CFO to Chief Future Officer

CFO to Chief Future Officer Innovating to drive the future of SMEsAmerican Express CFO Future-Proofing Survey

Foreword by American Express

Key Findings

The Changing Role of the CFO

Innovation is Key to Future-Proofing

Balancing Act Managing Risk and Opportunity

The Chief Future Officer

The Future-Proofer

The Innovator

The Influencer

The Visionary

Roadblocks to Future-Proofing

Opportunities and Challenges of the Future-Proofing Debate

Conclusion

Definitions

Research Methodology

Participants

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COnTEnTS

FOREwORd By AMERICAn ExPRESS

American Express is pleased to present new research that details future-proofing strategies that Chief Financial Officers (CFOs) are using to navigate increasingly competitive times. American Express has invested in the Small to Mid-sized Enterprises (SME) segment by commissioning detailed research and publishing the findings contained herein. This research is part of a regional series that explores your role as the Chief Future Officer of your organisation. An uncertain economic environment and technological disruptions make for increasingly competitive times. As a result, the role of the CFOs in Singapore SMEs has changed. They now have many more duties and responsibilities focused on forward thinking, so it may be more appropriate to think of them as Chief Future Officers. Companies that define themselves as SMEs have specific needs, differing significantly from start-up companies and large corporates. SMEs need to innovate to stay competitive as the global economic environment remains bound by slow growth.

American Express recognises CFOs as the drivers of that innovation, as they push for more investments in technology and people to help future-proof their businesses. This research reveals how CFOs are approaching innovation and demonstrating some caution about the future. It captures candid insights shared by the respondents in their assessments of their own performance, risk profiles and ability to future-proof through nurturing and promoting fresh thinking. Our aim for this research is to help SME CFOs better understand the role they play at the heart of their business and the importance of future-proofing.

NigEl FOxVice President & General ManagerAmerican Express Global Corporate PaymentsSingapore

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KEy FIndIngS

The Changing Role of the CFO

80% are willing to try new ideas without fear of repercussions and failure.

ThEy wOrk ClOSEly wiTh OThEr mEmbErS OF ThE ExECuTivE TEAm

67%play a significant role in helping lead or implement future-proofing strategies.

21%have a high personal appetite for risk when making business decisions.

SOmE CFOS ArE TAkiNg A bOld viEw ON riSkThE SmE mArkET iS lEAN SO ThE NEEd FOr rOlE divErSiFiCATiON iS ESSENTiAl

76%of CFOs say their role has changed over the past 12 years.

CFOS PlAy A SigNiFiCANT rOlE iN driviNg FuTurE-PrOOFiNg ACTiviTiES

59%believe they have more influence at board level.

27%would have taken more risks.

In hindsight,

The findings contained in this Report reflect the views of CFOs from across Singapore, with the quantitative survey data collected by ACA Research between 9 June and 24 June 2015.

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we are trying to understand how to identify, mitigate and reduce black swan events. we are working on how to respond to any crisis and are forming committees to address these issues.

mANuFACTuriNg ANd PrimAry COmPANy $100m$200m TurNOvEr

KEy FIndIngS

mOrE CFOS ArE lOOkiNg TO ThE FuTurE

Innovation is Key to Future-Proofing

65%are making future-proofing a bigger focus than 12 months ago. 52%

believe they are more focused on the future than their competitors.

bArriErS TO iNNOvATiON

46%lack personnel or time dedicated to innovation.

39%have insufficient budget available for innovation.

30%foresee operational barriers.

A widE rANgE OF FuTurE-PrOOFiNg iNiTiATivES ArE bEiNg imPlEmENTEd by SmES

70%have or will change strategic direction.

66%have or will diversify products or services.

68%have or will implement new technology.

58%have or will recruit staff with new skills.

28%do not have their organisational structure and processes geared toward innovation.


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Firstly, we are working on a marketing strategy. Secondly, we are looking at how to keep the business competitive due to resourcing issues.

CONSTruCTiON COmPANy$100m$200m TurNOvEr

Balancing Act Managing Risk and Opportunity

83% of CFOs think their organisation has a compelling competitive edge and

89%of those believe they will hold this edge for the next 35 years.

CFOS CONCErNSCOmPETiTivE EdgE

KEy FIndIngS

ThE riSk OF FAilurE iS rEAl

67%admit to a moderate or significant risk of failure in the next 35 years.

43%say they will not have the resources to improve human resources processes.

30%are worried about not doing cost management justice.

24%think that sales and marketing will be an issue.

17%are concerned that they will not be able to implement new technology or equipment.

buSiNESS ThrEATS ArE high

85%93%are concerned about changing economic conditions.

are concerned about labour and other government regulations.


