Navigating Through Turbulence

CapitaLand International Forum 2011 provides interesting insights into business strategies to help firms sail through troubled times

Issue: Dec 2011

The panel of distinguished speakers at the CapitaLand International Forum 2011 provided participants with a clear view of current world economic trends and tips on how to emerge from financial crises triumphantly
The panel of distinguished speakers at the CapitaLand International Forum 2011 provided participants with a clear view of current world economic trends and tips on how to emerge from financial crises triumphantly

This year's CapitaLand International Forum shed light on a topic that is close to the hearts of not just the business community but the world as a whole – economic turmoil and what businesses can do to weather the storm.

Held last month, the forum's keynote speaker was Dr John A. Caslione, President and CEO of GCS Business Capital, LLC. Founded in 2005 by Dr Caslione, GCS helps companies to globalise, especially for US and European companies to expand into high growth emerging markets. Dr Caslione is a global business strategy expert, highly respected thought leader in business globalisation, successful international businessman and leading author. His views on global business and strategies have prepared leaders for success as they learn to shift and plan for growth in a new world of higher turbulence, risk and uncertainty.

Joining him was a panel of experts from Bank of America Merrill Lynch, R&R Consulting, MasterCard Worldwide, China Merchants Group, F J Benjamin Holdings Ltd, and IDEO Singapore. Over 300 invited guests from various sectors ranging from real estate, banking and financial to academia were in attendance along with CapitaLand employees.

Dr Caslione
Dr Caslione expounded on the new normality and the new two-speed global economy

Why the Turbulence?

The forum began with Dr Caslione in Act One - Setting The Stage by outlining two new understandings: the new normality and the new two-speed global economy to help make sense of current world economic situations.

"We live in a turbulent society. The problem is clearly focused in Europe. The good news is that we, here in Asia, are doing quite well," he said. "But we will be affected because we live in an interconnected, interdependent world. While global interdependence works in everyone's favour in good times, globalisation's interlocking fragility rapidly spreads much pain and damage virally in bad times."

As a result, turbulence and chaos are heightened, and risk and uncertainty dominate. Instead of cycles of good times and bad times, the new normality see spurts of prosperity intermingled with spurts of downturn.

"We may need to redefine what 'recession' and 'recovery' mean," he warned.

The new two-speed global economy refers to increasingly unbalanced and uneven growth on many levels. The global economy is markedly split between the low-growth developed countries and the high-growth developing countries, giving rise to a two-speed world. The debt burden weighs heaviest on the developed world, while emerging markets are hit by ties to the Old Continent.

"We now live an increasingly unstable world with potential for many unintended consequences," said Dr Caslione.

What's Happening Now?

Three speakers followed with Act Two - The Big Picture, providing an understanding of possible future scenarios and world trends. Dr Chua Hak Bin, Director of Global Research from Bank of America Merrill Lynch, began with seven predictions that painted different possibilities to consider and prepare for, which included the United States' escape from the recession with weak growth, Europe's slide into recession, Greece's exit from the Euro; China's soft landing; the US dollar's drop while Asian currencies rally when QE3 begins; and ASEAN's continual resilience and strength which helped its recovery when global risks recede.

Dr Chua Hak Bin
Dr Chua Hak Bin, Director of Global Research from Bank of America Merrill Lynch, presented his seven predictions which painted different possibilities for consideration and preparation

Ann Rutledge, Founding Principal of R&R Consulting, shared her views on the role of credit ratings in modern debt capital markets.

She debunked the myth of the intrinsic goodness of credit ratings. She commented that people continue to believe in credit ratings because the market economy needs them for three reasons. Firstly, it is needed for standardisation assessment of credit risks. Next, credit ratings offer transparency to help buyers look through credit structure. Lastly, it provides protection against certain banks, institutions and pension investors from taking on "too much" credit risk while providing an indication of how much equity cushion broker-dealers should be retaining.

"To navigate through the turbulence, we must decide for ourselves what will happen next," she said.

In essence, there are three possibilities: the market economy will end because it has not served the public good and governments may step in to decide how to allocate capital; credit rating agencies will go away and the market will step in; or credit rating agency paternalism will yield to rising institutional responsibility. While the last option was her choice, Rutledge confessed that she did not know how it would turn out.

