CFOs in China are charting new paths to reshape business post-pandemic

Harvard Business Review (China Edition) 2022 Issue No. 2 – Published on January 25, 2022

Recovery of the global economy remains disparate and tenuous as COVID-19 continues to take its toll. According to the Organization for Economic Cooperation and Development (OECD), economic output in both developing and developed economies is not expected to recover to pre-pandemic levels until the end of 2022 at the earliest.

While pending uncertainty is certainly a challenge for businesses, it may not be all gloom and doom. A joint survey report recently released by Tricor Group and FutureCFO shows CFOs from companies in mainland China and APAC are signaling optimism alongside prioritization and investment in digital transformation.

The findings shine a light on the paths CFOs are taking to restore financial health and accelerate digital transformation. As a result of these efforts, according to the findings, 68% of CFOs in Asia Pacific expect to see a significant improvement in their business performance this year.

“While the still unfolding situation continues to trigger waves of uncertainty, changes always open new doors of opportunities. But only those bold enough to confront the unknown head-on can reap the rewards,” said Lennard Yong, Tricor Group CEO. “Rather than waiting for a return to ‘normal’, our findings reveal that CFOs around the world are charting new paths forward now and are taking steps to stay ahead of the eventual rebound and recovery.”

The inaugural Tricor Group and FutureCFO Insights Survey explores CFO sentiment and expectations in China, APAC and around the globe. The findings reveal the key actions that CFOs are taking to raise operational resiliency so they can thrive on the other side of the COVID-19 pandemic.

Recalibrate operations and digitalize to raise resiliency

When CFOs globally were asked about their priorities, recalibration of operations took the crown with 26% of respondents selecting it as their top priority. Following close behind were investing in sales and marketing (21%) and taking action to shore up cash and access to funds (17%).

Digitalization is key for recalibrating operations and raising business resiliency: 17% of the CFOs we polled in mainland China cited further investments in technology as a top priority in their recalibration efforts, which exceeds the global average (12%) and is the highest number in APAC when compared to Singapore (7%), Hong Kong SAR (12%) and Malaysia (16%).

With the threat of more novel variants of the COVID-19 virus emerging worldwide, digital transformation is particularly critical for supporting and enabling remote and hybrid work environments in the near and far term. Recent data from the U.S. suggests that remote work models could raise productivity levels by as much as 5% in the long term. But to unlock the benefits of virtualization, companies will need to digitalize a range of functions such as customer service, product, supply chain management, finance, human resources and payment processing.

Mitigate cybersecurity threats

When ‘the world’s largest work-from-home experiment’ launched in China back in the early phases of the pandemic, employees also began using a wider range of devices to access company data and applications via the cloud. As COVID-19 began its destructive spread around the globe, other countries followed suit in adopting remote work models to help contain the spread.

Against the backdrop of such rapid virtualization, the risk of cyberattacks has also increased tremendously. A study by Microsoft showed a 677% increase in COVID-19-related spear phishing attacks globally in the period between January and March 2020, when the pandemic first began.

Building business resilience in a post-pandemic world – where companies are likely to implement a mix of remote and hybrid work models – will undoubtedly entail stepping up vigilance against rising cybersecurity threats.

Spotlight data management

Significantly, CFOs in China will also have to help their companies contend with the country’s new Data Security Law (DSL), a legal framework that went into effect in late 2021 to govern how corporations manage their data. Companies that fail to comply and mishandle data are subject to heavy fines or criminal liability.

The DSL is China’s first comprehensive data regulatory regime, one of three key frameworks that reinforce the country’s data and cybersecurity governance. The DSL’s rules will be enforced in tandem with China’s 2017 Cybersecurity Law, which binds firms to certain security measures on their data networks.

The new data regulatory regime also supports the latest Personal Information Protection Law, which went into effect in November of 2021. This framework sets new regulations for how companies handle consumers’ personal information.

