Preparing for what comes next is key
Despite boardrooms focusing on an unprecedented global public health emergency, executives are also planning their future beyond the crisis.
While executives are dealing with the immediate impact of the crisis, they still need to reassess their outlook for growth and consider the future “new normal” for businesses. As countries in Asia-Pacific, led by China, East Asia and Southeast Asia, are gradually moving toward stabilization, companies will undergo large-scale transformations in many sectors, as companies adopt agility, flexibility and resilience into their business strategies. This is also likely to apply to Japan, albeit Japan is at an earlier stage in dealing with the impact of COVID-19.
Already, 74% of Japanese companies are taking steps to change supply chains and address digital transformation (28%), speed of automation (50%) and management of the workforce (50%). Pre-crisis, transformation was high on the corporate agenda, with three-quarters of Japanese companies (76%) saying they already had major transformation initiatives underway, triggered as a result of pressure on revenue and profitability goals. In the current COVID-19 environment, the urge for transformation and reshaping of business portfolios will be stronger than ever.
Japanese companies have been focused on adapting their business models in response to global trade tensions, and this is now further accelerated by the COVID-19 crisis.
Companies are not expecting COVID-19 as a one-off event. Most Japanese executives are expecting regular disruption to become the new normal, and business strategies centered around sustainability will be the top priority. The unwelcome and unexpected emergence of COVID-19 will further cement transformational strategies in the boardroom.
Post-crisis recovery points to M&A
With many companies assuming a recovery in the medium-term, 57% of Japan respondents will actively pursue M&A in the next 12-24 months. Eighty percent of Japanese respondents are expecting to see increasing competition for assets in the next 12-24 months, with 67% expecting the competition to come from private capital, including private equity, which has record-high funds available for investment.