- 3 months ago
Tariffs swing, policies flip, and rules keep changing. How can CEOs stay ahead when uncertainty is constant? Professor Joseph Cherian, CEO of the Asia School of Business, shares strategies and practical insights for leaders navigating today’s volatile world.
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00:00Hello, you are tuned in to our 1E Review. My name is Cynthia Ng.
00:14Global trade has never been more unpredictable.
00:18Tariffs changing overnight, supply chains tested and policies shifting faster than anyone can plan for.
00:25For CEOs today, it is not just about chasing growth, but staying agile in a world where the rules keep changing.
00:34So joining me on the show today, I'm very, very honoured to have Professor Joseph Cherian.
00:39He's the CEO of the Asia School of Business to talk about how leaders can plan smarter and stay ahead amid the chaos.
00:48So first of all, Professor, great to have you back on the show. Thank you for having us here at ASB.
00:53Thank you very much.
00:54So as I mentioned earlier, the world is changing so fast. So let's start with that, right?
01:00So if you look at how business leaders plan, traditionally they look at five-year plan, long-term plan.
01:07But that may no longer be relevant because we can't even anticipate what's going to happen in the next five months.
01:14So what should they be thinking at this point?
01:17Right. Every business leader goes through this process of what's called risk management.
01:21That means to figure out within the parameters of the world that we live in, how do we plan ahead five years, ten years, whatever.
01:29What's going on is risk management usually means you know what the potential outcomes are going to be and what the likelihood or the probability of those outcomes.
01:39And then you can start to manage what do I do in this kind of situation and do some assessments and make some optimal decisions.
01:47That's risk management.
01:49There's also something called uncertainty.
01:51That means you don't know what the outcomes are going to be.
01:53You don't know what the likelihoods are going to be.
01:55You're in a chaotic situation because policies change randomly.
01:59So when the policy changes randomly, you really have your work cut out for you because how do you plan in this kind of situations?
02:07I think that's what's going on with most business leaders and even governments.
02:12They're trying to figure out what's going on next.
02:14What do we do in these different circumstances?
02:17So I think that's where we are.
02:19It's become more difficult to navigate through the uncertainty that's going on because of the uncertainty of uncertainty.
02:27So just going to your point that I think what's happening is the uncertainty is heightened now.
02:33For a leader today, what should they be thinking to plan ahead for their businesses?
02:38Okay, so if you're talking about traditional risks, the kinds that we are familiar with,
02:43there could be some disruptions, there could be some temporary natural disasters.
02:48We now have to navigate around those so we can plan accordingly and we can even use financial markets to hedge against those risks.
02:54For example, catastrophic risk.
02:57Things are uncertain, but if it happens, you have actually instruments that can help a company or a corporate leader plan for it.
03:05When it comes to these kinds of uncertain situations, you have to use different techniques.
03:11And there's some techniques, I'm not the expert because I'm more of the quantitative person
03:15that has a prescribed set of outcomes and probabilities and we do what's called Monte Carlo simulations and analysis and so on.
03:24So is this like planning for different scenarios?
03:25Correct.
03:26So what happens is now you have a system that's being used a lot.
03:30It's an old system called scenario analysis.
03:32I don't do much of that, but I'm very familiar with what people do.
03:36So basically, you have to mix what's called the quantitative with the qualitative.
03:41You have to have not just a bird's eye view of what's going on around the space in terms of your supply chain,
03:48in terms of your suppliers, your factor inputs, your factor outputs.
03:52Where is it going to your customers and clients?
03:55Where is it coming from?
03:56Your suppliers.
03:57You have to have full visibility of all these in both time and space.
04:02That means you have to know where everything is.
04:04Your suppliers' goods, your clients' inventories, so you can actually optimise.
04:10So that is called scenario planning.
04:12What if this happens?
04:13What do I do?
04:14What if there's a COVID-19 pandemic?
04:17What do I do?
04:18So you have these kinds of...
04:19But right now, we're not even talking COVID-19.
04:20We're talking about man-made disasters that is policymaking by certain unhinged people.
04:27If you know what I mean.
04:29Okay.
04:29So I think scenario planning sounds like the more prudent thing to do right now.
04:34But it also sounds like there's extra cost and data and analyzing data, time.
04:40How do you make the case for CEOs to actually invest in this?
