Six months after its first survey, Standard Chartered Bank has again asked CFOs in Europe and the US about their plans and goals. The results are summarized in the second Standard Chartered Borderless Business survey. It shows that CFOs are once again more optimistic about the future and are increasingly focusing on growth outside their home markets. Preparations for the post-pandemic period have begun.
We spoke to Heinz Hilger, CEO of Standard Chartered Bank AG, about the results of the survey.
Mr. Hilger, the first survey was conducted in early summer 2020 under the full impact of the pandemic measures. The second one six months later, in December 2020. What are the key differences in the results?
Heinz Hilger: The first survey very much reflects the full force of the economic impact of the pandemic containment measures. Uncertainty was probably the one big word that best summed up the mood. By December 2020, and even today, things are looking very different. Corporate finance managers are now once again focusing on growth outside their home markets.
The shock-induced rigidity has disappeared and growth momentum is once again spreading. This is also reflected in the fact that companies have shifted their focus from securing supply chains to investing in digitization and freeing up liquidity.
More than 1,000 CFOs in the US, UK, Germany and France have been surveyed. When they turn their gaze to growth outside their home markets, where do they look?
Heinz Hilger: That depends, of course, on where their companies are based, but in general you can say that Asia is still seen by many as a very important growth region. If we look at the German CFOs, their CFOs see the North American market as even more important (from 29% in summer 2020 to 44% at the end of 2020).
Asia in particular continues to be an important growth region, with more than 85% of the companies surveyed being active there. German companies indicated that they are more likely to prioritize Asia than in the first survey (up from 50% to 57%) and favor Japan at 40% for trade and supply chain expansion opportunities in the region – China follows at 36%, Australia at 28%.
Further, Africa and the Middle East are becoming increasingly important, with 36% of companies naming the Middle East and 20% Africa among their top three, an increase of 4% in just 6 months.
So there is expansion fantasy in the market again. What else has changed in the minds of CFOs?
Heinz Hilger: Well, if we remember, a lot of supply chains have been disrupted by lockdowns, border closures, restrictions on air travel and other measures to contain the pandemic. We can imagine that last summer, securing supply chains was a top priority for many companies. How to set up differently, how to bring supply closer to production, how to diversify? These have been the questions that have been driving corporate leaders. Especially in the manufacturing sector, of course.
And these issues have been resolved?
In part, yes, in part conditions have simply improved again. Borders are open again, there are more flight connections again, solutions have been found, plans have been made and are now being implemented.
And now the CFOs are dealing with other pressing challenges?
Heinz Hilger: Exactly. Other challenges have moved further up the agenda. At the top of the list is now the topic of digitalization – incidentally also with a view to supply chains.
With the increased use of home offices, the need for digitization in companies has simply become a critical factor. So it’s not surprising that increased use of digital tools to increase supply chain efficiency has also become a focus for two-thirds (66%) of companies.
U.S. companies in particular have increased their focus on supply chain digitization: for 31% of companies, this topic is now the top priority, whereas in mid-2020 it was still secondary to supplier diversification. The same trend can be observed among German and British companies: In Germany, the main focus was 33% on supply chain digitalization.
In the midst of the crisis, environmental and governance issues were not so high on CFOs’ agendas. Has that changed again now?
Heinz Hilger: Yes, definitely. In times of acute crisis, the initial focus is on overcoming the immediate threats and challenges. And then the massive restrictions on our mobility also had a positive effect on the environment.
But now that we are slowly ramping life back up and things are already moving again in some places, ESG issues will once again become more of a focus. For example, in Germany in particular, the importance of ESG in expanding trade and supply chains was weighted higher than in other countries, rising from 14% to 29% in the second survey in just six months as one of the top three priorities.
About the Study:
This study surveyed 1,008 CFOs and senior treasury professionals from multinational companies with more than $500 million in revenue and headquartered in one of the four major Western economies: the U.S., the U.K., France or Germany. The survey took place in December 2020, with equal representation of 25% from each of the groups’ home countries. 50% of respondents represented companies with revenues of $500 million to $1 billion, while the remaining 50% represented companies with revenues greater than $1 billion. Of the respondents, 16% represented the technology sector, while representation of the remaining industries ranged from 6% to 9%. Financial service providers were excluded from the survey.