Global finance leaders investing in growth: American Express

BANGALORE, INDIA: The first ever American Express/CFO Research Global Business & Spending Monitor reveals senior financial executives across India, other Asian countries and Australia plan to invest in growth by actively looking to expand their market reach, invest in new production capacity and new product / service development and increase headcount.

At the same time CFOs plan to allocate more capital to shareholders through dividends or share buybacks, according to the results of a survey of 370 senior financial executives from around the world.

With eight out of 10 respondents from India, other Asian countries and Australia expecting their primary industry to grow and their company’s revenue to increase over the next 12 months, companies in this region are less pessimistic about the economy and their business prospects than their global counterparts.

While times are certainly challenging, companies are looking back to their actions during previous downturns to help guide them towards growth this time around. 81 percent said their investment priorities have changed in light of recent economic developments.

Commenting on the study, Firdaus Mogul, Head, American Express Commercial Card, India said, “In India as elsewhere, rising energy costs are an urgent concern. While companies plan to be conservative in their spending, they’re also looking to enhance investments in growth areas and are actively pursuing opportunities to expand market reach. They are pursuing investments that will allow them to reach more customers in new and better ways – all in an effort to preserve the bottom line while promoting top-line growth. They are also pursuing efficiencies through a combination of organizational, technology and process improvements.”

Added Pashupati Kumar V, Chief Financial Officer- Region 10, Deloitte Consulting India: “Generally speaking, I would agree with the findings of the American Express/CFO Services Global Business and Spending Monitor. Companies have learned from the last downturn and they are not going to over react this time around but will play things carefully. In India, businesses are most concerned about capital costs which are constantly rising. Interest rates and inflation are a real concern. Additionally, wage inflation has increased significantly and there is no indication of same cooling down.”

Of the companies surveyed in India, other Asian markets and in Australia, 35 percent said they should have invested more in product and service development during the last economic downturn compared to 23 percent globally and 40 percent said they should have invested more in market access compared to 34 percent globally.

“While it is hard for one to deny the uncertainties of today’s economic climate, companies in Asia and Australia are looking for ways to maintain their growth momentum and are a lot more optimistic than their counterparts in the US and Europe,” said Tracey Bowra, Senior Vice President, Global Commercial Card at American Express Japan, Asia Pacific and Australia.

Shareholders top priority for Asian/Australian companies

Companies in this region are significantly more likely to return profits to shareholders through dividends or share buybacks than their global counterparts (31 percent compared to 19 percent). In fact, companies seem to be more willing to commit resources to a range of priorities compared with some of their global counterparts including; capital spending, strengthening the balance sheet and mergers and acquisitions.

At the same time, these respondents said their companies are more likely than those in other regions to increase purchases of goods and services over the next 12 months. Technology purchases and investments to expand production and market access are especially strong. And 38 percent plan to purchase more computer hardware, enterprise level IT systems and advertising and marketing services, while 35 percent plan to purchase more labour and production inputs.

Growth expectations tempered

Rising energy costs outstrip other supply-side worries across the globe with 42 percent of all respondents and 40 percent from India, rest of Asia and Australia saying rising energy costs are an ‘urgent concern’.

In this region, companies are far more likely to consider the cost of capital, (cost of equity, cost of debt and cost of credit, etc.) an urgent concern with 35 percent of respondents citing this compared to only 26 percent globally and only 15 percent of US respondents.

In a separate question, 54 percent of companies from this region believe government policy and regulation presents the greatest threat to global expansion, 50 percent cite currency exchange rates, 44 percent cite access to financing and 31 percent cite unfamiliar political systems/business customs.

On the demand side Indian, other Asian countries and Australian companies are far more concerned than their global counterparts about foreign exchange rates (44 percent consider it an urgent concern compared to 30 percent globally), interest rates (40 percent compared to 30 percent globally) and consumer price inflation (35 percent compared to 25 percent globally).

Travel investments remain strong

Most survey respondents expect travel frequency and spend to stay the same or increase which paints a different picture to what we are seeing on a global level where companies are working to maintain travel frequency while spending less through tight policy control.

Asian and Australian companies are more likely however to plan to improve the level of automation currently in place for expense management and business travel which supports the view that they tend to have more money to spend in general than global counterparts.

US respondents (45 percent) are more likely than their peers (36 percent in Asia, and 21 percent in Europe,) to say they plan to restrict domestic travel, in addition to travel that is less likely to be critical to business growth such as conferences, retreats and training events.