04:43Because who are...
04:44Especially CEOs who are used to the old ways of planning.
04:49Okay.
04:49Look, we have to live with the times.
04:51You have to adapt.
04:52A good leader has to be agile.
04:55So they have to know what do I do?
04:56What are the best ways in which to deal with the circumstances and scenarios I'm dealt with?
05:01You can't say, oh, I'm used to net present value.
05:04It doesn't apply in this situation.
05:06Net present value is what we all learn.
05:08But it may not apply.
05:08You have to use different techniques.
05:10So I think corporate leaders better know what is scenario planning.
05:15They better know what all the potential scenarios can be.
05:17They have to have full visibility of both the macro and the micro trajectories that can take place.
05:25And then say, what will I do in this situation?
05:28Can I give two examples?
05:29Yes, please.
05:30Okay.
05:30I don't know if you still remember COVID-19.
05:34Yeah, most of us do, right?
05:35One airline, I remember reading about it, Korean Airlines, pivoted so quickly.
05:41None of the other big airlines, famous, top business class suites and first class suites,
05:47pivoted as quickly as Korean Airlines of all countries.
05:50Korea, which is very rigid and so traditional in the way they do things.
05:54They quickly pivoted and said, look, we're not going to make any money because there's no travel.
05:58There's no holidays.
05:59People are staying home.
06:01Our commercial flights are all empty.
06:03They quickly converted the planes into cargo planes.
06:07One of the earliest to do it, I remember reading about it.
06:09I said, I was sitting in Singapore and I said, wow, I'm stuck in Singapore.
06:13I couldn't go anywhere.
06:14I said, wow, this guy has turned around.
06:16And they're one of the few airlines that made a profit during COVID.
06:19Most people are getting bailouts, airlines.
06:22But Korean Airlines pivoted.
06:24That is what I call, they probably had the scenario, what if this happens?
06:28What do we do?
06:30I'm not sure what went through them, but that is what I would say.
06:34They had a scenario planned out.
06:35And when that scenario played out, they knew what to do.
06:38Quickly and agilely converted.
06:41That's what all CEOs and boards must do.
06:43Korea is not the epitome of good business practices.
06:46Sorry to say this.
06:47But in this case, they showed excellent agility.
06:50One more example.
06:51During the Depression in the 20s, 1930s, everything was dead and all hell was breaking loose.
07:01But actually, a few companies arose.
07:03To this day, they exist.
07:05Hewlett-Packard and there's one more.
07:09I can't remember the name.
07:10Hewlett-Packard.
07:10Disney.
07:11Disney.
07:11They felt during this time, what did people want?
07:16Quality, entertainment in the case of Disney, use of technology.
07:20We're talking 1930s and so on.
07:22So that technology was advanced in those stages.
07:25They actually played to that strength and actually they came out of the crisis.
07:31That Depression era.
07:33To this day, Hewlett-Packard exists in different forms and so does Disney.
07:37The other one is food and grocery companies.
07:40Many people know about Trader Joe's.
07:42It's a pretty famous brand name in the U.S.
07:47It got its origins during the Depression period because the guy who founded Trader Joe's grew up during the Depression.
07:54And he said, what do I need to provide in a food store?
07:58Affordability because people are poor.
08:00So you need affordability.
08:02High quality.
08:03Assurance that you're getting good food.
08:05Nutritious and a bit quirky.
08:07As you know, Trader Joe's, they're a bit quirky, right?
08:10People like that.
08:11And to this day, Trader Joe's exists.
08:13And there's another company called Publix Grocery Store.
08:15Still exists.
08:16Also arose out of that with the same principles.
08:19So what I'm trying to say is that it's not unique.
08:23You need to find ways to handle this.
08:26And if you are not sure how to do scenario analysis, go get the experts.
08:29There are a lot of our consultants and experts.
08:31Even we, ASB, we've got two or three experts, academic experts, who do scenario planning.
08:37So what I'm trying to say is that you can't say, oh, sorry, I don't know what it is.
08:41You better go and figure out what it is and plan for these uncertain scenarios.
08:45So it's not just about having the foresight, but also planning for different eventualities.
08:51Correct.
08:51Exactly.
08:52And putting the time and effort to do so.
08:54Correct.
08:54Okay.
