Execs fear Brexit and China-U.S. trade war

by Inside Logistics Online Staff

ESPOO, Finland –A post-Brexit world and an escalating trade war between China and the U.S. are making executives fear declining company performance.

A new report, What’s Now and Next for Finance and Procurement? by The Economist Intelligence Unit and sponsored by Basware, examines which emerging dimensions of three broad trends – shifting trade dynamics, automation and digitization – finance and procurement executives expect will affect their companies most; what their impact will be; and how they have prepared.

A key trend that surfaced was the concern of diminished company performance due to current global trade dynamics, namely due to increased procurement costs and greater supply-chain complexity.

Geopolitical Issues are Expected to Have Greatest Impact

When it comes to expectations regarding future trade trends, the two most widely expected to have the greatest impact within the next two years are post-Brexit trade negotiations (23 percent) and the escalation of the US-China trade war (21 percent). One respondent even expressed his fear of the lack of free markets in 10 years, seeing these trends as undercutting the progress made to date for globalization. Another source of concern is national barriers to digital trade, including censorship, localization measures and privacy regulation, which was cited by 13 percent of respondents.

Preparation is Driving Improvement in Internal Processes

Respondents expect trade dynamics to have negative effects, most commonly an increase in procurement costs (35 percent) and greater supply-chain complexity (29 percent). In preparation for these emerging dynamics in international trade, many respondents have focused on ensuring their internal processes and information gathering is as robust as possible. The most common preparation that companies have taken to meet the challenges arising from changes in global trade is to review internal controls and procedures (39 percent).

“With trade dynamics in constant flux, it’s encouraging to see that finance and procurement executives are indeed taking proactive steps to avoid negative consequences to every extent possible,” said Klaus Andersen, CTO and interim CEO, Basware.

“Forward-thinking companies are seeking greater transparency in their supply chains.”

Optimizing Talent & Automation Trends

Digitization will reduce overall costs but also intensify competition for talent, respondents believe. Just under a third (32%) expect digitization to bring down costs, the second most commonly expected impact, but almost as many (31%) agree that recruiting employees with specialist digital skills will be critical to unlocking digital transformation in their organizations. Another trend is to train existing staff to expect and adapt to change.

Procurement and finance executives expect that the automation of various finance and procurement processes will have the biggest impact on their organization, more so than AI-driven decision-making. When asked which automation trends were likely to have the greatest impact over the next two years, survey respondents most often selected “automation of payments” at 16 percent.

Respondents think that higher-order functions such as decision-making are more immune from automation, for now at least. Only five percent of respondents selected the automation of supply-chain decision-making as having the greatest future impact.

Conducted in February and March 2019, the report is based on the survey responses of more than 400 procurement and finance professionals in the U.S., UK, Germany and France.