Two years into the pandemic, owners of small and medium-sized enterprises (SMEs) in South and Southeast Asia are optimistic about their future economic and business growth prospects and plan to expand this year.
The Sun Life Asia Business Growth and Resilience Index suggests a gap between how well protected they are and the risks they currently face. Among the key data points:
- 74% expect the financial position of their business to improve in 2022 and 70% expect their national economic situation to improve.
- 84% have plans to expand or grow their business in 2022, with the top plans being to expand their product offering (44%), digitising to grow the business (30%), hire new employees (30%), and expand into new industries (22%).
- 46% of respondents reported the pandemic has had a negative impact on their business, however, 19% said their business fared a lot better in the pandemic.
- More than 90% had adapted their business strategy to navigate the pandemic, including adding new methods of distribution (51%), virtualising the business (43%) and offering new products (33%).
- Pandemic and health-related risks (51%), decreasing demand (43%) and increasing market competition (41%) are the top three risks facing SMEs.
“The pandemic has created tremendous challenges for businesses over the past two years, so we are glad that business owners now see a more positive outlook for 2022,” said Jay Sala, head of strategy, investment management & client impact, Sun Life Asia.
He added that the Index shows that SME business owners have a healthy level of optimism for improved growth prospects this year, but this is counterbalanced by the knowledge that they are still more vulnerable to some risks than they would like, particularly the impacts of the pandemic. “Successfully navigating the turbulence requires equal measures of planning for growth and building resilience,” he opined.
Optimism for the future
65% of Asian business owners participating in the survey are optimistic about growth prospects in 2022.
Business owners in Indonesia (76%) and India (74%) are most optimistic about the outlook, while entrepreneurs in Singapore (62%) and Hong Kong (51%) are more cautious. Manufacturing industries including automotive (75%), chemical & petroleum (74%) and mining (72%) are highlighted are particularly positive compared to others.
Resilience is borderline
Asked to rate their perceptions of the severity of 15 business risks and their preparedness for managing them, 55% of Asian business owners feel they sit on the borderline of resilience.
Business owners in Indonesia (60%), the Philippines (56%) and Malaysia (56%) feel they are somewhat better prepared for business risks than those in other markets such as India (53%) and Hong Kong (52%).
The pandemic and health-related risks are the most severe challenge for business owners, however less than half of respondents were using risk mitigation tools to build resilience to health risks. Only 46% of respondents have personal health and accident insurance, 34% had employee health and accident insurance, and just 20% had key man insurance in place.
Sala cautioned that many SME businesses still face a health risk protection gap. “Proactively taking action to mitigate the impact of these health risks can build greater resilience in business operations and provide owners and employees with greater security and ultimately peace of mind,” he continued.
COVID's impact
The study found the Covid 19 pandemic has had a disparate impact on SME businesses. 46% report their business suffered a negative impact in the pandemic, a fifth reported a positive change in performance.
Owners who experienced a positive impact were more likely to have innovated and adapted their strategies such as by adding new distribution methods, virtualising the business and offering new products.
By contrast, owners who experienced negative performance often used price and workforce reductions and delayed investments to overcome challenges.
In the Philippines, 33% of owners experiencing a positive impact from the pandemic had adopted new distribution methods, compared to 22% of owners suffering negative effects. In Singapore, 27% of owners who experienced a positive impact had virtualised aspects of their business, compared to 14% who experienced a negative impact. In Malaysia, 21% of owners with a positive performance had adapted and offered new products, compared to 11% of those whose businesses were negatively affected.
“The results show that adaptation and innovation have played a decisive role in helping businesses capture new opportunities in a rapidly changing environment, and digitalisation is at the core of many successful SME strategies,” Sala concluded.
