Crowe's Charbon Lo joins panel of judges at the Hong Kong Business Awards 2020

He reckons that SMEs should now redesign and improve to adapt under the “new normal".

Charbon Lo, Partner (Audit and Assurance) at Crowe (HK) CPA Limited (“Crowe (HK)”), has more than 10 years experience in the audit and finance fields and has an extensive exposure in handling audit engagements for small and medium enterprises, as well as Hong Kong Mainboard and GEM Board listed clients.

Also specializing on special engagements such as IPO projects and due diligence review, he’s been actively involved in the industries of property development, catering services, bio-pharmaceutical products, cosmetics, food manufacture, sustainable forest management, gaming and entertainment, etc. with operations in different countries.

Charbon is also affiliated with the Hong Kong Institute of Certified Public Accountants, Associate of the Taxation Institute of Hong Kong, as well as Certified Tax Adviser (Hong Kong). Chosen as one of the judges at this years’ HKB Technology Excellence Awards, Charbon Lo thinks that long-term opportunities will come for small and medium enterprises (SME) which can stay alive and adapt to the “new normal.”

In an interview, Hong Kong Business talked to Charbon Lo as he shared insights on the Greater Bay Area “Wealth Management Connect” scheme, and what enterprises can learn from the pandemic. 

Which particular markets or sectors are your main focus? Can you share with us your work experience or any backstory that has contributed to your professional career?

I started my career in auditing in CCIF CPA Limited in 2006, which merged with another local CPA firm to form Crowe (HK) in 2009, and became an audit and assurance partner of Crowe in 2014. Crowe (HK) is a full-service CPA member firm of Crowe Global in Hong Kong, which is one of the top 10 ranked global accounting networks. I am a former council member of the HKICPA and currently a committee member of the Practice Review Committee, Qualification Oversight Board and Young Members Committee of the HKICPA.

I specialize in auditing for listed companies in Hong Kong as well as small and medium sized enterprises. I work for clients across a wide array of industries including property development, catering services, bio-pharmaceutical products, cosmetics, food manufacture, sustainable forest management, gaming and entertainment, and enterprises having operations in different countries and regions including Mainland China, Hong Kong, Japan, Macau, Brazil, Russia etc. Working with clients in different industries provided opportunities for me to develop audit leadership skills as well as different industry knowledge.

What can SMEs and other homegrown businesses learn from the crisis? For those who have been badly hit, what do they need to consider to become more profitable and sustainable in the future?

Frankly speaking, the first and foremost goal for small and medium enterprises (SME) in the short term is to survive. A lot of SMEs are facing financial difficulties during the outbreak of COVID-19. As liquidity and solvency risks increase, SMEs have to revise cash flow forecasts and working capital management for assessing the financial stability of the enterprises. To achieve this, SMEs should consider using financial stress testing, cost optimisation, capital planning and restructuring, and applying government assistance programs available. Some SMEs like restaurants and fast food shops may even temporarily close down to reduce operating loss during the difficult time.

While the pandemic has dealt a huge blow to the global economy, the world moves into “new normal” which comprises a change in social dynamics, customer behavior, working environment, etc. For those SMEs that can stay alive and adapt to the “new normal”, there will be new opportunities that could emerge in the long term. Those enterprises that are ready to adapt to changing consumer behaviors and markets, able to think outside the box and innovate will be more likely to become more profitable and sustainable in the coming future.

To prepare for the economic recovery after COVID-19, the management of SMEs should now redesign and improve their operations and distribution channels to adapt to the changing consumer behaviors under the “new normal”. It is also important for SMEs to think about technology and digitalization to enhance the operation efficiency, reduce operating cost and diversify the distribution and marketing channels. In short, SMEs need to reposition themselves to meet the changing of environment and customers’ needs.

What’s your take on international companies moving their operations out of the Mainland? Where are the opportunities and how does Hong Kong fare in all these?

US-China tension over trade and other issues has prompted some international companies to realign their global supply chains and relocate part of their manufacturing operations to other countries/cities, especially South Asian countries, to avoid American tariff and increasing production costs in the Mainland.

However, for many other foreign companies and MNCs, China, the world’s most populous country, is too big a market to miss. As China is recovering from the pandemic, these corporations are likely to maintain their operations on the Mainland to continue to tap into this important market.

I believe Hong Kong, with its common law system, well-established financial infrastructure, deep pool of professional talents and low taxes, combined with its close proximity to the Mainland and the Greater Bay Area, will continue to play a crucial and irreplaceable role for doing business with China. Hong Kong can perform functions that no mainland city can and is better placed for many aspects of doing business in China.

Under the current situation, Hong Kong may also need to strengthen its role as a gateway to the China market, particularly to cope with the rapid development of Mainland China. Hong Kong is strongly backed up by Mainland China and needs to exercise the comparative advantages in the development of talents and innovation for doing business with China.

Besides, we also need to be forward looking and prepared for the emerging demands in different sectors. Under the “new normal”, it is expected that pharmaceuticals, healthcare and personal hygiene products, e-commerce, social network software, online gaming, and cyber security sectors would benefit and have a high growth potential in the coming future. It is time for Hong Kong to position its role in these sectors in order to cope with the changing environment.

HKMA and others recently implemented the Wealth Management Connect in the Greater Bay Area. What roles does this play in Hong Kong’s position as a financial and innovation hub and how does Hong Kong fare in all these?

The introduction of a cross-boundary “Wealth Management Connect” scheme (WMC) in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) is an initiative to facilitate cross-boundary wealth management within the GBA. Under this scheme, individual retail investors may open and operate cross-boundary investment accounts directly and choose their preferred investment products in GBA.

It is expected that Hong Kong’s financial services industry will benefit from WMC with a much larger customer base and generous room for growth, which will also drive the development of the entire financial services value chain, encompassing product development, distribution, asset management and related professional and support services. This will no doubt further consolidate Hong Kong’s roles as an international financial centre and the world’s offshore renminbi business hub. Hong Kong is likely to benefit from globalization and we can overcome the uncertainties and difficulties. Be positive and prepare to add value to the development of Hong Kong!