Asian Private Equity Funds Concerned About Digital Gap
Private equity executives remain confident about the long-term outlook, despite the pandemic, but expressed concerns about delivering on transformational objectives like digitalization, according to a report by Mercer, Oliver Wyman and Marsh.
While operating heads are confident in mitigating the effects of the pandemic in the short-term via basic approaches such as cost reduction and channel optimization, the «2020 Asia Private Equity Survey» said that there were concerns about delivering on more transformation objectives to adapt to the post-covid environment.
Two areas of concern, in particular, are digital transformation and workforce transformation.
Digital Gap
Amid health measures like social distancing, travel bans and lockdowns that make digitalization increasingly a prerequisite for commercial relevance in the future. Likewise, 60 percent of survey respondents took note that digital aspects of their portfolio companies is a major concern.
But many indicated lacking confidence in delivering on such objectives with 60 percent and 79 percent claiming to require external support to develop customer engagement models and digitize operations, respectively.
«Unlike commercial levers, though, most funds have indicated this is not an area they have confidence in delivering,» the report said. «The critical gap between ambition and skill set is concerning, but can be an opportunity for those fastest to bridge the gap.»
Workforce Transformation
Another area that funds expressed concerns about delivering is workforce transformation.
According to the report, there are four areas considered top priorities moving forward: productivity and improvement through AI and automation (66 percent); restructuring and organization (55 percent); flexible working (48 percent); and reskilling or upskilling employees (41 percent).
Value Creation
Future technology and models aside, value creation is also being hampered primarily in two areas: leadership and cultural alignment issues. But despite such cited concerns, 57 percent still do not conduct any formal competency-based assessment to evaluate leaders when acquiring companies and just 55 percent have identified a successor if the incumbent leader exits.
Another major risk cited is the rise of cybercrime with 32 percent of respondents claiming at least one of their portfolio companies have seen related financial losses in the last three years.
The private equity survey polled more than 40 funds operating in Southeast Asia, Hong Kong and mainland China.
