Experience from the events that marked 2022 suggests things will be different in 2023. finews.asia identifies ten developments.
1. Risk Management Becomes the Benchmark
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The Corona pandemic, the war in Ukraine, the plunge in the price of bitcoin, and billions of losses at Credit Suisse. All of these events could have been foreseen with today's tools and models. Still, no one saw it coming and because emotional and historical considerations played a role, the consequences of these events were that much greater.
The lessons to be learned from this are clear. In 2023, risk management will be given a much higher priority in both politics and business, perhaps leading to a bit more predictability and, to a certain extent, restraint when it comes to new projects and initiatives.
2. Investing Will Become More Exciting
(finews.tv CIO-Roundtable)
Over the past twenty years, investing has mostly been a one-way street, even if the global financial crisis in 2008 thwarted the plans of many investors. What remained unchanged over the past two decades is the policies of the world's major central banks have been characterized by an unprecedented glut of money at historically low-interest rates. This made investing relatively easy, leading to an increase in virtually all asset classes.
That all changed last year when the very same central banks started ratcheting up interest rates to tame a rapid inflation rise. Since then, government intervention has no longer dominated financial market developments. Instead, corporate fundamentals are once again coming to the fore, definitely making investing more challenging albeit more exciting.
3. The Next Bubble is Forming in Private Equity
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With the resulting turmoil in the stock markets, the financial industry was forced to look further afield to offer its customers new asset classes. One of these was private equity, which became attractive because investments in unlisted companies are made over the longer term and are not subject to the vagaries of short-term stock market trends.
Private equity is a business that because of its illiquid nature was previously the preserve of investors with large sums to invest. Now it is becoming «democratized» via digital platforms, making such investments accessible to a wider range of clients. To be sure, private equity is a highly complex business requiring a great deal of expertise and commitment and is hardly suitable for the average investor. As is so often the case in the financial world, the herd instinct is at work here, and the speculative bubble will inevitably burst.
4. A Farewell to Unicorns
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The word has been around since the early 13th century. Only in the last five years has it started to appear regularly in professional conversations. We are talking, of course, about unicorns. In modern parlance, they are young companies having the potential to reach a valuation of over $1 billion in a relatively short time.
Quite a few have been spotted lately, especially in the fintech and crypto sectors. But just as quickly as some companies grew into unicorns, they were dehorned in last year's bear market. This was particularly dramatic for companies hardly making money with their business model, yet still valued in the billions. Once again the adage that «past performance is not indicative of future results» proved prescient.
Investors' enthusiasm for unicorns is likely to give way to a return to proven and profitable companies with a long-term track record of success.
5. Social Media Will Become Less Relevant
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Very often, the times immediately before a financial market crash are characterized by hype and exaggeration. One trend in recent years has been an excessive emphasis on social media, even in the business world. It seemed nearly every CEO was advised to make themselves available on selected channels. At the same time, many companies tirelessly made mass-appeal proclamations on various topics and for a better world in general. But what did that all mean?
No one seemed to want to admit it was more fluff than reality, ultimately contributing little to nothing towards the operational progress of a company. Moreover, companies that are managed autocratically seek to control social media conversations, leaving it unclear what happens with our data. But the paradigm is changing. In recent months social media has begun to drift into the realm of niche, with that likely to gather pace in 2023.
6. The Best Time for Startups is Now
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But even in times of crisis, not everything is doom and gloom. A reading of economic history shows many of today's successful companies were founded during uncertain and difficult times. A look at the Fortune 500 reveals half of the companies making the list were founded during economic crises. Iconic firms like Walt Disney and United Airlines were born during the Great Depression of the late 1920s. Apple and Microsoft came to life during the recessionary 1970s, while today's hot companies like Airbnb and Spotify were created during the financial crisis of 2008 and 2009.
Perhaps being forged in the crucible of adversity, they learned to thrive. Today, the experience of the corona pandemic demonstrated working virtually and digitally from anywhere with professionals from around the world is possible. This opens up unique opportunities that will manifest themselves as early as this year.
7. Skills Above All Else
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Expertise is good and valuable but is not the be all end all. Today's working world is more complex, so other values and virtues count just as much. These can be found under the heading of «skills.»
Among them is the pragmatic and tolerant use of technology, but also analytical thinking, emotional intelligence, and the willingness to take targeted action on a small scale in the spirit of the platform economy.
Further skills include the use of common sense, especially when it comes to assessing and classifying trends in artificial intelligence, big data, or virtual reality in an unbiased manner in the technology environment. HR managers are likely to be busy taking a skills inventory this year.
8. The Office is Now Somewhere Else
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The era of office buildings as status symbols of economic prosperity is irrevocably coming to an end, as the baby boomer generation leaves work and heads into retirement. Of course, the home office experience of the past three years, especially the realization that many jobs can be done remotely, hastened this trend. That, and also the fact many companies will have to pay even closer attention to their costs in the coming years.
There are clear indications this will lead to a decline in demand for large commercial properties, even if construction is still brisk in many places. Will 2023 will be the year marked by the «curse of the skyscraper»? Conversion will be inevitable. London's Canary Wharf is a good example of this. Who still remembers the now trendy Maag Halls in Zurich that was once home to the engineering industry?
9. Real Exclusivity Instead of Virtual Comic Worlds
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Last year, the emergence of virtual worlds under the banner of Web3 and the Metaverse attracted attention, but they hardly proved to be suitable for mass consumption. Nearly everything offered in these environments is too rudimentary and anecdotal and we will probably have to be patient for a while before we can really enjoy these parallel worlds.
Another exclusive trend is already much further along if you have the means. Asia is seeing the emergence of invitation-only luxury boutiques and hotel suites where very wealthy people can plan, select and assemble their purchases away from the hustle and bustle. Referred to as VICs (Very Important Customers), the idea of the super-exclusive club is likely to become even more widespread in 2023.
10. Personnel Planning is a Long Term Job
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With all of the challenges companies around the world faced last year, it is no surprise many eliminated many jobs or are still doing so. But last year also saw the emergence of a countertrend with the acute shortage of skilled workers, posing major challenges for numerous firms. With that in mind, some companies might think twice about cutting jobs on a grand scale.
If the economy recovers more quickly than anticipated, the search for urgently needed personnel is likely to prove particularly difficult. There is already talk of «talent warehousing», where proven specialists can be reassigned more quickly and are being incentivized to remain.