Target new areas for operational efficiencies

With companies worldwide reviewing their operating expenses, one-third (33%) of CFOs in China said that identifying operational efficiencies will be a key priority in the upcoming fiscal year. With some companies turning to permanent work-from-home or hybrid models, those who are successful will be able to scale down on office space and overhead costs. Thus, 13% of the CFOs polled in China said reducing exposure to office leases and utility costs would be part of their cost-cutting strategy.

“As we approach recovery and concerns about cash preservation are addressed, CFOs will focus on ensuring that companies are positioned to operate effectively and efficiently in the ‘next normal.’ This involves making operational improvements to improve productivity, cut costs and revise the investment portfolio – including real estate.” said Wendy Wang, Tricor Group Chief Financial Officer & Group Chief Operating Officer of Tricor Group.

As companies pivot and look forward to a post-pandemic marketplace, CFOs must guide their companies on a master strategy that aligns a myriad of business needs, establishes how to maximize limited resources, assesses potential risks and seizes opportunities emerging on the horizon.

“All in all, after sparring with pandemic disruptions for over two years, CFOs in China are taking the lessons they’ve learned and future proofing to stay ahead of whatever disruptions the future holds,” said Wang. “To accomplish this, they must monitor business indicators earlier on in the cycle and embrace a holistic view of performance and productivity. In terms of projecting, CFOs should take a three-pronged approach, analyzing financial outcomes both in terms of decisions taken within the company, activity along their end-to-end supply chains and external forces shaping the larger marketplace.”

Outsource functions to third-party experts

It appears that to navigate the next ‘new normal’, CFOs will be increasingly turning to third-party experts that can handle elements of financial planning and analysis (FP&L). Just under half (44%) of the CFOs we polled globally said they were considering outsourcing non-core business functions to cut costs, including accounting and payment processing, payroll and human resources administration, tax compliance, corporate secretarial services, internal audit and regulatory compliance.

In China, 25% of the CFOs and finance leaders polled identified tax compliance as the most likely function they would outsource, a sentiment which surpassed Singapore (11%), Hong Kong SAR (16%) and Malaysia (18%).

To successfully outsource functions, CFOs must be strategic and diligent in vetting and selecting qualified, reliable partners. In particular, outsourced third parties should be able to deliver economies of scale, apply technology to compliantly process large volumes of transactional data and connect companies with new digital tools and capabilities.

“Going forward, leading CFOs in China will continue to identify other areas that could benefit from third-party outsourcing to leverage specialized expertise, such as business continuity planning (BCP), governance, risk management and compliance (GRC), environmental, social and governance (ESG) and digital transformation,” said Hailiang Zhang, CEO of Tricor Mainland China. “CFOs should also consider what emerging, cutting-edge capabilities might be needed in the post-pandemic period – and begin vetting qualified third-party experts to handle.”

Catching tailwinds in 2022

In the face of a global pandemic and ongoing economic volatility, it’s tough enough to drive the highly coveted year-over-year double-digit profit growth that many CFOs strive for. Couple that pressure with the unprecedented rate of technology acceleration – along with mounting expectations from regulatory bodies, leadership and clients – and it’s easy to see that the CFO role is truly at a turning point.

“Over the past decade, CFOs have evolved to become business planning strategists but their role as stewards will become even more significant in the post-pandemic period,” said Wang. “By asserting a resilient approach in upcoming months, CFOs in mainland China and throughout APAC will steer companies to reprioritize and reposition for success in the rebound and recovery. If CFOs can stick to resilience as a priority, what was a headwind will soon become a tailwind.”

Sunshine Farzan is a global marketing executive, an active contributor to business publications, and a certified career coach. She is devoted to helping companies build and scale their business through the integration of digital, marketing, product innovation, demand generation and public relations. She has two decades of experience in building brands, enhancing customer experiences and transforming businesses through digital innovation in Asia Pacific and North America. She currently leads Global Marketing & Communications at Tricor Group, a PE-backed professional services firm.

The article was written by Sunshine Farzan.