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we are putting the emphasis on processes to be more relevant, as efficiency is one of the issues we are very concerned with.

diSTribuTiON COmPANy $10m$49.99m TurNOvEr

ThE ChIEF FuTuRE OFFICER

The CFO wears many hats in the evolving business landscape. The Chief Future Officer has to anticipate threats, nurture great ideas, have the ear of the management team and have a clear view of the future.

1. T

hE

FuTurE

-PrOOFEr

2. T

hE iN

NOvATOr

3. Th

E iNFluENCEr

4. Th

E viSiONAry

Future-proofing is becoming a higher priority for SMEs. Sixty-five percent of CFOs surveyed say there is now a greater focus on future-proofing than 12 months ago, and 70% of those who believe the role of the CFO has changed say it is now significantly more focused on future-proofing.

Most identified a wide range of future-proofing initiatives that either have been implemented during the last 12 months or will be implemented during the next 12 months to enable their companies to remain competitive.

The list was made up of 11 main strategies and shows that future-proofing comes in many guises and reflects the diversity of the industries and organisations in the marketplace. Most common future-proofing strategies were changing strategic direction (70%), implementing new technologies (68%), and diversifying products and services (66%).

while changing strategic direction scored highest in the Professional and Business Services sector, at 80%, the Retail and Consumer Services sectors were not far behind, at 77% and 73% respectively. Implementing new technologies varied across the sectors, at between 59% and 74%, and Manufacturing industries were diversifying products and services most actively.

ThE FuTurE-PrOOFEr

1.

70%of those who believe the role of the CFO has changed say there is significantly more focus on future-proofing now.

we are speeding up the introduction of technology such as upgrading our computer systems for accounting and billing to streamline our business.

CONSumEr SErviCES COmPANy$100m$200m TurNOvEr

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where failure of the business in the near future was considered less likely in the next three to five years, more focus was being directed to technology (78%) and new marketing approaches (58%). Those with a higher risk of failure are restructuring (62%), changing strategic direction (70%) and diversifying their products and services (70%).But CFOs are not magicians. Forty-three percent say they wont have the time or the budget to recruit and train staff, or improve human resources processes or communication. A further 30% say they are concerned about not doing justice to cost management, and sales and marketing will be an issue for 24%.

A lack of resources is the biggest barrier to implementing new ideas, led by a lack of personnel or time (46%), and followed by a lack of money (39%). Organisational barriers (30%), a short-term mindset (28%), and structures and processes not geared towards innovation (28%) are also impediments.

ThE ChIEF FuTuRE OFFICER

mANuFACTuriNg ANd PrimAry COmPANy$100m$200m TurNOvEr

we are looking for new business, so it is good to diversify. we have limited resources, so the focus has been on the existing business. If I had the resources, we could have a parallel business.

58%on new marketing approaches.

78%more focus was being directed to technology and

For businesses that considered themselves at less risk of failure,

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CFOs are confident that they can try new ideas without fear of failure. Eighty percent feel they can take risks without fear of repercussions. But 63% of the CFOs who do not enjoy such an environment believe other factors besides a lack of tolerance towards failure are the main obstacles to trying and investing in new ideas and approaches.

Even so, CFOs remain committed to traditional business models, with 28% saying their main differentiator from their competitors is pricing and just 3% saying technology is setting them apart. Coming close behind pricing was the skills and knowledge of the companys workers, at 25%.

Breaking it down by industry, Professional and Business Services (63%) and Manufacturing (64%) businesses are more likely to use technology to differentiate themselves from the pack.

As the business environment changes, its necessary for companies to innovate and transform just to keep pace, which means taking risks. ninety percent of CFOs have a high to medium personal appetite for risk when making business decisions, and only 10% admitted they have a low or very low appetite for risk.

however, they say their management colleagues are generally braver, with 31% seeing a high or very high appetite for risk and 58% recognising a medium risk appetite among management personnel.

Mistakes are common, with many CFOs recognising they have often failed in gauging how much risk to take. In hindsight, 40% of those with a low risk appetite say they would have taken more chances. Only 23% of all CFOs say that looking back, they would have taken fewer risks, while 50% would not have done anything differently.

ThE iNNOvATOr

2.

80%feel they can take

risks without fear of repercussions.

Our biggest challenge is working out how to stand out from the existing competitors in the local market.

CONSumEr SErviCES COmPANy$50m$99.99m TurNOvEr

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CFOs are taking a lead role in driving change in Singaporean SMEs, with 76% claiming their job has changed over the past one to two years.

