@ the IERP® Global Conference, August 2024
The views and opinions expressed in this article are solely those of the featured speakers and do not necessarily reflect the official view or stance of the IERP®. The content is provided for informational purposes only.
Noting that corporate renewal was a way of transforming processes to improve business, moderator Datin Dr Norrizan Razali, Founder and MD of Tech Capacity pointed out that in today’s volatile, dynamic environment, companies were not waiting for distress signs before undertaking corporate renewal. “In the current business environment, what are the key issues that drive companies to initiate corporate renewal strategies?” she asked speakers Jalalullail Othman, Independent Non-Executive Director, CIMB Islamic, and Tony Chin, Advisory Board Member, Kanzun Ventures.
Chin said that companies should not wait for something to go drastically wrong before embarking on corporate renewal; instead, they should be doing it continuously. “Business comes with risk-taking,” he said. “The idea is to increase revenue, then reduce cost. It must be sustainable. In terms of increased revenue, you want to stay competitive and increase market share. You want to be in business for the long haul, not the short term.” This includes having new products, investing in R&D, collaborating with OEM producers, and using other means of outsourcing.
Businesses must also consider new marketing strategies like using social media and other technological tools, and advanced logistics which have the ability to deliver products globally. He cautioned, however, that businesses could suffer internal issues, like organisational strategies which are not robust enough, or management not being sufficiently proactive; or they could face external issues like an overconcentration of customers or markets, which may cause unexpected incidents that result in financial trouble.
“You sometimes need to spend money to save costs – improve efficiency and productivity, acquire new machinery and talent,” he said, adding that there are some costs which companies cannot escape, as these are part of doing business. “We talk about sustainability…but it is about being agile and resilient. You have to adopt strategies to ensure that if you are hit (by an untoward event), you will have the strategy to recover quickly.” For this, scenario planning was important.
Commenting on what conditions should be, for companies to ensure that corporate renewal is successful, Jalalullail said that while corporate renewal should ideally be pre-emptive rather than reactionary, most of the time it was a case of “too little, too late.” He identified several factors that companies should take into account when considering corporate renewal. One was the size of the company; another was the issue of technology. But “If I had to choose one single point that requires us to tailor-make all our corporate renewal, it is the C word: Culture,” he said.
“The tone from the top is very important. The tone from the top means from the bottom up as well. Bottom-up means accountability.” Building culture takes time, but this is often something businesses do not have. Even the tenure of CEOs is often only long enough to make plans, not implement them, he stressed. With change as the only constant, organisations must have risk management that keeps pace. What then would be the strategic leadership role of the board, in helping to overcome macro-level issues which may affect micro-level situations which in turn affects the corporate renewal strategy?
There was a need to understand the global operating landscape, and how external factors affect the business, Chin said. Board and management must work together, build trust and be aware of the drivers that will affect the company, and prepare for it – although “the Board’s role is actually to provide oversight… (And) not to engage and do things within the ambit of management,” he stressed. “So many people (on the board) with so many skill sets and diversity will apply an overview lens and brainstorm with management, particularly the CEO.
There is a tendency when viewing discussion papers, to look at and comment on things which are written, but not at what is unwritten; these are the things that will come back to bite us. “We need to look at the landscape and see what things are going to affect you, and then develop strategies so that when it happens, you are not unprepared,” he advised. To meet corporate renewal objectives, there should also be incentives and recognition. “Things can go wrong in a big way, and if there is a failure, it should not be laid entirely on the doorstep of the risk people,” Jalalullail warned.
The business landscape has changed; what worked for risk 50 years ago, may not work now as things are more interconnected than ever before. The board’s approach is important, as is the composition of the board. Board diversity is imperative. A board must be well-balanced and have a well-balanced risk appetite. Reiterating that the board and management must work together for the success of the company, Chin said that CEOs may come and go but the company has an infinite life. “For a company in trouble, the CEO may come in as a turnaround specialist,” he said.
“This can help the company get out of trouble, but the CEO’s skill sets may not be right for growing the company.” There was also the possibility, he added, that with a turnaround in conditions, and the development of a successful growth phase, the company’s focus could shift too much to sales instead of cash flow. “The CEO may lose track of the various drivers affecting the company, and it will get back into trouble again.” Reviews of corporate renewal must therefore include board members as well as the CEO and senior management.
