer; rethink your traditional reporting practices Internal Market: You Can Control Recognize where risk is hiding and take steps to mitigate against it, particularly with regards to fraud, misstatements, missed opportunities, and lack of timely data Build on cross-departmental relationships to get a holistic view of your company’s risk profile Act as a "risk advisor" to management – provide input on taking intelligent risks to win returns, by maximizing the upside and minimizing the downside Design and test a risk response plan for each of your areas of exposure Raise risk awareness throughout the organisation to promote "risk intelligence" across the enterprise. [eventpdf] More specifically, here are 10 areas where your Risk Exposure is greatest: 1. Regulatory Compliance Across Asia’s emerging and developing markets, governments are scrambling to introduce regulations to control and protect their economies. But this poses a problem for organisations that are active across a number of the region’s markets – and that is the case for most of you. It’s imperative that you keep up to date with changes in regulations as a mistake can cost you dearly, and set your operations back. 2. Fraud & Financial Crime With rampant growth comes the potential for fraud. Just at the time your business is expanding and your financial processes are so crucial, you need to be vigilant against any gaps or loopholes that might allow fraud to creep in. The payments sector is particularly at risk, and while governments are fighting against corruption, you need to do your part to protect yourself. Your ability to monitor, identify and respond to fraud will make or break your international expansion plans. 3. Monitoring Data Most financial executives are already relying on data to support the business in its growth, drive efficiencies through processes, and identify fraud. But data, specifically Big Data, offers an array of – often confusing – opportunities. Smart companies are investing in data analysts who sit within the Finance team and constantly mine and analyse the information. Much of their work is now focused on "predictive" analytics, which guard against future market changes. Today’s data analytics can monitor and alert you about processes real-time, across a massive volume of transactions, and even track email, voice and social media for suspicious activity. 4. Your Skillset Are you keeping up with the requirements of your role? To manage a transformed finance function requires more than strong accounting skills. You need to understand your customers’ requirements (internal and external), know where organisational strategy is headed, grasp the end-to-end process, and develop upstream and downstream relationships. Collaboration is the name of the game. 5. Faster, Better, Cheaper Financial data at the push of a button. That’s what the Board needs (and wants) to make the right decisions in uncertain markets. A wrong decision is costly, and you can’t afford to wait for days for reports. Re-evaluate your enterprise architecture and consider the advantages of in-memory databases for fast and reliable results. 6. Talent Management You are only as strong as your team – but with the skills you are seeking still in short supply, you’re probably struggling to find the resources you need to support growth. Embrace the multigenerational dynamics of a younger workforce (70% of your finance peers are, according to a Deloitte Consulting poll). Try recruiting in markets with a strong supply of qualified manpower, even if they’re outside your home market. And invest in softer training skills (customer service, knowledge management) as well. That’s what your finance function needs. 7. Sitting on Cash Still fearful after the economic crisis, hesitant about committing to M&A, discouraged by tax regulations from shifting your cash around the globe, and uncertain about allocating your capital? You’re not alone in stockpiling cash. But if you hesitate to invest, you’ll run the risk of failing to innovate, or to lay the foundations for future growth; and you may not be able to buy off company shareholders with dividends once you’ve lost their trust. They’ll jump ship if you don’t show them the goods. 8. Capital Productivity & Capital Expenditure Effectiveness What’s preventing your capital expenditure programs from being more effective? – usually, it’s down to improper metrics and evaluation methods. It’s tough to link CapEx metrics to your operating expenditure budget, unless you are clear in the planning phase. Use a common set of metrics, or drivers, across capital and operational planning, to make sure you are getting the most out of your investments. 9. Business Intelligence & Analytics No one is better placed than you in Finance to lead analytics across the enterprise, leveraging centralized control of operational decisions, and helping you monetize the risk of operations. Focus on those business decisions that drive margins or growth outside the finance function; that’s where you can really make a difference. Use the data to hedge against volatility and respond faster, and with greater insight, to changes in the marketplace. The potential for growth is enormous: in a recent survey2, 96% said analytics will become very important in the next three years and 49% plan to leverage analytics to make better decisions. Interesting fact: after finance, marketing and sales groups are the biggest investors in analytics. 10. Leveraging Social Data Across the Business Many companies are missing out on the revenue-enhancing value of the social data they collect. Don’t follow them. Leverage your CIO and invest in data and analytics tools to interpret social signals, especially where they relate to areas such as risk management, product development and planning. You’ll need to turn this information into business intelligence and actionable insights faster than your competition does. A recent survey found 93% of executives believe their companies are missing out on the revenue-enhancing value of the social data they collect – on average, by 14% annually. In fact, although 94% said their organisation was collecting and managing more business information today, 29% gave themselves a "D" or "F" in preparedness to manage the data deluge. References/Resources 1. 2013 Q3 Global CFO Signals, Deloitte 2. The analytics advantage, by Deloitte Touche Tohmatsu 3. Deloitte webcast, Capital Productivity: Creating Value Through Capital Expenditure Planning 4. From Overload to Impact: An Industry Scorecard on Big Data Business Challenges Oracle 5. "Putting Your Business on the Front Foot: Finance Effectiveness Benchmark Study 2012" PricewaterhouseCoopers 6. 2012 Oracle Report

Asia’s Main Financial Center Poised for Growth, But Facing Risks

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