They now feel they have more responsibility (70%), are under increased pressure to deliver results (68%) and have a bigger boardroom influence (59%). This includes playing a significant role in future-proofing strategies, by either helping to lead or implement future-proofing strategies or initiatives (44%), or being responsible for developing and executing the strategies or initiatives (23%).

Perhaps because of the greater weight of responsibility placed on them, 83% of the CFOs are confident their businesses have a compelling competitive edge and 89% expect this can be maintained over the next three to five years.

By industry, those most confident of their current competitive edge are the CFOs in distribution (92%), while 100% of those in Retail expect to maintain their position over the next three to five years.

while CFOs are confident of their companys competitive edge, they are not complacent about their place in the market. Sixty-seven percent of CFOs identified their businesses as at risk of failure during the next three to five years.

while competition both locally and internationally is seen as a significant threat, labour issues (20%) and rising business costs (19%) are seen as greater risks. The threat of increased labour and government regulations worried 85% of CFOs, while changing economic conditions (93%) remained the biggest macro concern.

ThE iNFluENCEr

3.

76%claim their job

has changed over the past

12 years.

Our biggest concern is manpower essentially, the shortage of good talent. you have to pay for this and because of budget constraints that is not possible.

CONSumEr SErviCES COmPANy$50m$99.99m TurNOvEr

ThE ChIEF FuTuRE OFFICER 14

ThE viSiONAry

4. The CFOs in our survey were asked to look into the future to identify the areas that would provide the greatest growth in the next three to five years.The top response was developing new products and services (25%), followed by expanding into a new industry or sector (17%), and grasping opportunities in emerging markets (17%).

The aim of future-proofing is to anticipate the needs and future structure of a company to be able to respond effectively to challenges and opportunities. That means keeping ahead of the competition. Fifty-two percent of CFOs in Singaporean SMEs believe they are doing more on future-proofing than their competitors, while 43% say they are keeping pace. The most confident CFOs are diversifyingtheir products and services (74%), implementing new technologies (71%), recruiting staff with new skill sets (63%) and expanding into new areas (62%).

In contrast, CFOs that say they are falling behind their competitors are changing strategic direction (71%) and appointing new leaders (47%), showing they are anxious to make up lost ground.

when asked what areas would provide the greatest growth in the next 35 years, the top response by CFOs was developing new products and services,

25%

grasping opportunities in emerging markets. 17%

17%followed by expanding into a new industry or sector, and

Our aim is to work on a strategy to enable various teams to achieve economies of scale and lower costs for the company.


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Id like to concentrate on new technology such as a structural monitoring system to monitor construction work. Also to get more instruments for real-time systems.

PrOFESSiONAl ANd buSiNESS SErviCES COmPANy$50m$99.99m TurNOvEr

ROAdBLOCKS TO FuTuRE-PROOFIng

In their own words

Labour issues the government regulations are tightening so its difficult for us to convince the government to change the labour policies.


dealing with the labour regulations there are reduced quotas on manpower and a higher labour cost. Also, we have an issue with a lack of technology.


Cost-cutting I wish I could have more time to look into how things are done in terms of productivity.

mANuFACTuriNg COmPANy$10m$49.99m TurNOvEr

we need more focus on hR and recruitment policies to transform the culture, strengthen our staff retention and recruit better talent.

rETAil COmPANy$2m$9.99m TurNOvEr

Internal processes and workflows we have been modifying as and when, but its good to have a well-structured plan.

rETAil COmPANy$10m$49.99m TurNOvEr

we have spent time looking at internal controls, systems and risk management, but we have to spend more time on it to give us a more thorough study of the company.

PrOFESSiONAl ANd buSiNESS SErviCES COmPANy $100m$200m TurNOvEr

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Although SME CFOs are actively future-proofing, a lack of resources may affect the sustainability of their efforts and expose them to competitors developing and using disruptive business models. whats more, SMEs may not be nimble enough to compete with start-ups or larger players with more resources.

OPPORTunITIES And ChALLEngES OF ThE FuTuRE-PROOFIng dEBATE

ThE ChAllENgES

ThE OPPOrTuNiTiES

hOw CFOS ArE wOrkiNg:

CFOs have an underlying confidence about the future.

A wide range of future-proofing initiatives is being implemented.

Innovation plays an important role in future-proofing.

Most CFOs balance tried and tested business practices with risk taking.

Failure is accepted as part of the process of investing in new ideas.

83% of CFOs claim their organisation has a compelling competitive edge.

Future-proofing is an important part of day-to-day work.

ThEir biggEST FEArS:

The risk of failure is real.

SMEs are too small for dedicated functions and too lean to use external experts.

