Russian firms cautiously aiming at new investments

(Moscow News – themoscownews.com – Nathan Gray – August 21, 2013) Growth in targeted investment is the key message of the 2013 American Express/CFO Global Business and Spending Monitor, scheduled for release in Russia this week.

While businesses worldwide are still exercising caution, the report’s findings cite growing optimism among companies toward investment, with specialization in markets and value delivery two of the main poles to guide corporate spending.

“Right now, despite the fact that the economic environment is still unclear in terms of outlook, we see that most of the CFOs surveyed in Russia represent companies that are now ready to invest,” Vladimir Salakhutdinov, country manager for American Express Russia and chairman of the board at American Express Bank, told The Moscow News. “Not aggressively, perhaps, like in previous years, but with caution, making smart investments that demonstrate careful control over spending and returns.”

The junction of east and west

Born in Moscow in 1975, Salakhutdinov studied at the Moscow Engineering and Physics Institute and the Kellogg School of Management at Northwestern University. He began his career at the Micex stock exchange in 1997, moving to Vienna in 2002 to start as a manager at Western Union.

The Austrian capital may not come to mind when thinking of international financial centers, but Vienna was a good city for a corporate base. On the former frontier of the European Union, it was well-placed for firms to take advantage of the bloc’s expansion from 2004.

“This was a perfect connection, where Eastern and Western Europe met,” Salakhutdinov said.

In 2007, he returned to Moscow to take charge of Western Union’s Russia-CIS business before becoming regional president at NET1 in 2009, where he remained for two years, joining American Express in 2011.

The findings

The potential for business in Russia is outlined in the monitor’s sixth edition, which features Russian respondents for the first time.

The focus on chief financial officers lies in their traditional responsibility for expense management, which has assumed even greater importance in the economic crisis.

“CFOs are now key, because they make the link between business operations and financial and expense management,” Salakhutdinov said. “Given their central role over value delivery, we believe that their opinion represents a balanced and comprehensive view on the economy and its future.”

The inclusion of Russia illustrates the growing importance of its economy worldwide, with many analysts believing that the country will break through to the top five world economies by 2020.

“That’s why it’s important to hear the voice of Russian executives,” he said. “I believe that there will be more and more of this type of research related to Russia in the future.”

The participants

Companies whose CFOs participated in the survey were not defined by national origin, though, but by ability to shape the business environment, determined by the level of their revenues ­ set, for this research, at $500 million.

“It can be both companies of Russian origin or companies with foreign assets,” Salakhutdinov said. “I don’t think it makes any difference, because the companies are operating here in Russia, they generate business here.”

The international optimism reflected by the research is tempered in Russia, with the lowest proportion of executives here ­ 39 percent ­ believing that there will be growth in the economy, compared to those in Brazil, India and China.

The number, though, is not necessarily a cause for pessimism, as it only indicates the close ties with Europe that Salakhutdinov feels are underestimated in discussions of the Russian economy. The optimism remains due to the 70 percent of Russian CFOs surveyed that plan to invest in the next year, if more warily than in the pre-crisis period.

“CFOs in Russia are not ready to undertake aggressive investment, where they say, ‘We’ll just put money up front to boost sales,'” he said. “The market has huge potential, and companies can still grow, but now it’s very important that they apply a value discipline when undertaking investments ­ a strategic approach which prioritizes growth while also delivering efficiency and a significant [return on investment].”

A mature market

For Salakhutdinov, the emphasis on expense management demonstrates a greater maturity in the Russian market. The interests and concerns of companies are coming to focus on the same things as companies in Western countries: efficiency and cash flow.

Businesses are therefore looking to engage in investments that are directed at increasing revenue, such as business travel to develop customer relationships. According to the research results, more than 60 percent of Russian executives plan to increase business travel over the next year.

“This means that they’re really thinking about expansion, because you can’t expand sitting in the office,” he said. “There is still a strong belief from Russian businesses that they have not used all the potential of the market within Russia.”