Job losses loom: Majority of SIngaporean CFO's won't hire new staff

And forget about asking for a pay rise, with 41% deeming rising cost of labour or scarcity of well qualified employees as the greatest threat in 2012..

Finance executives here are still cautiously optimistic about economic growth prospects, with about half (47%) of them saying that they expect to see economic expansion in the country next year. The sentiments of Singapore CFOs appear to be less positive than their peers in other Asia Pacific countries in the fifth installment of a global survey of 541 senior finance executives by American Express/CFO Research Global Business & Spending Monitor. Three-quarters (74%) say they anticipate that Singapore will likely return to robust economic growth within the third and fourth quarter of 2012.

Worldwide, the outlook for economic expansion among the countries covered by this study was brightest in India (86%), followed by the U.S. (78%), Germany (74%), Mexico (73%), Argentina (70%), Australia (69%), and Canada (67%).

Emerging markets remain as the main revenue generator, with 74% of Singapore businesses saying they will depend more on or expect no change to exports to these countries, compared to the past five years. About two-thirds (62%) of them, on the other hand, say their company will spend more on selling goods or services within its domestic market over the next two years.

Investments in mergers and acquisitions, expanded operating capacity as well as research and development are on the table as finance executives dip into their companies’ cash stockpiles. More than half (53%) of executives in Singapore say their company will make modest investments to support top-line growth while improving profitability, while seven in ten (68%) are “somewhat likely” use their cash reserves to fund ongoing operations.

Hiring is also on the rise, with a majority of CFOs planning to increase headcount over the next twelve months. In Singapore, 44% say they will increase headcount modestly over the next year, with 47% expressing ‘acquiring specialized skills, expertise, or experience’ as the primary motivation for hiring. However, 41% deemed rising cost of labour or scarcity of well qualified employees as the greatest threat in 2012.

“CFOs in Singapore remain cautious about the economic outlook, as the country’s external-oriented sectors are still facing challenging times due to persistently uncertain global growth indicators. That said, Singapore businesses are still setting optimistic growth targets in fiscal 2012, with a total of 65% indicating that they were confident that their company would meet them. This shows some assurance that the outlook would improve over the course of the year,” said Jennifer Berthold, Vice President & General Manager, Global Corporate Payments, American Express, Singapore.

A Moderate Growth Outlook

In terms of when the global economy will gain greater strength, nearly half of the world’s finance executives (46%) believe that “robust” economic growth will return in their countries by the end of 2012. Singapore’s figure is in line with the global average, with 48% anticipating that the country will return to robust growth.

· Countries where finance executives are most bullish include Hong Kong (83%), followed by Mexico (77%), and Germany (66%).

· Respondents in the U.S. and the U.K. report a more extended growth horizon. Three-quarters of U.S.’s (75%) and 58% of U.K.’s finance executives see robust growth returning at some point after the close of 2012.

Around the world, finance executives are also setting a higher bar for their own companies’ growth. Three in five (60%) have set more aggressive growth targets compared with 2011.

A majority of respondents (63%) in the Asia/Australia region expect to see economic expansion in their respective countries this year. In Singapore, 47% say their company has set more aggressive goals for 2012, of which 65% expressed confidence that they can achieve.

Opening the Coffers

After amassing large cash reserves as a buffer against the economic uncertainty of the past few years, finance executives say their companies intend to deploy these resources in 2012. In contrast with last year, when a sizeable majority of all respondents (62%) were pursuing a deliberate cash preservation strategy, almost half of all participants in this year’s study (45%) now say their companies are planning to spend down a portion of their cash reserves in the next twelve months.

In contrast, Singapore-based finance executives were more conservative, with 32% saying they will use some of their reserves this year. Almost all finance executives (97%) in Singapore say they are likely to use this cash to fund ongoing operations.

Other frequently cited cash destinations include activities focused on energizing growth, such as:

· Acquisitions (86%)

· Increased capital spending (80%)

· Expanded operations and headcount (79%)

· Increased research and development (74%)

“Finance executives are looking for ways to stimulate growth, in part by deploying some of the cash that has built up on corporate balance sheets in recent years,” said Berthold. “We’ll also see finance executives keep a sharp eye on the bottom line, but spend selectively on activities that will drive revenue like sales and marketing and new product development.”

Safe, Smart and Selective

Companies are likely to take a conservative approach to spending and investment over the coming year. Nearly half of all respondents (49%) report that “modest spending and investment to support top-line growth while improving profitability” will characterize their approach to spending and investment. In contrast, only 14% of respondents say they plan to “spend and invest aggressively to boost top-line revenue”.

In Singapore, most executives say they will likely invest more or the same amount over the next year, with more focus on selecting the types of investments that will support long-term growth:

· 85% of finance executives say they will invest as much, if not more, on developing new products or services

· A total of 81% say they will improve production capacity, while 90% will expand market access through sales and marketing activities

· 61% polled say their company will continue to put in the same amount in ‘merger & acquisitions’ in 2012, while 33% say that they will inject more in this activity

· 53% will likely undertake similar investments on improving production-process efficiency, while 35% say they will spend more in this area

Finance executives are holding the line on travel spending. About half of respondents in Singapore (51%) will spend the same or more on business travel over the next twelve months. Almost all of them (94%) say they will use the money for travel to meet current or prospective clients, indicating that companies will focus their resources on travel that is closely connected with revenue expansion.

“Frequently, business travel is a key factor that enables companies to win on a national and global scale,” Berthold said. “Our research suggests that when companies see a positive return on investment from travel, they will continue to spend on it.”

Dealing with Volatility

Many finance executives around the world say their companies are managing volatility effectively — and some even identify volatility as a source of competitive advantage.

· In Singapore, about one in three respondents (36%) say they are thriving on volatility and see it as a source of competitive differentiation for their companies

· Another 30% simply view it as part of the business landscape, while the same percentage see volatility as a problem that is likely to negatively affect their profits or growth prospects.