CFOs and Treasurers Flag Potential Global Recession as Top Risk for Business – J.P. Morgan Survey

Oct 23, 2019

CFOs and Treasurers Flag Potential Global Recession as Top Risk for Business – J.P. Morgan Survey

October 23, 2019

Shanghai, China — Chief financial officers (CFOs) and group treasurers in Asia Pacific from leading companies across the world have flagged the prospect of a global recession as a top risk for their business in the next six to 12 months, according to a survey conducted at the 2019 J.P. Morgan Asia Pacific CFO and Treasurers Forum in Shanghai earlier this month.

Nearly a third (30 percent) of the more than 150 respondents from 130 global corporations ranked a potential global recession as the top risk to business, followed by 27 percent expressing caution over the impact of global trade tariffs and 24 percent over an emerging markets slowdown. Concerns over cyber security (10 percent) and the outcome of Brexit (9 percent) rounded out the top five risk concerns. [Refer to Chart 1]

Chart 1

Poll Question: What are the top 3 key risk factors facing your business in the next 6-12 months? 0% 5% 10% 9% 10% 24% 27% 30% 15% 20% 25% 30% 35% Potential global recession Impact of global tariffs Emerging markets slowdown Cyber threats Brexit/Future of Eurozone

As for actions CFOs and group treasurers are taking in response to the global supply chain disruptions, most respondents (34 percent) said they exploring pricing options with suppliers, followed closely by other respondents (32 percent) currently sourcing alternative suppliers. About 15 percent said they were shifting production from China to other countries. [Refer to Chart 2]

Chart 2

Poll Question: What actions are you taking in response to the global supply chain disruptions? 0% 5% 10% 15% 19% 32% 34% 15% 20% 25% 30% 35% 30% Exploring price options with suppliers Sourcing alternative supplies Passing on costs (trariffs) to customers Shifting production from China to other countries

“Clearly, the concerns over the impact of headwinds in the global macro environment are front and center in the minds of the top CFOs and treasurers of global corporations. While J.P. Morgan’s view is not for a recession, growth is expected to slow in the coming quarters, with global growth for 2019 forecast at 2.7 percent and dipping to 2.5 percent in 2020. We still see growth opportunities especially in emerging Asia but the geopolitical events are somewhat clouding sentiment,” said Oliver Brinkmann, head of corporate banking, Asia Pacific, J.P. Morgan.

Technology and E-commerce

On the disruption by technology in the finance and treasury space, CFOs and treasurers pointed to the inefficient processes (25 percent), lack of technology (25 percent) and shortage of resource (24 percent) as the top three challenges they face in future proofing their organizations, the survey showed. [Refer to Chart 3]

Chart 3

Poll Question: What are your top 3 challenges in future proofing the finance and treasury organization? 0% 5% 10% 5% 21% 24% 25% 25% 15% 20% 25% 30% Inefficient process Lack of technology Lack of people resources Cost constraints Other

Half the respondents singled out artificial intelligence (AI) as the emerging technology that would play the biggest role disrupting traditional finance, followed by blockchain (28 percent), cryptocurrencies (15 percent) and quantum computing (7 percent). [Refer to Chart 4]

“There has been a desire by finance practitioners to better harness data for predictive analytics and the advances in AI technologies in recent years have been a game-changer. AI today has the ability to deliver meaningful insights and prescribe future actions in real time, and has been helpful for CFOs and group treasurers in optimizing liquidity, increasing efficiencies and preventing fraud,” said Brinkmann.

Chart 4

Poll Question: Which of these emerging technologies do you think would play the biggest role in disrupting traditional finance? 0% 10% 20% 7% 15% 28% 50% 30% 40% 50% 60% AI Cryptocurrencies Blockchain Quantum computing

Respondents appeared predominantly ready for e-commerce, with 45 percent stating they have an e-commerce strategy in place and 21 percent saying they are in planning phase. They cited the multiple collection channels, cybersecurity, incoming reconciliation, and processing chargebacks and disputes, as the key challenges in managing e-commerce transactions. [Refer to Charts 5 & 6]

Chart 5

Poll Question: Do you have an e-commerce strategy in place? 0% 5% 10% 21% 34% 45% 30% 25% 20% 15% 35% 40% 45% 50% Yes No In the planning phase

Chart 6

0% 5% 10% 13% 17% 17% 19% 26% 15% 20% 25% 30% Supporting multiple collection channels and methods Cybersecurity Reconciliation of incoming flows Processing charge backs and disputes Scale and volume of transactions 8% FX management Poll Question: What are your top 3 challenges in managing your e-commerce flows?

“There is no question that the e-commerce space continues to grow at a rapid pace. Asia Pacific already comprises more than half of the global e-commerce volume and is expected to increase its share to 70 percent by 2022. Migrating commerce activities onto electronic platforms is no longer an option; it has become inevitable for most businesses. With our global platforms and regional and local capabilities in payments, J.P. Morgan is well-positioned to help our clients along this journey,” said Brinkmann.

In its 6th year, the annual J.P. Morgan Asia Pacific CFO and Treasurers Forum returned to Shanghai for the second time in three years, bringing together top practitioners across 12 Asia Pacific markets who represent a range of industries with a collective market capitalization in excess of $6.5 trillion*.

*Market cap volume computed at group level as of Sep 30, 2019.

 

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