How businesses can thrive in a world in flux

Running an international business has never been easy. In 2024, its likely to be more complex than it has been for generations. Yet structural shifts driven by innovation and the net-zero transition will create opportunities for agile firms – especially in Asia.

In a more predictable time, the theory goes, growing an international business depended on analysing fairly transparent economic, industry-specific and financial factors. A company deployed capital and resources where there were strong economic fundamentals and where conditions were favourable for manufacturing or sales. Strategies were typically driven by an analysis of where and how return on equity could be maximised.

None of this has changed. But recent years have added a new layer of complexity for international growth strategies. Managers must make judgements about opaque risks connected with conflicts, societal change and geopolitical tensions. They also need to assess and adapt to structural shifts in their operating environments driven by innovations like artificial intelligence (AI) and quantum computing, the transition to a net-zero economy in the years ahead and demographic changes.

This year also presents specific policy and macroeconomic challenges. Over 4 billion people will go to the polls in 2024 in the biggest election year in history, creating the potential for significant policy changes.¹ Inflation remains high and could be stickier than expected in major markets, keeping interest rates elevated for longer. HSBC forecasts that the global economy will grow by just 2.3% in 2024, while Asia will grow by 4.2%.²

Navigating this environment will not be straightforward, but the most agile firms will still be able to capitalise on attractive international opportunities. Many businesses remain confident about growth in Asia in particular, which accounted for over 60% of global GDP growth in 2023.³ Our recent survey of 3,500 international companies with a commercial interest in at least one Southeast Asian market revealed high levels of expected growth, with 91% planning to expand in the region.⁴

But heightened complexity will challenge companies to adopt a new mindset when it comes to managing risk and capturing growth. What worked in that more predictable time may not be enough now.

Perhaps the greatest challenge in a more uncertain time is distinguishing between short-term phenomena and long-term, structural changes. This first requires international business to be constantly learning, processing and interpreting a wider range of signals than ever before about potential risks and opportunities. It also calls for bold and visionary leaders who are willing to change course when the data and insights they have point in a new direction.

Management teams need to leverage all the human and digital assets at their disposal in this environment. Some estimates suggest that the amount of data created globally has increased by 60 times since 2010, providing businesses with a vast and rapidly-expanding trove of information that they can mine to make better-informed decisions. The emergence of AI as an easily accessible tool for analysing ‘big data’ and identifying patterns also has significant potential for businesses. Quantum computing, which is beginning to be commercialised, can take analysis of large and complex data sets to another level.⁵

But while accessing and using data will be critical to firms in an age of complexity, human capital remains as important as ever. Businesses with more diverse teams should be able to access a wider range of perspectives, generate new ideas and better challenge thinking. According to research from McKinsey, companies that lead on gender diversity in executive teams are considerably more likely to achieve above-average profitability than the less diverse ones.⁶ Influence within the C-suite is also changing: Chief Technology Officers and Chief Sustainability Officers are becoming more critical to business strategy as firms focus on these areas to drive growth and efficiency.

Developing a team that is focused on learning, alert to fast-moving risks and opportunities and adept at leveraging technology clearly requires a commitment to investing in people. Upskilling is critical in this age of disruption because it will enable firms to better leverage technology to sharpen their competitiveness, as well as retain key talent. This is set to be an ongoing imperative for international businesses in Asia in the years ahead: our survey of firms with a presence in ASEAN also found that difficulty finding the right talent was one of the top challenges they faced in the region.

In a more uncertain environment, access to capital is also more important than ever, providing security against unpredictable events. HSBC provides capital to millions of companies, including small and medium-sized enterprises, across Asia Pacific.

Even in a world in flux, some structural changes endure and grow in importance. As energy and transportation systems start to decarbonise, for example, opportunities are emerging in Asia. Indonesia, ASEAN’s biggest economy, is well placed to benefit from surging electric vehicle sales as it is a critical provider of materials needed for their batteries. In 2022, 14% of all new cars sold globally were EVs, according to the International Energy Agency, up from less than 5% in 2020.

The International Energy Agency (IEA) also estimates that USD1.7 trillion will be invested in renewable energy globally in 2023 out of a total USD2.8 trillion of energy investment.⁷ Investment in renewable energy is growing faster than investment in fossil fuels: USD1.7 is now invested in clean energy for every USD1 invested in fossil fuels, up from a 1:1 ratio five years ago.

These long-term shifts point to opportunities for international businesses in Asia, which still relies on fossil fuels for most of its energy. So does the continued growth of the region’s digital economy.

ASEAN is recognised as a global leader in digital payments and e-commerce globally – and is planning to harness digital technology to accelerate its already-impressive growth. BCG forecasts that its digital economy will grow from around USD300 billion to nearly USD1 trillion by 2030, rising to USD2 trillion with the implementation of the Digital Economy Framework Agreement (DEFA) announced last August.⁸

China and India’s share of global services exports doubled in the years between 2015 and 2022, when the proportion of digitally-delivered service exports also increased by nearly four times, according to the World Trade Organization.⁹

For firms looking to capturing international opportunities from structural trends like the net-zero transition and digitalisation, working with the right financial partner can make a big difference. Pilmico & Gold Coin, one of the Philippines’ largest agriculture and food businesses, credits HSBC’s digital banking platform with enabling it to better manage regional treasury and teams across its growing ASEAN footprint, which includes Thailand, Indonesia, Singapore, Vietnam and Malaysia.¹⁰

Leveraging data and investing in human capital can all help businesses deal with that big challenge of a fast-changing world: making strategic choices that distinguish between short-term phenomena and long-term, structural changes. So can the insights and solutions provided by HSBC, which has been supporting international growth ambitions in Asia for more than 135 years and today serves customers worldwide from offices in over 50 countries and territories.