Has the successful Asian CEO built a resilient, sustainable legacy — Or a house of cards?

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‘Why Asia, Why Now?’

The business environment for the CEO in Asia has never been better than over the last fifteen years. The Asian CEO who hasn’t provided a substantial return on shareholder investment during this time must have been pretty unlucky, pretty incompetent, or both. The Asian CEO that doesn’t keep asking “Why Asia, Why Now?” probably won’t keep their job for much longer.

Why Not? Six reasons:

1. Internal powerhouses: Never in human history on the planet have so many people moved from low income to medium or high-income brackets in such a short space of time as in Asia in the last fifteen years. It will never happen again like this, in these numbers, anywhere, ever. All these fellow Asians need fridges, cars, holidays, condos — the list is as endless as the business opportunities.

2. External money trees: Investors and companies from North America and Europe have never spent so much time and money looking for partners to help them ‘make it big in Asia’ as in the last fifteen years. As Asia continues to move from emerging to ‘emerged’ the focus from the West will sooner or later switch to Africa and South America.

3. Economic blue skies: Never has the Asia region had such a prolonged period of benign economic factors. Since the Asian Financial Crisis of 1997 / 1998 Asian economies have shrugged off every new trauma relatively unscathed. Dotcom bubble — No impact. 9/11 — No impact, Global Financial Crisis — Not only no impact but conversely the best buying opportunity ever. Asian CEOs looking to go global could never have imagined in their wildest dreams this chance to snap up so many global brands at rock bottom prices.

4. Limited impact from Natural Catastrophes. There have of course been significant events over this period and on a personal level they have been terrible tragedies. The Indonesia earthquake and tsunami; the Japan earthquake, tsunami and consequential nuclear issues; the Thai floods. All of these caused deeply regrettable loss of life but from the perspective of the Asia wide economic engine, the impact was immaterial. Earthquakes, tsunami and flooding are part and parcel of the risk of doing business in Asia. Every Asian CEO has this factored in already.

5. No Pandemics Spread of disease has had virtually no unpredictable impact over the fifteen-year period. SARS (Severe Acute Respiratory Virus) was very disturbing but in reality, only lasted about six weeks. Concerns over repeated bird flu and swine flu outbreaks have come to nothing to date. The likes of MERS, Ebola and Zika whilst highly destructive to economic value in some countries of the world have had little or no impact in Asia.

6. Geopolitical Stability is at an ‘all-time’ high in Asia. Admittedly there has been civil unrest in Thailand and one or two other places. But a savvy Asian CEO allows for disruption resulting from Thai politics every five or ten years or so anyway. North Korea remains an unpredictable threat but has so far proven mostly impotent. The elephant in the room is China. A massive runaway success that would have been inconceivable only a generation or two ago.

To paraphrase the words of UK Prime Minister Macmillan to the British people in 1957: “You’ve never had it so good” Congratulations! Here’s to the Asian CEO who has been in the right place at the right time.

But it’s not all good news. Looking ahead in the murky crystal ball, headwinds are definitely building up for business in the region. Here are a few examples:

1. China Global Powerhouse Years are Finished. Much as everyone misses the highs, it is completely unrealistic to expect China to ever get back to 8% to 10% growth. 6% dropping to 4% seems much more likely medium term. Is the complex domestic economic/social/political contract sustainable under these conditions? How will potential backlashes against OBR play out across the region and into Africa?

2. India Struggling with Momentum Despite its best efforts India won’t replace China as Asia’s powerhouse soon, if ever. India’s GDP is only one quarter the size of China today and faces internal bureaucratic and other difficulties which were never an issue in China in the heady days of top speed growth.

3. Technological Disruption to Replace People Technological change is accelerating business model change globally, often in ways that we poorly understand and may be ill-prepared to meet in Asia. The historical heart of Asia’s competitive advantage? — Do it more cheaply, with good quality and stay flexible. This model is fundamentally at risk from the emergence of the Internet of Things, Advanced Robotics and Artificial Intelligence. These developments are leading to heavy redundancies in both blue collar and white collar roles globally and at an accelerating pace. Many Asian business models will likely be swept away with the tide of change.

4. Climate Change Global Warming and the potential failure to respond to its implications is the number one risk in the World Economic Forum’s Global Risk Report. The four cities with the highest GDP at risk from natural disaster globally today are Taipei, Tokyo, Manila and Seoul according to the Lloyds City Risk Index. The impact of climate change as it emerges will disrupt everyone but could likely displace and disrupt more people in Asia than anywhere else on the planet.

5. Water and Food Security There are huge emerging risks around the medium term security of both water and food supplies. With the largest populations on the planet, businesses in Asia will see both risks and opportunities in this area within a relatively short time frame.

6. Global Political Tension There are troubling times on the global political stage. On the plus side, progress has been made in USA/North Korea and USA/Cuba relations. The Ukraine/Russia standoff seems to have stabilized at least in the short term. But Brexit, Trump increasing xenophobia and tensions between Russia/USA all indicate business risk levels unprecedented since the Cold War ended.

In our own region, religious tensions are likely to increase as fallout from the situation elsewhere. Furthermore, and arguably for the first time in a thousand years, China has become expansionist again. The Nine Dash Line and the grab for the South China Sea receives little attention in the Western media but may have the most significant geopolitical ramifications in Asia since the end of the Vietnam War. That’s before we talk about the long-term implications of the Belt and Road Strategy.

The unpredictable question for Asia is “How long can the blue skies last?”

Has the successful Asian CEO of the last 15 years built a resilient, sustainable legacy to pass on to future generations? Or a house of cards that will collapse at the first puff of severe headwinds in the region.

After over twenty years running, owning and managing risk at some of Asia’s largest companies I’ve written down all the best bits I can remember in an ebook on Amazon Kindle. In this packed book I give practical advice to CEO’s and their teams on how to best manage risk in Asia.

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