08:55My next question then would be how we talked about how things are so uncertain right now,
09:01where even few months feel uncertain.
09:03So how do CEOs plan for that when policies are changing overnight?
09:09And I've mentioned earlier, supply chains are being tested.
09:12Okay, first let me step back a bit and say the world saw the best growth and the most extreme exit out of poverty in many countries during the time that China and America were best friends.
09:28Do you remember when China and America were best friends?
09:30Everyone wanted to go to America, China, they wanted to learn Mandarin, you know, it was no longer Japanese or Persian, it was Mandarin.
09:39Everyone wanted to learn Mandarin.
09:40All the kids were learning Mandarin in Manhattan, all my friends' kids.
09:44But so we know the world prospered during the time when they got along.
09:48But now we live in a funny world where everyone's fighting each other.
09:51The problem is whenever, you know, it's a, how should I say, when your neighbor is doing well, you want to pull the person down.
10:01We should all do well together as opposed to pulling someone down over ideology or religion or whatever.
10:07We need to get everyone to work together.
10:09So my view is the optimal situation, the ideal situation is we all get along and trade freely without any special treatment or biases or tariffs.
10:24Don't forget, it's not just America that's imposing tariffs.
10:27A lot of emerging countries, a lot of our countries actually impose tariffs on imported goods.
10:31Do you feel like tariffs are being used, is this a temporary measure or do you see this as a weapon in trade?
10:39For the long term.
10:41So let me come back to that question.
10:42So let me finish up on that part about when you don't have that free trade and the glorious economic trading that is free of barriers, you need to form blocks.
10:56You need to start trading their favorite partner and stuff like that.
10:59But coming back, is it temporary?
11:01I think it's temporary because the one who's going to get most affected by this is the one imposing the tariffs.
11:08As soon as they start hitting a recession, as soon as the price of goods go up in their territory, because of this tariffs, it's going to happen.
11:16Mark my words, it will happen.
11:18Can I get your sense of when would that happen?
11:20My sense is probably if it does happen, if we don't reverse course, first quarter of 2026, that's when inflation starts creeping up.
11:28You know, I listen to some pundits saying, oh, no inflation.
11:31So far the ground, you know, in America, mid-time level is all OK, stable.
11:35No, they're living off inventories.
11:37Wait and see.
11:38The prices are bound to go up.
11:39There's no way it's not going to go up.
11:41So once inflation hits the heartlands of America and once recession starts creeping in, they're going to ask, what is going on here?
11:49And that's when you'll see the pullback.
11:52Everyone's politically astute.
11:54It's going to be the politics driving them into the tariffs and it's going to take them out of tariffs too.
11:59Because I know a lot of companies or leaders are waiting to wait and see, do I diversify right now?
12:03Do I trade with one block over the other?
12:07Or do I just wait?
12:08Do everything.
12:08No, you've got to run the business.
12:10You've got to play along with the blocks.
12:13That means if your country is part of a big regional block, take advantage of that.
12:17If the government is giving you financial enterprise solutions and financing, take advantage of that.
12:24Take whatever comes because you need all the help you can get.
12:27So my view is take whatever you can.
12:29Go with the trade blocks.
12:32If you can, or even diversify.
12:34Come back to your question of diversification.
12:35If I'm a tire maker and I've got no operations in America, I do send tires to America, I'll get hit by the tariffs.
12:44Yes.
12:45Correct?
12:45So what do I do?
12:46Do you start building a factory in America?
12:49Not necessary.
12:50If you want to, if it makes business sense, do it.
12:53Don't do it because it's a temporary measure because you know it's going to go away.
12:57So if it makes business sense, do it there.
12:58And I know a few companies that actually benefited, they had the foresight to put…
13:03Could you share some of that?
13:04I'm very interested to know.
13:05Okay.
13:05One of them is actually GT Tire.
13:06That's why I use a tire company.
13:08GT Tire has operations in Indonesia.
13:10It's the 10 largest tire company.
13:12They have operations in Indonesia.
13:14They have in China.
13:15And they're debating, should they do one more in America?
13:18Should they do here?
13:19Because the…
13:20And they're the largest EV brand tire maker in the world.
13:23Because for EV cars, it's heavier.
13:25You need special tires.
13:26So they're the biggest on EV.
13:28So in China, they've got like 30 or 40% of the market because EV is huge in China.