Mr Nagesh Devata
Mr Nagesh Devata, Vice President of Market Development for Asia/Pacific, Middle East & Africa, MasterCard Worldwide, shared the short-term and medium-term trends gathered from a consumer poll in the Asia Pacific region

MasterCard Worldwide's Vice President of Market Development for Asia/Pacific, Middle East and Africa, Nagesh Devata, offered a glimpse of short-term and medium-term consumer trends gathered from a consumer poll in the Asia Pacific region. The findings were illuminating given the somewhat dire economic prospects the world faces.

For one, travel amongst affluent countries remains strong. Dining out is still on the menu for most and homes still rank as a priority with people listing buying or upgrading property as a top reason for saving. Globalisation is the leading the transformation of the online shipping landscape. He highlighted some markets to look out for such as emerging markets which are set to take the lead by 2015, the women market in developing nations, the youth market in China and Japan's silver market.

"Despite global economic uncertainty, we still see resilience in short-term consumer spending, emerging markets will take the lead and economic power will transfer from Japan and Australia to China and India," Devata summed up.

What Can We Do?

"Regardless of turbulence or sentiments, we still have to do business. As long as we know what the problem is, we can find the solution," said Dr Caslione, offering a positive perspective in the closing session.

He carried on by highlighting 10 mistakes companies make during turbulence which all revolve around cutting back, conserving and retreating.

"We say: 'No, don't do that'. Instead, build a single strategy when facing turbulence, broaden resources when in turbulent times and maintain a steady forward movement after turbulence," advised Dr Caslione.

He told the audience that to navigate turbulence to achieve sustainability, companies have to create an early warning system to detect turbulence and also to look into scenario planning as a way to learn to cope with future turbulence because "unaddressed turbulence creates chaos".

Three characteristics of organisations that thrive in turbulence were outlined. Companies that succeed are the robust ones that react and react quickly, build resources, possess assets including cash reserves and are resilient; plus they move at a steady pace no matter what is hurled at them.

He concluded, "Globalisation will continue. It is inevitable. One of the best hopes for long-term prosperity for all regions is to globalise and integrate, to be inter-dependent."

People First

The panel of experts fielded questions from the floor
The panel of experts fielded questions from the floor

At the panel discussion, the running theme was "people first". CapitaLand's President and CEO, Mr Liew shared that building people was top on his list when it comes to navigating turbulence. Absolute commitment in selecting the right people, putting them in the right place and motivating them was the first key to success. The other two were to stick to core values and simple strategies.

For China Merchant Group, Chairman Dr Fu Yuning disclosed, the "simple strategies that have kept them strong for the past 140 years include "innovating and changing with the times, observing strong financial discipline, and maintaining a high cash and credit position."

Andrea Kershaw, Location Director of IDEO Singapore, a world-leading design and innovation firm specialising in designing new products, services, brands, customer experiences and businesses, warned against losing sight of individual needs even as global concerns prevailed.

For F J Benjamin, people are also central to their business success, according to Eli Manasseh (Nash) Benjamin, Chief Executive Officer of F J Benjamin Holdings Ltd. Knowing what consumers want determines their success. Communicating with the staff helps them ride the tough times.

"Communication with the staff, even with the rank and file, is very important for us to band together. Get them to understand what the company is facing," said Benjamin.

Fielding a question from the floor is international investment banking expert, Donatella Ceccarelli
Fielding a question from the floor is international investment banking expert, Donatella Ceccarelli

Donatella Ceccarelli, a non-executive director of Business Capital, LLC with over 20 years in international investment banking and expertise in international business and financial markets, asked about a possible bursting of the property bubble in China. Her concern was addressed by Mr Liew who expressed confidence in the Chinese market and the Chinese government's measures to stabilise the situation.

"Even if there is a bubble and it bursts, the Chinese economy will be able to adjust. If there is any country in the world that has enough foundation in terms of pillars of the economy, it is probably China," added Dr Caslione.

A discussion also ensued about the future of market economy, raised by Rutledge. Jennie Chua, Chief Corporate Officer of CapitaLand Limited, mooted the idea of the possibility of a hybrid type of economy that involves free market with a measure of government regulation and intervention.

Other tips on navigating turbulence include continual innovation as in the case of China Merchants Group, and diversification as what IDEO did.

After the somewhat less than sanguine outlook, Dr Caslione said it best when he summed up all the advice, "One of the gifts we have all been given is instinct. So look at your core values upon which you are operating. Always know that part of the human condition is that there is always a way."

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