Amex Warns Singapore SMEs Not To Be So Shortsighted

Singapore is home to SMEs with sophisticated cash management strategies. New research from East & Partners placed this market at the top of the list when it comes to the penetration of FX risk mitigation tools, like options and forwards, among local SMEs, which comes as no surprise considering Singapore is quickly climbing the ranks of the global currencies trading market.

But, as is the case with any small business, cash flow remains a challenge to stay afloat and remain successful. A new report from American Express uncovers just how challenged SMEs in Singapore are when it comes to financial strength.

A survey of 253 CFOs at Singapore-based small and medium-sized enterprises found that tightening cash flow and the increasing cost of doing business are the two greatest concerns these professionals have today. Coming in at number three is the concern over tightening economic conditions within the local market, according to reports.

It’s a significant shift from survey results last year, which revealed that changing economic conditions ranked as the number one concern for SMEs in the country. That was followed by a shrinking labor pool, as well as government regulations.

Creating A Game Plan

The findings are outlined in American Express’ latest installment of its “Game Plan 2020: Using change to your advantage” report, which came to the conclusion that SMEs in Singapore aren’t taking a broader view of their performance, instead opting to focus on short-term growth.

Just 38 percent of CFOs surveyed said they have a game plan to stay competitive in today’s market, and 87 percent said that their immediate priorities trump developing a long-term strategy.

“There’s no doubt SMEs need a long-term game plan to manage risk during unpredictable times,” said American Express Singapore Vice President and General Manager of Global Corporate Payments Nigel Fox in a statement. “What’s also crucial is an organizational culture adept at being agile, supporting business tools and technology to automate processes and cash flow management solutions. This allows businesses to be long-term-oriented but also have the ability to ride on short-term market opportunities and trends.”

While separate research suggests Singapore’s SMEs are largely competent at addressing threats, like FX volatility exposure, American Express uncovered a few areas that could be considered missed opportunities for SMEs looking to grow.

For example, 70 percent of Singapore’s SMEs surveyed said they aren’t using, nor do they intend to use, government grants, while only about a quarter said the nation’s tax environment is beneficial for their SMEs.

Why It Matters

As what is perhaps a reflection of Singaporean SMEs’ wide use of FX strategy, American Express’ report highlighted the benefits small businesses in the country hold due to their location. For example, a fifth of CFOs surveyed said access to southeast Asia markets for procurement is a key advantage. And while many SMEs in the country said that local economic pressures are a challenge, access to the broader global economy can offer significant growth opportunity — if, Amex noted, small business owners can plan in the long term.

“Singapore SMEs constantly seek better ways to manage their short-term needs to free up resources in order to create a long-term plan that will guide them to a successful future,” explained Fox. “In order to do so, they must look both internally and externally and invest in technology to automate the internal processes so as to maximize business performance. This will then allow them to capitalize on external opportunities in an agile manner.”