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Revenue growth expected, but external risks remain: Deloitte

Singapore firms, laggards in revenue growth in the Asia-Pacific, name political climate and macroeconomic concerns as risks
Saturday, July 22, 2017 - 05:50

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The business outlook is looking up. Just over three-quarters (77 per cent) of Singapore respondents said they expect revenue growth in the next two years.

Singapore

REVENUE growth for Singapore businesses is expected to catch up with that in the rest of the Asia-Pacific in two years, but external risks such as macroeconomic and political factors remain top concerns, Deloitte's first biennial cost survey has found.

The report said Singapore businesses had the lowest annual revenue growth in the Asia-Pacific in the last two years; only 53 per cent of respondents in the city-state reported increases in revenue, compared to a 75 per cent average in the region.

In fact, the proportion of Singapore respondents whose revenues shrank in the last 24 months was 40 per cent - against the Asia-Pacific average of just 18 per cent.

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This is forecast to change in the coming 24 months. Just over three-quarters (77 per cent) of Singapore respondents said they expect revenue growth in the next two years, in line with the Asia-Pacific average of 78 per cent. Singapore's growth expectations beat that in Japan (65 per cent), Hong Kong (70 per cent) and Australia (71 per cent).

But despite the relative optimism, Singapore firms are keeping an eye out for external risks.

The top ones are the political climate, at 40 per cent, and macroeconomic concerns at 43 per cent. These factors were cited with much higher frequency than in the rest of the Asia-Pacific, where the regional averages were 26 per cent and 25 per cent respectively.

Despite increasing emphasis on going digital, digital disruption was not perceived by most Asia-Pacific respondents as a major external risk. Only an average of 2 per cent in the region thought so; in Singapore, none saw it as a top risk.

Omar Aguilar, global strategic cost transformation leader at Deloitte, said: "We expect this trend to change and accelerate in the near future. It's one of those things we have not seen in Asia-Pacific, compared to places like the US, where the threat of digital disruption is everywhere."

Asked for their top three strategic priorities, Singapore respondents named sales growth, product profitability and cost reduction, just like in the rest of the region.

The Deloitte report said: "This mixed set of priorities typifies a cost-management strategy we call 'save to grow' - using cost savings to fund growth activities."

Some 90 per cent of Singapore respondents said they expect to focus on cost reduction over the next 24 months, coming in behind countries such as China, with 98 per cent, and India with 95 per cent.

About 57 per cent of Singapore businesses have cost-reduction targets of more than 10 per cent, slightly higher than the Asia-Pacific average of 52 per cent.

In Singapore, 57 per cent of respondents said they aimed to streamline business processes, making it the most frequently cited line of action; this was followed by outsourcing offshore business processes at 43 per cent.

The report described the former as a tactical cost action, and the latter, a strategic one.

In the report, Deloitte warned companies against sticking to tactical cost actions and the status quo, which will likely create implementation problems and high-cost programme failures.

Mr Aguilar added that going forward, more businesses in the Asia-Pacific will need to take a strategic approach to reducing costs, such as through automation and adoption of the latest technologies.

The report surveyed 299 business leaders (C-suite executives and senior management) from large and mid-size companies in China, India, Japan, Australia, Hong Kong and Singapore; these comprise 89 per cent of the Asia-Pacific economy based on gross domestic product. The poll was done in January and February this year.

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