The RAM-CTOS Business Confidence Index (BCI) continues to rise, climbing to 54.8 in the second quarter (2Q) 2023 from 51.4 in the previous quarter, indicating businesses remain sanguine about prospects for the next three months.
The improvement in sentiment was led by a positive outlook for sales and profitability, with the latter finally reverting to a positive reading (51.6) after languishing in a pessimistic territory in the last three quarters.
“Following a round of price increases in late 2022 to maintain margins, the cost pressure faced by businesses may have started to ease this year,” said RAM Holdings and CTOS in a joint statement on Wednesday.
Commenting on the improved sentiment, CTOS Digital Bhd group chief executive officer Erick Hamburger said CTOS SME subscribers accessed 5% more credit reports in 2Q compared to 1Q to evaluate new customers, a good indicator that they are ramping up operations and productivity in line with the improved 2Q BCI sentiment.
The average CTOS SME Score rose by two points from 307 in 1Q to 309 in 2Q. This means the average Malaysian SME has “good” credit standing, which is important to access credit, Hamburger said.
Meanwhile, RAM Holdings GCEO and executive director Chris Lee said firms may be able to shift from “survival mode” to growing their business again with a sales pick-up in 2023.
Aside from pursuing operational improvements, an increasingly important development that businesses should heed is sustainability practices.
“In particular, firms with export dealings or which are part of the global supply chain will have to comply with new global and domestic environmental, social and governance (ESG)-related regulations that are being rapidly introduced,” he said.
Most firms observing some sustainability practices
Of the 146 firms surveyed in 2Q, about 75% said they had adopted at least one sustainability practice, with waste reduction and recycling being the most cited.
Not surprisingly, ESG practices are more common among firms that are part of a global supply chain (80%) as they may need to meet clients’ compliance requirements versus those that are not (68%).
Energy and resource conservation initiatives are also popular among the firms surveyed, the statement said.
Meanwhile, 26% of respondents have not adopted any sustainability practice.
This is more prevalent among small and medium enterprises (27%) and micro firms (30%) as they face various impediments to progress on this front.
“A lack of incentives was the most common hurdle, as cited by 45% of firms surveyed. About 40% of respondents said it is too expensive to adopt green practices,” it said.
However, over half of the firms surveyed, particularly those with multinational clients, are keen to further adapt to sustainability initiatives to become ESG-compliant but the cost of compliance is a concern, it added.
