AI, Fintech, IoT ranked top challenges by ME CFOs in American Express Survey

Senior finance executives across the Middle East remain optimistic about the economy, the outlook for their companies and their investments for the future, despite economic uncertainty, according to the 2019 Global Business and Spending Outlook, a survey released by American Express Middle East and Institutional Investor Thought Leadership Studio.

The cross-industry findings in the joint American Express and Institutional Investor study are based on a global survey of 901 CFOs and other senior finance executives of firms with annual revenues of $500 million or more. 180 of these respondents are located across the Middle East region including the United Arab Emirates, Saudi Arabia, Egypt and Bahrain. Now in its twelfth year, the survey was conducted in late November and December 2018.

Whilst senior executives suggest they are less likely to foresee economic growth in the region as they did last year 72% in 2019 vs 92% in 2018 due in part to lower oil prices, the growth outlook for the Middle East is in line with expectations worldwide. 71% of the total response base anticipates a substantial or modest expansion in their home countries. Additionally, growth expectations within the region range from 67% of respondents from Bahrain expecting substantial or modest expansion, to a high of 77% in Egypt.

Only 10% of senior finance executives from the Middle East foresee a modest or substantial contraction in 2019. Of the 72% who do expect to see growth in 2019, 45% anticipate modest expansion while 27% anticipate a substantial economic expansion. The majority of executives saw their companies’ worldwide revenue rise in 2018 and the Middle East showed especially strong firm-level performance compared with Europe and Asia.

“Despite operating in unsettled times, senior finance executives across the region are concentrating on their day-to-day business but keeping an eye on the future,” said Mazin Khoury, Chief Executive Officer, American Express Middle East. “While they balance spending to drive topline growth with profitability, they are pressing ahead with expansion plans, which include pursuing foreign trade opportunities, hiring and investing in next-generation technology.”

Technology and innovation

While digital transformation is clearly a central theme for the majority of organisations across the region, this year’s study also revealed a growing awareness for the dramatic impact of next-generation technology on competitive dynamics within industries 31%, up from 23% last year. Expectations for major disruption on company operations and performance 16%, compared to 18% last year or on countries have waned 14%, down from 21% last year. Among those industries surveyed, the media-entertainment-travel 43%, wholesale-retail 41% and construction 38% industries are most likely to anticipate major disruption to their industry’s competitive dynamics.

Queried on the greatest technology challenge to their industry across the region, senior finance executives in this year’s study cite the use of artificial intelligence 59%, fintech applications for payments, risk management or investment management 48%, and the Internet of Things, which includes embedded sensors and ubiquitous, Internet connected devices 43%.

Against this backdrop, in keeping with their focus on the next generation, many Middle Eastern companies are investing in these emerging technologies. The most popular being artificial intelligence where 66% of respondents indicated this was a major areas of focus up from 40% in 2018. Other areas of focus included the Internet of Things 57% in 2019 vs 24% in 2018, and fintech 44% in 2019 versus 27% in 2018.

Generation Z

Another key theme from this year’s survey was the continued rise of Generation Z, as both a customer and employee. Young people under the age of 24 now make up between 50% and 65% of the Middle East population, and senior finance executives across the region believe their companies are prepared for this generation Generation Z, and the technological and economic changes they bring with them.

81% of those asked agreed with the statement: My company has a long-term plan that considers technological, demographic and economic changes over the next 5-10 years, and 78% agreed that: My company has explicit strategies to appeal to Generation Z consumers born between 1995 and 2005.

War for talent

Companies across the region will continue to be competing for talent in a highly competitive marketplace in the coming year, but senior finance executives are looking beyond compensation to attract and retain the best employees. In the Middle East, 61% of senior executives expect to increase their companies’ worldwide number of employees between 8%-15%. On average, headcount will grow by 8.6% for companies across the region, somewhat lower than the global average of 9.2%.

However, this increase is not going to be accompanied by aggressive increases in compensation. Instead companies will focus on improving career development opportunities and working environments. Just 31% of respondents intend to raise wages or salaries to attract and retain employees in 2019. Instead companies will expand career development opportunities 56%, improve working environments through reconfigured office spaces and increased amenities 56%, and allow flexible working arrangements 45%.

Foreign trade

This year’s survey also highlighted that despite uncertainties around global trade issues, a majority 64% of senior finance executives in the Middle East expected socioeconomic changes and global trade policy would strengthen their companies’ growth prospects in the near future, while only 5% of senior executives think these issues will weaken growth prospects. This view aligns with respondents globally, where 66% believe economic changes and global trade policy will strengthen their companies’ growth prospects.

Additionally, it was suggested that expanded foreign trade will be based more on organic strategies than partnerships, with companies most likely to set up or expand foreign operations 75% and use online media for marketing programmes 70% to pursue international growth opportunities. These company-controlled strategies are preferred consistently over local partnerships and alliances in foreign markets 58% and produce service localisation 48%, a sign that a more nimble approach to foreign trade is taking hold in the Middle East.

The 2019 Global Business and Spending Outlook was conducted by Institutional Investor Thought Leadership Studio and is based on a survey of 901 senior finance executives from companies around the world with annual revenues of $500 million or more. 180 of these respondents are located across the Middle East region including the United Arab Emirates, Saudi Arabia, Egypt and Bahrain. All survey responses were gathered in late November and December 2018. The margin of error for the survey to be approximately +,-3.2% at a 95% level of confidence.

Key takeaways

• 2019 Global Business and Spending Outlook is based on 900+ finance executives with annual revenues of $500 million or more.
• 180 respondents are located across Middle East region including UAE, Saudi Arabia, Egypt, Bahrain.
• Digital transformation is a central theme for majority of organisations across the region.
• Growing awareness for impact of next-generation technology on dynamics within industries 31%, up from 23% last year.
• Expectations for major disruption on company operations have waned 14%, down from 21% last year.
• Media-entertainment-travel 43%, wholesale-retail 41%, construction 38%, anticipate major disruption.
• Most popular technologies artificial intelligence 66%, Internet of Things 57%, fintech 44%.