The COVID-19 pandemic has pressed the “pause” button for the world and impacted us in different aspects of our lives.
“COVID-19 has been become a new normal and people need to be prepared to fight the virus on a long-term basis,” said Jack Chan, Regional Managing Partner of EY Greater China with 20,000 professionals in 29 locations covering mainland China, Hong Kong, Taiwan, Macau and Mongolia. Chan is an alumnus of The Hong Kong Polytechnic University, graduated with a Master’s degree in Corporate Finance in 2003.
Chan reckons that the pandemic will gradually come under control but will be staying with us for a while until a vaccine is discovered or when herd immunity is achieved. As for businesses, Chan highlighted that in the short run, enterprises would face cashflow and liquidity challenges, which could threaten the survival of businesses. In the medium to long term, the outbreak will urge many to look at reshaping their business models or better still, to expedite their transformation so as to get ready for the next unknown.
EY recently published a report on the influence of the coronavirus titled “Beyond COVID-19, what will define the ‘new normal’”. In the report, EY has offered insights into the new normal and considerations business leaders should factor into planning beyond the COVID-19 pandemic.
“Our research shows that businesses have to experience three stages. First, they need to grow the existing business, maximizing profitability and shareholder value, and responding to immediate obstacles,” Chan said. “Then businesses need to cope with medium-term challenges and opportunities, largely as a response from disruptions in their sector. If they are able to transform themselves – from building a resilience supply chain to adopting digital solutions that fit the business operations, they will be able to ride on the global megatrends and capture new opportunities that shall emerge in the long term.”
Chan believed that high levels of uncertainty shall continue for the global economy as we enter the post pandemic stage. He explained that the first wave of the outbreak in China was controlled in a short time. The second wave outside China has hurt some European and American countries, however countries such as Italy and the US were planning to resume business even when the pandemic was yet to come fully under control.
If the US, as the largest economy in the world cannot control the second wave effectively, the situation is expected to get worse. As the third wave is already developing in Africa and some other countries where medical competency is lacking, the outbreaks could be more destructive and potentially creating further impact in the global economy.
Chan discussed further how the real economy and virtual economy would emerge under the new normal after the COVID-19 outbreak, in particular for small- and medium-sized companies in the F&B, retail and tourism sectors that have been strongly attached to the real economy. In the past months, when lockdown and social distancing came into effect as governments tried to keep the pandemic under control, people’s everyday livelihood and activities were restricted and forced to change. As a result, many of the real economy activities have to find ways to survive via virtual means. SME operators who were quick to develop service offerings via the internet have managed to transform their business operations to cope with the suddenly vanishing physical or traditional marketplace. The use of innovation and technology has proven to be effective to support SMEs through the short and medium term challenges. Chan suggested that these businesses should consider overcoming future market uncertainties by fully embracing digitalization, including the use of big data and blockchain technology to map out customer behavior and business strategy.
Chan went on to discuss how the develop of fintech will see drastic acceleration as part of the virtual economy. EY recently released a report named Global Fintech Adoption Index 2019. The report found that China and India are leading the way with the adoption rate of fintech at 87%, while the adoption rate of fintech in Hong Kong surged from 32% in 2017 to 67% in 2019. As fintech has caught on around the world and entered the mainstream in all markets that EY studied, the report concludes with advising companies to stand out from the crowd by adopting technology to make financial services more accessible and efficient from both the B2C and B2B perspectives.
Commenting on the technological development in Hong Kong, Chan felt that there has been a misunderstanding of Hong Kong not promoting technology and fintech. “The government has actually done a lot to develop fintech,” he said. Chan quoted Cyberport and the Hong Kong Science and Technology Park as examples and said that they are digital technology clusters committed to inspiring innovation, nurturing entrepreneurs, and attracting global talents, partners and companies to Hong Kong for collaboration and business opportunities. Statistics also show that more than 600 fintech companies are now in the clusters and the fintech sector in Hong Kong has raised more than US$ 1.1 billion from 2014 to 2018.
Switching to the development of the Greater Bay Area, Chan said the EY Greater China region has established a dedicated committee to explore opportunities emerging from the GBA development plan and strive to support companies that have the vision to expand business footage in the Area.
He suggests that Hong Kong should take advantage of its well established roles as an international financial centre, capital fundraising centre and its advanced position in the financial and legal systems, then applies its mature business models to capture opportunities in the GBA as well as the ASEAN countries.
Chan also thinks highly of the role that talent can play in a city’s progress. “Hong Kong should keep and train talent to serve the community, especially at a time when social moment weighs heavily on talent outflow. The government and universities could adopt a more strategic approach in cultivating talent, such as offering more training and job opportunities in the technology sector, to get our young people ready for the new normal,” he said.
Photo credit: HKICPA’s A PLUS magazine
