Senior finance executives are bullish about continued global economic growth and are prepared to increase their spending and investment in light of the benign environment.
This was one of the main findings of this year's 2018 Global business and spending outlook by American Express and Institutional Investor. Last year's survey predicted growth would continue and this year's survey results continue that theme.
According to the results of the research, which sought the views of 870 senior executives worldwide from businesses with revenues in excess of US$500 million annually, 85% of senior finance executives globally expect substantial or modest economic expansion in 2018. This represents a 15% rise from last year's result of 70%.
In total 54% of respondents said their businesses had grown over the last 12 months, a jump from last year's result of 44%. In Europe, 69% of respondents reported revenue growth compared to the previous year. In the Asia-Pacific region 66% of executives said their revenue was higher than a year ago.
Strong trade growth was one factor executives cited as helping to stimulate growth and this is expected to continue.
The report notes, “Political change and global trade policy are especially likely to strengthen growth prospects for companies in 2018, according to 52% of respondents."
Asia-Pacific executives were the most positive of all executives surveyed for the research, with 59% expecting trade to contribute to business performance.
Additionally, 68% of the executives surveyed said exports will become much more or somewhat more important to their business's growth prospects this year, up from 63% in 2017.
In an environment where trade is driving growth, executives are becoming less anxious about political surprises having an impact on their businesses. But they are still looking for ways to better manage their risks, especially across the Asia-Pacific region. Overall, the results show more executives (68% in 2018 compared to 43% in 2017) want to expand risk management programs this year.
When it comes to spending and investment, executives want to focus their efforts on better meeting customer needs, protecting market share and investing in new products and services. The results show more than 70% of executives expect spending to increase by 6% or more this year.
Globally, 16% of companies expect an aggressive rise in spending to achieve top-line revenue growth, with a similar percentage indicating they intend to tighten the reins to support profits. The survey indicates the biggest investment will happen in the Asia-Pacific region, especially Japan.
This investment will be made to better meet customer needs, with 71% of respondents saying this is their focus, up from 48% last year. Half of those surveyed said they intend to enter new markets and 39% said they intend to improve shareholder returns.
Protecting market share is especially important for Asia-Pacific executives with 41% stating this is one of their top business goals this year. While almost half (48%) of Asia-Pacific executives anticipate increasing spending on production capacity and service delivery, up from 23% last survey.
Given the rise of strict data privacy rules such as the European Union's General Data Privacy Regulation (GDPR) and the introduction of mandatory data breach reporting in Australia, technology spend is an important agenda item for global executives.
The research shows executives intend to apply their tech budget to cyber security and protecting sensitive data. On top of this, global executives are exploring how new tools such as artificial intelligence, automation and robotics may be a source of change for their businesses, with many already incorporating these innovations into their enterprises.
In total 65% of Asia-Pacific executives, compared to 47% of global respondents, are especially likely to use insurance and hedging instruments to manage economic and political uncertainty at home or abroad.
Staffing remains an important issue around the world and the executives surveyed for the research expect to add to headcount this year. However, finding management, administration and support staff remains a challenge. As a result, executives are increasingly relying on temporary staff to meet their human resource needs.
Asia-Pacific executives said they were more than twice as likely to add to their planning teams and rely more on third-party data in planning activities compared with executives working elsewhere in the world.
When it comes to the changing role of senior finance staff, executives reported “they are most likely to see substantial financial benefits from greater end-to-end visibility into transaction processes (70%), improvements in their ability to negotiate with suppliers and customers (63%), and in closer, more collaborative relationships among finance, procurement, and treasury functions (54%)."
This contrast with the 2017 result, which indicated the vast majority (97%) of executives were laser-focused on end-to-end visibility into transaction processes.
Overall, the survey results indicate the strong likelihood of continued global growth and optimism among senior executives.
- Global executives expect growth to continue, but at a slower pace.
- Executives anticipate improved opportunities for global trade will help support their business's growth profile.
- A trend towards increased spending and investment to better meet customer needs, protect market share, and invest in new products and services.