STUDY SHOWS MAJORITY OF COMPANIES FOCUSING ON SURVIVAL

KUALA LUMPUR, June 25 (Bernama) -- Majority of companies are still focused
on survival, according to a study of executives at 570 leading global
companies by Ernst & Young on the impact of the worldwide recession on
corporates.

The study, released by Ernst & Young Malaysia Thursday, showed there is a
significant minority who are looking to take advantage of the situation to
pursue new opportunities.

Nearly half of those surveyed (43 percent) in the study, titled
"Opportunities in Adversity: Accelerating the Change", said their operating
model had been permanently altered by the events of the last 18 months.

A further 45 percent said there had been a temporary impact.

Similarly, 56 percent of the executives said their risk management processes
had been permanently altered, and 33 percent temporarily.

For 45 percent, the regulatory framework for business had also fundamentally
changed.

Other alterations to their business model -- price sensitivity,
profitability, competitive sensitivity and economic stability -- were viewed by
respondents as more temporary.

"Not only does this research show the permanent impact of the change that
has taken place in the last 12 months it also demonstrates how rapid that change
has been and how very few people saw this coming," said See Huey Beng, country
managing partner, Ernst & Young Malaysia.

"More than three quarters of the executives we surveyed were surprised by
both the severity and speed of the downturn," he said.

Ernst & Young carried out a similar study five months ago.

"The corporates we talked to then, and the thousands of companies we have
discussed the research with since, are still seeing huge competition on price,"
See said.

"Companies are still seeing significant numbers of bankruptcies and
competitors withdrawing from their sector, but there was also an increase in
those organisations reporting new entrants in their sector," he said.

Although 64 percent of executives said they had been able to make cost
reductions, 31 percent said they had improved revenues and more than a third
said the environment was more positive in terms of making strategic
acquisitions.

A majority of executives had seen deterioration in revenues (58 percent) and
profitability (56 percent).

"Given the pressures that these corporates are under, it is remarkable that
a slim majority had seen their business either improve or stay static over the
past 12 months. The management challenge over the coming year will be to act
even more quickly and decisively," See said.

Andy Tan, partner, transaction advisory services, Ernst & Young Malaysia,
said many assets are at much lower prices than two years ago, which will bring
opportunistic buyers to the table.

"The number of executives in our survey intending to carry out strategic
acquisitions in new areas of business was up seven percent on January to nearly
a quarter," Tan said.

"Given the continued relative scarcity of cash, we anticipate more creative
deal structures and alternative financing arrangements," he said.

Ernst & Young said back in January over a quarter of executives said cash
was not an issue but that proportion has slipped to 18 percent.

Respondents also highlighted an increase in communications to lenders and
rating agencies, it said.

There was however less talk of companies disposing of assets purely to raise
cash, it added.

More companies were focusing on renegotiating their debt covenants, Ernst &
Young said.

It said that while cash management is always important, the liquidity crisis
has intensified the pressure on cash flow.

Though tax rates as one of the biggest items on the income statement, many
companies have not fully explored the full range of cash-tax management
strategies available to them, Ernst & Young said.

"Tax provides a wide variety of strategies for virtually any type of company
to preserve, acquire or maximize cash to support overall business goals," said
Kenneth Lim, national director, Ernst & Young Tax Consultants Sdn Bhd.

"Plus, with new fiscal stimulus-driven tax measures being introduced by
governments around the world, a wide range of new opportunities are emerging
nearly every day," he said.

While these planning strategies and stimulus programmes can yield generous
benefits, they often feature narrowly defined eligibility periods, Ernst & Young
said.

As such, the ability to evaluate and act quickly is a critical key to
success, it said.

In terms of looking post-recession, executives were evenly split between
expanding into new geographies, increased use of strategic alliances,
acquisitions, and speed to market and divesting non-core business.

"In our earlier report we identified that, contrary to expectations, the
crisis had actually accelerated reshaping trends," said Chow Sang Hoe, partner,
advisory, Ernst & Young Maaysia.

"This has continued and we are now seeing even more companies with active
plans to fundamentally change their business," he said.

On the issue of upturn of the economy, Ernst & Young said a quarter of the
respondents said the worst was over while 42 percent said some signs of life in
the global economy are evident or will be by end of this year.

A strong minority of 21 percent saw no recovery before the second half of
2010 at the earliest, it said.

Respondents in Europe were generally more negative than in Asia or the
Americas, it added.