2 in 3 SMEs see a risk of failure in next 3-5 years

Singapore

OVER two-thirds of SME chief financial officers (CFOs) say they face a moderate to significant risk of failure in the next three to five years, according to the American Express CFO Future Proofing Survey.

Of the 151 respondents, 67 per cent acknowledged a risk of failure - 17 per cent indicated they face a significant risk of failure while the remaining 50 per cent said they face a moderate risk of failure in the coming three to five years.

This is despite 83 per cent of these SMEs saying their business has a compelling competitive edge today.

Key concerns of CFOs include labour and government regulations (85 per cent), with changing economic conditions as the biggest macro concern (93 per cent).

Nigel Fox, vice-president and general manager of global corporate payments at American Express Singapore, said: "With the slowing economy, intense competition and tight manpower conditions; innovation is key for the survival of Singapore SMEs. Standing still or looking the other way won't make the future go away.

"More and more of the SMEs we work with are searching for tools, data and insights to help them make strategic and risk management decisions to be future-ready."

To that end, SMEs have implemented a wide range of future-proofing initiatives. For instance, 70 per cent of respondents said they have, or will change their strategic direction.

A further 68 per cent have or will implement new technology while 66 per cent have or will diversify their products or services. Fifty-eight per cent said they have or will recruit staff with new skills.

The study also found that companies with a higher risk of failure are restructuring (62 per cent), changing strategic diversification (70 per cent), and diversifying their products and services (70 per cent). Where failure of the business in the near future was considered less likely in the next three to five years, more focus was being directed to technology (78 per cent) and new marketing approaches (58 per cent).

On the flipside, however, CFOs acknowledge that lean resources, outdated organisational structures and systems or processes hinder their ability to innovate.

These barriers to innovation include lack of personnel or time dedicated to innovation (46 per cent), insufficient budget (39 per cent), foreseeing operational barriers (30 per cent), and not having their organisational structure and processes geared towards innovation (28 per cent).

The study also found that 76 per cent of CFOs say their roles have changed over the past one to two years - 65 per cent now have a bigger focus on future-proofing compared to 12 months ago and 67 per cent take on a significant role in future-proofing strategies.

Mr Fox said: "Our research shows CFOs are now taking the lead role in driving change in Singapore SMEs. The new roles and responsibilities include that of an innovator to trial fresh ideas, influencer with a bigger boardroom influence and, most of all, a visionary to look into the future to identify areas that will provide the greatest growth for their organisations for the next three to five years."