13:33So I remember talking to the founder and the CEO.
13:37And they were saying, you know, we were debating, should we do America or not?
13:39They finally decided, you know, at some point, this pay is going to go up.
13:44We need to have a presence there because it's one of the largest consumers of tires in the world.
13:49So they decided to do the factory way before all these tariffs happened.
13:53And they're so glad because now they're just increasing production in America to meet the American demand.
13:58No tariffs.
13:59So they're not sending the Chinese tires or Indonesian tires over there.
14:02They're using the local production.
14:03So they have the flexibility.
14:05Not everyone does.
14:07Those who don't have the flexibility don't jump and say,
14:09I'm going to do factories here.
14:10I'm going to do factories.
14:11Think carefully about the long-term solution.
14:14What if I do it in America?
14:15How does it affect the other parts of the business?
14:17Can I use financial markets to hedge against those kind of situations?
14:22So you have to be a bit more flexible in your thinking as well
14:25because you don't have to completely change the way you do your operations
14:30just because of some temporary blip in the economic trading system.
14:34But that's it.
14:36If you have operations in America, ramp it up.
14:39It'll help your case.
14:40Can you also talk about, you mentioned briefly, using financial markets to hedge the system.
14:45What exactly do you mean by that?
14:46If I am a producer of tires and I don't have any operations in America
14:55and I've been exporting a large chunk of tires to America
14:59and now I've got this tariff, I have to find alternative markets.
15:03I have to go to Indonesia.
15:05I have to go to Europe.
15:06I've got to look for alternative markets.
15:07Africa maybe.
15:09What do I do with America?
15:10You know, my sales are going to go down.
15:13So what you can do is, if you predict your sales are going to go down
15:17because you do not have operations there,
15:20you can take on financial market positions that hedge.
15:23They counter it.
15:24That means when those sales go down, the value of your other investments go up.
15:30This is called hedging.
15:32It's a crazy example.
15:33I would invest in Goodyear.
15:35Goodyear's operations tire.
15:36Goodyear, buy the stock of Goodyear, you know that when your sales go down,
15:39Goodyear's go up.
15:40Do you see what I'm saying?
15:41It's a perverse example because you're not going to invest in your counterparty,
15:44but you look for something that moves in the opposite direction
15:47so that when your sales come down to America,
15:49your hedge because the other parties goes up, net-net, even-steven.
15:53Does that make sense?
15:54Yes.
15:55All right.
15:56So what you have mentioned are very great examples,
15:59but these are companies with financial resources, with capacity.
16:02I want to bring this closer to a lot of businesses in Malaysia,
16:06mid-sized but still exposed to the global supply chain.
16:10What would be your advice to them for those who may not have the capacity to do so?
16:15And if there are other alternatives for them to use as a hedge
16:20to the instability that's happening?
16:23You raise a very good point because in some countries, including Malaysia,
16:28SMEs, MSMEs, the micro ones as well, are about 40% to 60% of the economy
16:34and they give about 70% of the jobs.
16:36So they're a very important part of the economy.
16:39We tend to forget them.
16:40And they're part of the cog-and-wheel system that feeds into the multinational companies.
16:45So, first of all, there are two ways.
16:48One is the SMEs have been very slow to adapt in terms of AI,
16:53in terms of digital transformation, in terms of sustainability.
16:58You know, they have to be faster in adapting, first thing.
17:01So that's a bit of the internal part.
17:05Externally, the government needs to provide more support to them.
17:08The Intels and the Microsofts don't need support.
17:11It's the SMEs.
17:12SMEs.
17:13So governments should avail to SMEs more support, soft loans,
17:19enterprise financing schemes, and stuff like that to keep them going
17:23until the uncertainty wears out.
17:26So my view is both sides.
17:27SMEs have the role to play.
17:29They have to spend some money to upskill themselves.
17:31And sometimes there's a lot of subsidised programmes.
17:34Even ASB runs a lot of subsidised programmes for SMEs,
17:38subsidised by the government, you know, the ministries of finance
17:41or whatever would subsidise, or the ministry of digital
17:44would subsidise some of these programmes.
17:46So they need to find those programmes that will help them upskill.
17:50Going back to your earlier statement about risk management,
17:53a lot of companies, they plan with risk in mind.
17:56But what about capturing opportunities when things are volatile?
