Companies face growth challenges

Although three-quarters of Canadian financial executives are optimistic about growth opportunities, many are still facing challenges.

According to a Canadian Financial Executives Research Foundation (CFERF) study, these include: increasing pressure (i.e. price, product) from existing competitors (69%); current economic conditions (58%); increasing customer expectations (49%); technological change (35%); competition from new market entrants (33%); and regulatory change (27%).

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Despite new tax and policy initiatives, a number of financial execs cited other structural challenges, including lack of availability of financing (31%) and regulations and red tape (26%).

International growth

Almost one-third isn’t seeking opportunities beyond Canadian borders. Of those looking at international markets, only 17% are considering China and Asia Pacific, 13% to South and Central America, and 12% to Europe.

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“This is a major concern…especially when you look to the increasingly strategic importance of markets in Asia and South America,” says Bill Brushett, Grant Thornton’s national clients and services partner.

The study also found private companies are more likely to focus on domestic expansion, while public companies are more likely to expand into the U.S., and South and Central America.

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Companies are advised to pursue multiple channels as part of an overall integrated growth strategy. Some successful initiatives include: launching a new product or service (51%); investing in training and development (39%); opening up new markets (35%); reorganizing for growth (33%); engaging in mergers and acquisitions (26%); and process improvement (21%).

Risk management

Only 18% of survey respondents have a fully implemented Enterprise Risk Management (ERM) process.

Further, 39% rely on an informal risk management process. And when asked how they evaluate which growth opportunities to pursue, only one-quarter conducted a formal risk analysis.

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“Effective risk management must address potential opportunities and threats to all aspects of a growing business, including leadership, operational, financial, political and geographic risk,” says John Harris, Grant Thornton partner and national leader of privately held business.

He adds, “Otherwise the company could be exposed without a safety net.”