Standard Chartered commissioned the second in its series of Borderless Business research in January 2021 to explore the international ambitions and priorities of multinational corporations (MNCs) from the perspective of CFOs and treasurers. This article outlines findings from the Nordic respondents, where international growth has always been at the heart of their companies’ business strategy, whether across neighbouring countries, more widely in Europe, or further afield.
While companies headquartered in the Nordics have experienced the same, dramatic impact of the COVID-19 crisis as their global peers, they have demonstrated 3.4% better returns on average, with particularly strong performance amongst Danish companies. One reason for this may be that Nordic companies have developed particular characteristics in their business models that have strengthened resilience and agility, and enabled growth. Looking ahead, digitisation is a key focus for Nordic firms, evidenced by 78% of respondents looking to increase use of digital tools to increase supply chain efficiency.
Nordic growth perspectives
Nordic consumers and companies have a strong reputation for being advanced in many of the key areas that have become today’s global priorities, such as technology adoption, and clean and renewable energy. Sweden is already virtually cashless, for example, while countries such as Sweden and Norway are world-leading in clean and renewable energy. Given this degree of sophistication, and willingness to embrace innovation, 63% of Nordic companies continue to prioritise growth opportunities in the region and wider Europe.
However, the value of Nordic companies’ expertise and solutions resounds far beyond local markets. Africa and Asia present significant growth opportunities, for example. Forty percent (40%) of respondents already undertake business activities of various types in Asia, and a further 50% are in the process of doing so. Australia and Japan are the most commonly cited priority countries at 47% and 26% respectively, with over a fifth of companies also focusing on Singapore, New Zealand, India, Hong Kong and China. Middle East is also a strong growth prospect, with 52% selecting the region as a top 3 priority, particularly UAE, Qatar and Saudi Arabia.
Supply chain resilience and agility
As Nordic companies pursue their international growth objectives, 34% of CFOs and treasurers emphasise that building and adapting supply chains is their single biggest challenge, compared with 21% globally. The reasons for this divergence between Nordic companies and their global peers will vary across companies and industries. However, recent research from McKinsey shows that amongst machinery companies, for example, Nordic companies are now outperforming the peers in Germany, that typically represents the industry benchmark, across variety of key metrics, including profitability, resilience and growth. Ensuring that supply chains are robust and agile is key to this performance.
Conversely, while understanding regulatory requirements in growth markets is the number one priority for 35% of participants globally, this figure is slightly lower amongst Nordic participants at 30%. Given that Nordic companies are already highly experienced in international growth, they are perhaps more familiar with the types of regulatory issue they need to consider when expanding their business in new markets.
The impact of supply chain friction on liquidity
Despite strong performance and focus on resilience, Nordic companies have had to deal with the same challenges as their peers globally. From a liquidity perspective, CFOs and treasurers highlight the difficulties associated with lower than anticipated revenues (25%), delayed receivables collection (25%), and managing the impact of supply chain failure or interruption (18%). CFOs and treasurers noted that this latter issue poses the most important challenge over the next 6-12 months in their companies’ pursuit of international growth. This is consistent with the point above, notably that many Nordic companies rely on high levels of productivity and resilience to preserve margins and maintain competitive advantage. Conversely, participants expect few issues around digital capabilities for managing liquidity than their global peers: 32% identify this as one of their top three challenges, compared with 41% globally. With Nordic companies often advanced in their use of technology, this finding suggests that their digital sophistication also extends to treasury and finance.
The value of digitisation in trade and supply chains
Digitisation is also a primary theme for Nordic companies around international trade and supply chain management. Thirty-four percent (34%) of CFOs and treasurers identify digitisation of trade and supply chains, and diversification of suppliers respectively, as their most important international growth priorities over the next 6-12 months. These results echo the findings noted previously. Furthermore, over three-quarters of respondents (78%) place digitisation in their top three priorities, emphasising the importance of digitisation in achieving the degree of productivity and resilience that Nordic companies are seeking.
Positioned for growth
Business confidence amongst Nordic firms is at its highest since late 2018, particularly amongst Swedish and Danish companies. This, combined with comparatively strong performance during the COVID-19 crisis, and a focus on productivity and resilience, should ensure that these companies are well-positioned for growth and further success within Europe and into Asia, Africa and the Middle East. Furthermore, our research findings reinforce Nordic firms’ reputation for sophisticated treasury and finance practices, mature and adaptable policies, and a strong appreciation of the value of digitisation. Consequently, CFOs and treasurers are better able to spend time on issues around the business itself, such as resolving the impact of working capital constraints, and mitigating supply chain friction, delay and interruption that can restrict growth and squeeze margins. With longstanding experience, a strong presence and innovative digital solutions in the world’s most dynamic growth markets, we are ideally positioned to help Nordic companies expand their business internationally, and maintain industry-leading levels of productivity and resilience.