18:00Are companies planning for that?
18:01It depends which stage you are in the life cycle.
18:05If you're a very mature company and you've got a very good set of tools
18:09and people to handle it, I would say yes.
18:13But if you're early stage, think about a family business.
18:15I don't think they have all these tools and know-how and knowledge.
18:19So my view is that you can't just stop business, right?
18:22You have to survive.
18:23So for them, they have to first tide over.
18:26And to tide over, I just told you the methods.
18:29There are a lot of government programmes,
18:30I mean, not just in Malaysia, Singapore.
18:32I've been through them where I've seen these programmes
18:34that help them tide over.
18:36Then you have to plan for growth.
18:38How do I get this business to what I want it to be?
18:42You know, a big listed company or a multinational,
18:46whatever the case may be.
18:47So I think we need role models as well.
18:50Now, people who have been through it have come up.
18:53You know, Malaysia has a lot of family businesses
18:56that are now global.
18:58You know, they can also serve as role models
19:00and do sort of mentoring and so on.
19:03So we need to find a way to bring these peoples together,
19:06the ones who are early in the life cycle and those who are later,
19:09so they also can aspire.
19:10I want to be like this family business, which is now global.
19:14You know, there's so many.
19:15I don't have to mention these are household names to many of us,
19:18but they started as family businesses.
19:19They were small businesses too.
19:21I mean, the Kwok Brothers was a small little sundry shop
19:26in Johor many years ago.
19:28And look at it now.
19:29It's properties, it's hotels, it's plantations.
19:32You know, they grew.
19:33It's a local Malaysian company from Johor.
19:36So we should aspire to be like them
19:38and do the right thing along the way.
19:41Sustainability, all that should also be part of our DNA.
19:47It pays off.
19:49Believe me, all these things pay off.
19:51It helps towards your growth.
19:52Okay.
19:53Now, CEOs these days,
19:55they're not just caught in business cycles,
19:57but also political cycles.
19:58So there are two things right now.
20:00What is your advice?
20:01What are three things, if you could share with us,
20:03that they should be looking at at this stage of growth
20:06and at this stage of the political cycle that we are in right now?
20:10There are some things that are controllable,
20:12others that are uncontrollable.
20:13Leave the uncontrollable to your leaders, political leaders.
20:16Let them figure it out.
20:18Support them in getting the right solutions.
20:20As you know, there's a lot of negotiations going on.
20:23You can or may not be a part of it.
20:25You know, you're not in control of that.
20:27So you let the parties that are working towards it work that out.
20:32In the meantime, you bolster your defenses internally.
20:36Just be prepared because life is never going to be smooth.
20:39So these companies really have to ramp up.
20:42I've been to events where the government organizes locally,
20:45and not just in Malaysia and Singapore,
20:47where there's all these incentives being offered,
20:50but the take-up is very low.
20:51They say, no, it's not for me.
20:52I would prefer to just run this mom and pop thing.
20:55No, you can't think that way.
20:56That means you'll never be beyond a mom and pop.
20:58If you want to become world class,
21:00you need to avail yourselves to what's available.
21:03And I can tell you, there's a lot.
21:04You may say, oh, Malaysia, we now have it.
21:06No, we have actually a lot of incentive programs
21:08for small and medium businesses.
21:11So actually, when things are most uncertain,
21:14when things are most chaotic,
21:17it's the time you take advantage of these things.
21:19I feel that it's actually a positive outcome.
21:22We'll all learn how to change.
21:23COVID made us pivot very quickly to technology,
21:27to more advanced tools.
21:28We would not have been so fast into technology-driven solutions,
21:33even if not for COVID,
21:34because we had to sit at home.
21:35We can't go around.
21:36So we had to rely on technology.
21:38So you see what I'm saying?
21:38Sometimes bad events can lead to good outcomes.
21:42So never view anything as a setback.
21:45Take it as a challenge to do better.
21:47And you must have the heart to do it.
21:49So if you're still focusing on SMEs,
21:51and we're talking to SMEs here,
21:53I would say just go out there and do your best
21:57and avail yourselves to all the systems.
22:00Think big.
22:00We've got to think big.
22:02Malaysia is a very talented country.
22:04If someone, I'm Malaysian,
22:05but I've lived abroad for many, many years,
22:07I can tell you when I come back,
22:09I see that this is a very talented, creative society.
