2020 was the year in which companies and consumers gained a stronger appreciation of how digital technologies can connect, transact and transform the way communities and colleagues live and work, creating enormous new growth opportunities for tech companies. This year, CFOs have a major role to play in realizing these opportunities and ambitions. As a recent CFO Network article illustrates, CFOs are increasingly viewing the business through a strategy and value creation lens, with growth and digital transformation amongst their top priorities for 2021 and beyond . This resonates with the results of our recent Borderless Business research , which drills down on the challenges faced by CFOs and treasurers as corporations pursue international growth, with two studies conducted in June and December 2020.
THE PURSUIT OF GROWTH IN EMERGING MARKETS
As Borderless Business reveals, Forty-six percent of tech companies headquartered in United States, Germany, France and UK are focused on Asia as a priority growth region (most notably Australia, Japan, China, South Korea and Hong Kong), while 42% now place Middle East in their top three growth regions (e.g. UAE, Saudi Arabia and Qatar), compared with 23% six months earlier.
CFOS’ GROWTH CHALLENGES
Given the diversity within and between international markets, it is unsurprising that understanding regional regulation is the biggest challenge for tech CFOs and treasurers as they expand outside their home territory, an issue cited by 39% of respondents. This figure is higher still amongst US tech companies, of whom 41% placed this as their no.1 challenge. Concerns around regulation are not restricted to finance professionals, but are reflected across the C-Suite. For example, IBM’s recent survey of 3,000 CEOs places regulation in CEOs’ top three challenges .
Liquidity issues also pose potential headaches for tech CFOs, particularly resulting from lower than forecast revenues, delays in receivables collection and supply chain failure. A notable development between the studies in June and December 2020 was that continued access to credit became more important, with an increase from 3% to 12% of tech companies citing this as their top liquidity issue.
LEVERAGING TECHNOLOGY TO FACILITATE GROWTH
Despite the challenges associated with international growth, tech CFOs are well-positioned to identify and realize the digital solutions that will help reduce friction, create efficiencies and facilitate new business models. Fewer CFOs and treasurers believe they are constrained by lack of digital solutions for managing real-time liquidity than those in other industries, helping to minimise cash buffers and optimise working capital to allow higher investment in growth and relieve pressure on credit facilities. The past six months has also seen a substantial leap in interest amongst tech CFOs for digital solutions to improve supply chain efficiency. In June 2020, 19% placed this as their no. 1 supply chain priority; six months later, this had grown to 35%. Seventy percent placed supply chain digitisation in their top three priorities.
issues also pose potential headaches for tech CFOs, particularly resulting from
lower than forecast revenues, delays in receivables collection and supply chain
Doing business better
A final, encouraging finding from the study was tech CFOs’ and treasurers’ focus not just on growth and the tools to facilitate it, but how to do business. While 13% placed environmental, social and governance (ESG) issues in their top three international trade and supply chain priorities in June 2020, this had grown to 19% within six months. We expect this trend to continue growing strongly to reflect wider C-Suite priorities. For example, KPMG reported that 80% of CEOs in the technology industry believe that managing ESG factors will be crucial to achieving long-term growth .
While international growth is challenging, there are ways to overcome obstacles. CFOs can leverage banking partnerships to understand and comply with regional regulations, particularly in more challenging and disparate markets in Asia, Africa and the Middle East. Digital technologies can help reduce supply chain friction and create financial and operational efficiencies. And banking partners that share the company’s commitment to ESG excellence can help tech CFOs do business better.
ABOUT BORDERLESS BUSINESS
•Includes 164 technology companies headquartered in US, France, Germany and UK as part of a 1,008-respondent quantitative survey
• 52% of respondents were CFOs or finance directors; 48% senior treasurers
• All businesses have a turnover of over $500m and plan to take advantage of opportunities outside of its home region within the next 12 months