A research report by PriceWaterhouseCoopers and AsiaLink Business found that on the ASX 200, only 19% of board members were Asia ready, when assessed against six key Asia capabilities.
Senior executives performed even more poorly – only 14% were Asia capable.
The report assessed the current level of Asia capability by quantifying the presence of six individual capabilities across board members and senior executives.
These capabilities are defined as sophisticated knowledge of Asian markets; extensive experience operating in Asia; the existence of long-term trusted relationships in the region; the ability to adapt behaviour to Asian cultural contexts; capacity to deal with government; and a useful level of language proficiency.
Of the top 30 companies, ranked by the average level of Asia capability of board members and senior executives, 20% were in the energy, resources and mining sector or the financial services sector
“It appears that Australian resources companies realised that as their customers, suppliers and other key components of their operational value chain were now largely based in the Asian region, a high level of Asia capability would be required to deal more effectively with them,” the report states.
“A number of the best-performing resources companies – on an Asia capability scale – also had either large investments or assets in Asia or were part-owned by an Asia-based company.”
Companies in the resources sector that were highly Asia capable consistently reported a relatively high proportion of revenue from Asia and a significant volume of exports to Asia.
As expected, these companies were trading minerals and metals known to be in high demand in a number of Asian markets, including lithium and alumina.
The high performers in this sector also had mines or other ancillary operations in one or more Asian markets.
In some cases they also had a significant level of Asian investment although only one of these companies’ Asia capability scores was aided by the presence of a director that represented the Asian investor.
Asialink Business CEO Mukund Narayanamurti said having a long-term growth strategy and the right capabilities was essential for succeeding in Asia, however, many mining and business leaders feel constrained by a lack of information, pressure to show short-term results, negative public perceptions about Asian investment and analysts’ aversion to overseas investment.
“Asia is a competitive playing field,” he said. “Just as we wouldn’t send our top athletes onto the field without ample training, we shouldn’t expect business leaders to kick winning goals in Asia until they are ‘match fit’.”
Institute of Managers and Leaders CEO David Pich said a shift in industry mindset towards pursuing long-term growth through innovation instead of short-term returns was well overdue.
“Boards regularly face questions from investors about the relative priority of short and long-term results, which is fair, however, business leaders, analysts and investors need to realise the value decision-making processes that consider longer-term outlooks bring to a business,” he said.
“Asia offers businesses the chance to achieve double-digit growth but these returns are characteristically seen in the medium to long term. If you want results in Asia, it’s important to have the right frameworks in place to foster these capabilities.”
