As companies embark on a new year, they continue to face challenges from dynamic global crises, geopolitical complexities and an uneven global economy. At the same time, growth opportunities beckon to the bold. Generative AI (GenAI), for instance, offers tremendous potential to increase productivity and transform work, business models and society.
In this context of crisis and opportunity, directors need to deepen their engagement and guide companies to build resilience by carefully balancing discipline and transformation. Central to this is the ability to address key concerns on capital allocation, talent, evolving technologies and ESG, among a slew of other competing corporate priorities.
Focus on capital
Global economic activity is expected to remain subdued in the year ahead. However, Asia remains promising in driving global growth. The Economist Intelligence Unit anticipates Asia will contribute to 60% of global GDP growth this year — higher than the pre-Covid pandemic average. According to a report by the Asian Development Bank, Southeast Asia is also projected to see an uptick in growth in 2024, spurred by favourable factors like the continuing travel revival, steady internal demand, and greater public investment.
Notwithstanding, boards are generally cautious and are placing a strong focus on capital allocation. While global appetite for M&A has fallen to its lowest level since 2014, companies should not hold back from crucial investments that underpin long-term growth, such as those related to technology and sustainability. Boards must urge management to take a long-term perspective to avoid missing out on innovations or investments for growth and competitiveness. Equally crucial is being proactive and transparent in communicating the company’s growth narrative and capital strategy with stakeholders.
Elevate the talent agenda
Having a workplace culture that enhances retention and belonging has become more challenging — and as such a differentiator — for organisations. The EY 2023 Work Reimagined Survey found that nearly four in 10 employees in Southeast Asia are likely to leave their jobs for competitive salaries, career advancement and better wellbeing programs. If boards have been relegating talent matters to the sidelines, now is the time to engage with the CHRO and get close to employee sentiments.
Artificial intelligence (AI), and specifically Generative AI (GenAI), is expected to impact employees in more ways than displacing or augmenting job tasks. The above survey found that while more than 90% of employers in Southeast Asia are already using, or planning to use, GenAI this year, only a quarter plan to provide GenAI-related training. This is a very telling gap. Reskilling and upskilling must take priority if our workforce is expected to fully harness technologies — and grow and thrive with them.
See also: A US$12 bil climate fund is readying a rare bond issuance
Innovate fast with technology
It must be said though that there is still much uncertainty in the AI space, making it hard for executives to respond agilely. Governments too are seeking to strike a balance between fostering innovation with AI while designing regulations to mitigate macro risks.
Despite the ambiguities, companies know that inertia can cost them opportunities to innovate for growth and the risks of deploying AI irresponsibly. Leading companies are moving beyond thinking incrementally about AI in terms of how they can make existing processes more efficient, to how AI could transform their business models, products and services. At the same time, considerable attention must be driven toward robust AI policies and governance — not only to ensure compliance but also to build confidence with regulators, investors and other stakeholders.
Keep up on climate action
With just six years to meet the Paris Agreement target of halving greenhouse gas emissions worldwide by 2030, swift action from companies must continue to address the escalating climate crisis. Stakeholders are closely monitoring how companies are meeting their emissions reduction targets and climate transition plans — and so too must boards.
See also: India aiming to finalise carbon deals with Japan, Singapore
Granted, the push to prioritise sustainability is challenging as ESG considerations are wide-ranging and require trade-offs that may be hard to quantify. But investing in climate action pays off. EY research found that companies taking the most action to address climate change are 1.8 times more likely to report higher-than-expected financial value from their climate initiatives, compared to those taking the least action.
Moreover, multiple studies have shown that investors look for focus. Companies that direct their efforts in a concerted manner on the most material ESG aspects for their sector have historically demonstrated a higher alpha than peers that do not.
The boardroom concerns discussed above sit against a backdrop that is increasingly fraught with geopolitical tensions, the impact of which on corporate strategy is arguably at its most complex in a generation. Robust board leadership is crucial to help increase the resilience of the enterprise’s business model and supply chains to prepare for future shocks. After all, the board’s role doesn’t stop at defending the past; it’s also to define the future – hopefully, one that’s marked by resilience, growth and optimism.
Liew Nam Soon is the managing partner at Ernst & Young Solutions LLP for Singapore and Brunei and also the EY Asean regional managing partner. The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms
