Crowe’s Charbon Lo joins Hong Kong Business Awards’ panel of judges
To maintain sustainability, the Partner for Audit and Assurance advises enterprises to adapt and think outside the box.
Charbon has more than 15 years of experience in the audit and finance fields. He has extensive exposure in handling audit engagements for small and medium enterprises, as well as Hong Kong Mainboard and GEM Board-listed clients in the industries of property development, catering services, bio-pharmaceutical products, cosmetics, food manufacture, sustainable forest management, gaming, and entertainment, etc. operating in different countries including Mainland China, Hong Kong, Japan, Macau, Brazil, Russia, etc. He also works on special engagements such as IPO projects and due diligence reviews.
Working with clients in different industries provided him with opportunities to develop audit leadership skills as well as different industry knowledge.
As a movie lover who finds true stories deeply inspirational, Charbon believes that the COVID-19 has changed people’s habits and lifestyles, with the new normal impacting all industries, including the media and entertainment. This prevailing influence extends to businesses, where redesigning and improving operations and distribution channels to adapt to consumer behavior is—according to him—greatly needed during this time.
Charbon will join the elite panel of judges at the Hong Kong Business Awards 2021. He shares some of his thoughts about business trends in Hong Kong, the “new normal”, thinking outside the box, digitalisation, and the effect of the Anti-Foreign Sanctions Law on many multinational enterprises.
Which trends do you think will define Hong Kong businesses in the years to come?
The economy of Hong Kong expanded 7.9 percent year-on-year in the first quarter of 2021, ending a six-quarter recession due to social unrest in 2019 and the COVID-19 pandemic in 2020. The government of Hong Kong confirmed its forecasts that the economy will grow by 3.5% to 5.5% in the current year. Despite the growth, the overall economic activity remains below the pre-recession level. Certain economic segments will continue to suffer from the pandemic due to social distancing requirements and travel restrictions and recovery is uneven across different sectors.
Furthermore, the continuation and pace of the global and Hong Kong recovery are highly dependent on the evolution of the virus and the coverage of vaccinations. High coverage of vaccinations is the key to bring pandemic control and faster economic recovery.
Almost all industries in Hong Kong have been severely affected by the pandemic. What's your advice to those who are in the early stages of recovery?
While the pandemic has dealt a huge blow to the global economy, the world moves into a “new normal” that comprises a change in social dynamics, customer behavior, working environment, etc. For those companies that can stay alive and adapt to the “new normal”, there will be new opportunities that could emerge in the long term. Those enterprises that are ready to adapt to changing consumer behaviors and markets, able to think outside the box and innovate will be more likely to become more profitable and sustainable in the coming future.
To prepare for the economic recovery after COVID-19, the management of companies should now redesign and improve their operations and distribution channels to adapt to the changing consumer behaviors under the “new normal”. It is also important for the management of companies to think about technology and digitalisation to enhance operational efficiency, reduce operating costs and diversify the distribution and marketing channels. In short, companies need to reposition themselves to meet the changing environment and customers’ needs.
China’s newly passed Anti-Foreign Sanctions Law has been causing panic to many businesses and financial institutions in Hong Kong. What's your view on this?
Starting from 2018, then US President Donald Trump imposed heavy tariffs on Chinese exports and initiated the China-US trade war. Since then, U.S.-China tensions escalated further by a series of events including accusations against the Chinese large technology enterprises ZTE and Huawei of compromising US national security and US sanctions imposed on Chinese government officials over alleged human rights abuses in Hong Kong, Tibet, and Xinjiang.
In response to the above, China publicly urges the US to remove the sanctions against Chinese enterprises and individuals and pass the Anti-Foreign Sanctions Law.
China is one of the fastest recovering countries from the COVID-19 pandemic. With attractive market opportunities in China, a lot of large multinational enterprises cannot give up or ignore this market in their strategic plan. Therefore, the Anti-Foreign Sanctions Law will impose pressure on those multinational enterprises and it is expected that these enterprises will start to persuade the US government to lift the sanctions. However, the actual outcomes of the Anti-Foreign Sanctions Law are still uncertain as the tensions between the US and China remain high currently. These multinational enterprises are now facing very high political risk in doing business in both markets and need to closely monitor the development of the new laws of the US and China when determining their business strategies.
Many experts are espousing digital transformation as the key activity that will keep businesses afloat during and after the pandemic. But is there a possibility that it can also be a hindrance--much less an added problem--to their survival and progress?
As I mentioned in the second question, the world moves to a “new normal” that comprises a change in social dynamics, customer behavior, working environment, etc, and there will be new opportunities that could emerge in the long term. Digital transformation helps companies to manage operations with high accuracy and lower labor cost as well as expansion of new markets. However, digital transformation is an investment decision that needs to incur the cost. The costs of implementing digital transformation are not insignificant which include acquisition of system hardware and software, recruitment of IT team for daily operations and cybersecurity, etc. The management of companies needs to assess the overall costs and benefits of each component of digital transformation (in short, mid and long term) and to prepare a profit and cash flow forecast before making the investment decision.
If a company is currently facing financial difficulties and striving for survival during the COVID-19 pandemic, it may not be feasible for digital transformation at the current stage because investment in digital transformation will cause additional financial pressure on its cash flows. Indeed, the first and foremost goal for such a company is to survive. Such a company needs to consider cost optimization, capital planning, and restructuring, and applying government assistance programs available at the current stage. Once the company’s business becomes stable and moves to the recovery stage, it is time for the management of the company to consider digital transformation.
What key factors are you looking for when judging who should win?
The following are some key factors that I am looking for when judging who should win: financial and business growth, innovations, risk management and adaptability of the changing environment, social responsibilities and employee relations, and the organization’s reputation.