Tight resourcing makes innovation difficult.

government labour regulations and the cost of doing business are challenging.

The level of competition is high.

differentiation is based on traditional business model pricing.

growth opportunities are likely to be in more risky expansions into new markets and company acquisitions.

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COnCLuSIOn

The CFOs of Singaporean SMEs were asked some detailed questions, which they answered with impressive candour. Many questions involved a degree of self-assessment and required CFOs to provide an honest appraisal of their own performance. The safety of anonymity also allowed them to voice their views of the future and reveal their misgivings.

Their responses have allowed American Express to glean the real state of play for this often overlooked but vital segment.

CFOs were challenged to articulate how they were future-proofing their businesses. More than half of the CFOs said they had taken more steps to future-proof in the past year than the previous year and would do more in the next 12 months.

They identified a wide range of future-proofing initiatives they would implement to enable their companies to remain competitive.

The changes CFOs are making show that future-proofing comes in many guises and reflects the diversity of the industries and organisations in the marketplace. The most common strategies were future-proofing by innovating, changing strategic direction, implementing new technologies, and diversifying products and services.

Standing still or looking the other way wont make the future go away but sharing what we can see will help us all.

Innovation is the main means of future-proofing, suggesting business leaders should encourage fresh thinking to give their organisations an edge.

Staying on the same path can mean making the same mistakes so you should be prepared to change your strategic direction.

The digital era is bringing so much new technology, it is essential to keep pace with the changes.

Making more productsand services available to yourcustomers may bring in morebusiness so it is wise to diversify your products and services.

hiring workers with theright skills and experience toenhance your business is critical.

This survey gleaned insights including:

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dEFInITIOnS RESEARCh METhOdOLOgy

FuTurE-PrOOFiNg

This is defined as the process organisations use to anticipate and respond to changes so they remain successful. This can include having financial agility, developing new ways of working or structuring the company, or investing in new products and services. Future-proofing is not confined to financing and can include action taken by all C-suite executives or innovation departments within the business.

riSk ANd iNNOvATiON

The terms risk and innovation were not explicitly defined in the research highlighted in this report. American Express accepts risk and innovation have different meanings to different people and remain key areas of focus for CFOs.

The specific research objectives of this study were to: UnderstandtheroleoftheCFOintheSMEmarket,

including their appetite for risk DeterminetheCFOsroleinfuture-proofing

and innovation Determinestrategiesformaintainingacompetitive

advantage Understandtheextentoffuture-proofingand

innovation activities.

TimEFrAmE


iNduSTry TyPES

A sample of 151 surveys were completed over the phone. All respondents were CFOs or CEOs responsible for the financial management of their organisations. Organisations ranged in size and industry, including: ProfessionalandBusinessServicesbusiness

services, professional services and property management

ConsumerServiceshospitality,education,health,personal services and membership organisations

Distributiontransport,logistics,utilitiesandwholesale

ManufacturingandPrimaryIndustrymanufacturing, agriculture and mining

Constructionconstructionandengineering Retail.

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PARTICIPAnTS

by iNduSTry*Professional and Business Services 23%Construction 19%Manufacturing and Primary 19%distribution 16%Consumer Services 15%Retail 9%

rEvENuE*S$2M$9.99M 17%S$10M$49.99M 17%S$50M$99.99M 31%S$100M$200M 36%

lOCATiON OF hEAd OFFiCE Local 74%Overseas/regional/global 9%Both 17%

JOb TiTlECFO 95%CEO 5%

*Percentages add to more than 100% due to rounding.

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AbOuT AmEriCAN ExPrESS

American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at and connect with us on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/companies/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.

For Singapore content, visit us at www.americanexpress.com/sg and www.facebook.com/americanexpresssingapore.

AbOuT AmEriCAN ExPrESS glObAl COrPOrATE PAymENTS

Through its global Corporate Payments group, American Express provides Corporate Card, Business Travel Account and other expense management services to mid-sized companies and large corporations worldwide. In the u.S, it is a leading issuer of corporate cards, serving more than 70% of the Fortune 500, as well as tens of thousands of mid-sized companies. American Express issues local-currency commercial cards in more than 40 countries, and International dollar Corporate Cards in an additional 100+ countries.

For more information, visit https://business.americanexpress.com/sg.

For more trends and insights for smarter business, please visit https://business.americanexpress.com/sg/business-trends-insights

American Express International, Inc.Incorporated with Limited Liability in the State of delaware, u.S.A

Registered Trademark of American Express Company10 Marina Boulevard #15-00, Marina Bay Financial Centre Tower 2,

Singapore 018983

CFO to Chief Future Officer

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