22:12But we need to punch above our weight.
22:15I like that you're very positive
22:17and also pragmatic at the same time.
22:19But I do want to get your opinion about,
22:21so yes, there are opportunities
22:22that leaders should go for,
22:25but what about blind spots
22:27that leaders here tend to underestimate about training?
22:31You're talking about, again, business leaders?
22:33Businesses, yes.
22:34Yeah, you know, you can't blame.
22:35I mean, we all have blind spots.
22:38And that's where I feel the collective knowledge
22:40is always important.
22:42Don't be centrally located.
22:44Even when you, let me give you an example.
22:46When the scenario analysis is done,
22:49there are spectacular failures.
22:51My colleague who told me about,
22:54who's an expert in this,
22:55spectacular failures.
22:56You know why?
22:57Mostly it was being centrally planned
22:59out of headquarters.
23:00For some problem, which is happening downstream,
23:04you need to make sure you get feedback
23:06from the ground.
23:08What is the most optimal scenario
23:10in this situation?
23:11So one of the things we have to learn also
23:15is to listen to the ground
23:16to be able to empower people
23:19because your staff and employees
23:21can be your greatest feedback mechanism,
23:23telling you what's wrong on the ground.
23:25Why is inventories low?
23:26Why are supplies not going the way they're going?
23:29So you need to learn how to listen.
23:31So the scenario planning of the leaders,
23:33the blind spot, what I would say is,
23:35you can avoid blind spots by listening,
23:38learning and empowering.
23:40Let your staff,
23:41I'll tell you personally,
23:42I used to run a business too.
23:44I'm telling you,
23:45the reason why we were successful
23:46and we were pretty damn successful
23:48was because our staff were empowered too.
23:51Around the world,
23:52I had teams in Europe,
23:54in US,
23:54they were empowered to make decisions
23:57and that was what caused them
23:59to be so motivated
24:00and to build.
24:01And your blind spot disappears
24:02because someone is watching your blind spot
24:04for you, you know.
24:05This leads to my next question,
24:07actually.
24:07Oh, I hope we started stuff.
24:08Now, this is the final few minutes
24:09that we have.
24:10I do wonder from where you sit
24:11in such a volatile environment, right,
24:14which leadership traits separate
24:15those who succeed
24:16and those who fail,
24:18who struggle?
24:19Let's not say fail,
24:20who struggle.
24:21What separates the two?
24:22Yeah.
24:22Okay, I think that leaders,
24:26and I'm speaking from experience.
24:27I may not look old,
24:29but actually I am.
24:30So, and I'm not as young as I look.
24:32I've got a lot of experience.
24:34You need to be agile.
24:35You cannot be fixed in your mindset
24:37about the way the world works.
24:39You have to adapt.
24:40You have to take information in.
24:42In probability theory,
24:43we call it Bayesian learning.
24:45Bayesians after mathematicians
24:46who said,
24:47take all the available information
24:49and change and adapt
24:51to that information.
24:52Don't be stuck in your old ways.
24:55It's like driving.
24:56I remember Nobel laureate Robert Merton
24:57was here a few weeks ago.
24:59He was saying,
24:59it's like driving
25:00by looking in the rear view mirror.
25:01No one does that.
25:03You don't look at the back
25:03to go forward.
25:05You have to anticipate,
25:06look forward.
25:07Where could the blind spots be?
25:09Where could the potential accidents?
25:11You have to anticipate the future,
25:13not look at the rear view mirror
25:15and drive.
25:16I thought it was a perfect example.
25:17So my view is people have to learn how,
25:20leaders have to learn how to,
25:21there's no such thing as blind spot.
25:23You have to learn how to let go
25:25and empower people
25:26to give you good feedback.
25:28Don't be afraid to be criticized
25:30for a wrong move.
25:31Adapt quickly.
25:32So my experience tells me
25:34agility is very key.
25:37Agility and flexibility
25:38in the way you operate your business
25:40and the way you think about issues.
25:43All right.
25:43Well, thank you so much, Professor.
25:45Always a pleasure.
25:46Listening to you
25:48and your advice
25:49and great to have you on the show.
25:50Hope to speak to you again soon.
25:51Thank you so much.
25:52Thank you, Cynthia.
26:02You
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