More diverse teams and leadership are an asset in an environment of heightened uncertainty. Studies show that diversity fosters creative ideas, which helps teams adapt more quickly to unforeseen events. Photo: Shutterstock
The View
by Colleen K. Howe
The View
by Colleen K. Howe

How businesses still upbeat on Asia can adapt to uncertainty as the new normal

  • China’s growth trajectory, the impact of global economic conditions, geopolitical tensions and ambiguity on the energy transition are all risks
  • But businesses can prepare by boosting in-house intelligence and diversity – both in recruitment and operations

Businesses like certainty. So why are they bullish on the business environment in Asia, as a new survey has found, even as uncertainty is on the rise?

In a world of overlapping crises, uncertainty has become the new normal, forcing business leaders to put adaptability at the core of their strategy. Increasingly, executives must think about how to stay relevant in a rapidly changing environment and use diversity to their advantage to build more resilient and adaptable businesses.

The International Monetary Fund’s World Uncertainty Index, updated to the second quarter this year, indicated that global uncertainty has reached its highest level since the first quarter of 2020 – when Covid-19 was first declared a global pandemic. The index tracks the frequency of the word “uncertainty” in country reports produced by the Economist Intelligence Unit.

Big jumps in uncertainty often predict a decline in gross domestic product, because they mean it is riskier to commit to long-term plans, such as investing in factories or employing new workers.

Still, business leaders in Asia are relatively optimistic, according to the coming results of a survey of CEOs and chairmen by the Asia Business Council. Almost half of those polled expect conditions to improve over the coming year, up from just one-quarter last year – even though anecdotally, they point to more downside than upside risks.

Those polled also point to plans to invest and employ more over the next 12 months than they did last year. That suggests that uncertainty is becoming the new normal.


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What is driving uncertainty for businesses in Asia? The trajectory of China’s economic growth is one of the biggest question marks. It will depend on whether consumer confidence picks up, leading to a service sector recovery, and to what extent real estate sector weakness will spread to the broader economy.
Another element of uncertainty is the degree to which Asian businesses can be shielded from global financial and macroeconomic weakness: inflation, weak demand in the United States and Europe, and tightening global financial conditions.
Close to half of business leaders believe inflation will be the biggest economic problem in the coming year, as higher prices for food and energy affect spending. Export-oriented economies are facing a manufacturing slowdown.

Yet prices in Asian economies have not risen as much as in the West, and many of the region’s economies have taken a more conservative approach to tackling inflation while sparing GDP. Developing Asian economies also benefit from having a younger population and, thanks to their experience with technological leapfrogging, are resilient and adaptable.

The third element is geopolitical risk. CEOs increasingly see US-China tensions as a risk to their business, while the share of businesses that believe they can leverage supply chain restructuring and “China plus one” strategies to their advantage is shrinking. Essentially, leaders of multinational companies are more pessimistic about their ability to maintain trade and investment relations with both the US and China.


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Finally, there is still too little policy clarity on the energy transition. Ambiguity about timelines for when corporations will have to comply with mandates for disclosing or reducing carbon emissions makes it hard to plan.

How should businesses respond to greater uncertainty? A solution for many multinationals is to devote more resources to in-house intelligence analysis. A function traditionally outsourced to consultants, dedicated staff in areas such as geopolitical risk analysis have the best chance of understanding a company’s vulnerabilities and how to work within the organisational structure.

More diverse teams and leadership will also be an asset in an environment of heightened uncertainty. Asian companies are increasing their focus on diversity and inclusion, in part as a response to stakeholder pressures. From the #MeToo movement to advocates of marriage equality, a new generation wants to work for more progressive employers.

With female representation in management and on boards lagging across the globe, leaders who report having concrete diversity initiatives are most focused on gender diversity goals, according to our recent survey. Studies show that diversity fosters the generation of creative ideas, and that helps teams adapt more quickly to unforeseen events.


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Other dimensions of diversity are becoming more important too as CEOs take stock of new challenges. For example, as leaders of companies face increasing geopolitical risk and, in some cases, diversify their operations to new locations, Asian multinationals need more geographic diversity in their leadership.

The concept of economic security – understood as the need to build resilient supply chains and infrastructure while also securing the rules-based economic order against non-market policies – is changing the profit calculations of some projects. That has created fresh urgency for a diverse leadership team that understands how different governments think about economic security, and the political economic imperatives they are facing.

Leadership teams need people who understand not just economics but also how economic security is understood by the governments in the regions where they operate. Creating a culture of recruiting for diverse skill sets and geographical experiences, rather than overemphasising language and cultural fit in the home economy, can help to create a pipeline of leaders with this element of diversity.

Done right, that will facilitate another business imperative, diversification. Businesses with operations varied across geographies and business lines will be most able to weather disruptions. That includes arguably the biggest disruption: the energy transition.

When clear government road maps are lacking, businesses should set their own targets, influence others in their sector to do the same and, where relevant, invest in a diversified portfolio of future energy technologies. Uncertainty might be permanently heightened, but companies that are prepared can leverage it to their advantage.

Colleen K. Howe is a programme associate at the Asia Business Council