Organisations in Asean expect to be badly hit by economic repercussions of Covid-19
Businesses in Asean expect a significant or worse impact on business with more considering layoffs to reduce costs compared with the rest of the world, according to a survey by Korn Ferry.
A whopping 81 per cent of businesses in Asean said they expect a decline in revenue, compared with 72 per cent for Singapore and 73 per cent globally. Meanwhile, 61 per cent of companies in Asean said they are expecting significant (or worse) impact to their annual revenue this year, compared with 51 per cent in APAC and 50 per cent globally. The benchmark is set at more than 15 per cent decline in annual revenue.
This is the third pulse survey conducted by Korn Ferry. More than 3,500 respondents from 99 countries responded.
Mary Chua, APAC rewards and benefits leader at Korn Ferry said: "Given how swift and severe this pandemic is impacting businesses globally, we are not surprised that 9 out of 10 companies reported that it will not be business as usual post-pandemic, and existing operations, systems, processes and policies will not go unaltered."
Indeed, 67 percent of companies in Asean anticipate being more disciplined about cost management (compared to 59 percent in APAC and 56 percent globally). This also means more companies in Asean are reporting that they will be restructuring their businesses (36 percent in ASEAN versus 29 percent in APAC and 23 percent globally), and expecting re-training and re-skilling of existing staff with available capacity in new focus areas (51 percent in ASEAN versus 37 percent in APAC and 27 percent globally).
"Organisations will continue to be challenged in having to deliver shareholder returns as soon as possible yet having to invest for the future rapidly to capture new business growth. Many studies have shown that firms that have undergone the deepest cuts during a recession, with limited investment for the future, often take the longest time to recover, and some may never ever. Being able to balance planning for different time horizons under such uncertain times will certainly be keeping leadership awake at night for a while,” added Ms Chua.
Separately, salary freezes were found to be the most prevalent form of wage control both globally (24 percent) and in the Asean region (17 percent). While salary cuts are less prevalent, for organisations who have implemented this measure, executives are generally most impacted by reductions in compensation.
Specific to Singapore, more organisations are now expecting a serious impact (an estimated 30-50 percent decline in business revenue) - 21 per cent, compared with 15 per cent in March adn April 2020. In line with the gloomy business outlook, more organisations in Singapore have implemented or are considering people-related cost containment measures.
Since the last survey conducted in April, 19 percent of organisations have implemented salary cuts as of May 2020, an increase from 12 percent previously. This figure is higher than the regional average for Asean organisations of 14 percent and the global average of 17 percent. For companies in Singapore who have implemented or are considering salary cuts, the expected duration of salary cuts is generally three to four months, reflecting the projected recovery for Singapore and the gradual reopening of the economy, said Korn Ferry.
Despite the Singapore government’s extensive support in terms of wage subsidies, the extended circuit breaker period in May has pushed more organisations to implement or consider permanent staff layoffs and redundancies. There is an increase from 12 percent of organisations who have implemented or are considering the measure as reported in the April pulse survey, to 17 percent as of May 2020. Nonetheless, this is still lower than the regional average for organisations in Asean of 19 percent and the global average of 24 percent.
Kartikey Singh, associate client partner, advisory, Korn Ferry, said: “As restrictions around Phase 2 ease over the course of next quarter and businesses start to get back to some semblance of normalcy, the pressure of short-term cost reduction would reduce. Organisations will need to re-calibrate their talent needs and focus on re-filling the talent gaps that are created during the pandemic. Whilst the requirement for talent might arise quicker, the pressure of salaries will continue for a bit longer as the market has an abundance of manpower resources.”