Whatever your beliefs, whatever your ideology, it is hard to argue that political events over the last year haven’t brought with them a significant degree of uncertainty. This is especially true for business. In a survey of 735 board members from the consulting firm Protiviti and North Carolina State University’s Poole College of Management, 72% cited ‘uncertain economic conditions’ as potentially having a significant impact on their companies over the next 12 months. CFOs and CEOs who responded were found to be the most worried of all, with every one of 30 risk issues graded by top finance and executive officers receiving at least a ‘potential impact’ rating of 4.5 on the ten-point scale.
According to Patrick Scott, Protiviti’s executive vice president of industry groups, ‘Executives are concerned about their companies’ ability to keep pace with the rapid speed of change, While the effects may vary across industry groups in terms of different risk profiles, our study shows that no industry is immune to future uncertainty in a changing world.’
There are a wide range of considerations for companies to be aware of when preparing their business to survive in the rapidly changing environment in which we find ourselves. Finance departments need to be more flexible in their forecasting, something far more easily achieved with a raft of new data technologies enabling rolling forecasting. An AFP study recently revealed that 44% of finance professionals have turned to continuous forms of planning, as old methods become increasingly less viable. With a rolling forecast, executives can make decisions that reflect any changes and trends in their industry or business, manage cash flows to anticipate risks, and set shareholder expectations according to the most recent possible projections.
This kind of agility needs to be a priority in all functions during uncertain times. Strategies need to be adapted and risks mitigated against. Big data is of particular importance in predicting the negative ramifications of an event like Brexit and how best to mitigate against them. For example, BlackRock has introduced one data initiative that attempts to identify a potential recession before it occurs by mining senior management’s conversations for signifiers to gauge the economic outlook. Every quarter, the financial services firm mines 3,000 earnings conference calls and compares the topics and language used by CEOs and CFOs, looking for any minor changes in their language that could suggest a change in thinking around a topic. In their blog, they claim that ‘Rather than relying on a few anecdotal bits of evidence, big data allows us to measure exactly how much more frequently words like ‘recession’ have crept back into use. We can then decide if we should be worried, too.’
Data analytics can also be used to help identify solutions. For example, how customers’ purchasing habits have been affected. They can adjust their marketing and product strategies accordingly before major damage is done. Using predictive analytics models also allows companies to cut investment to parts of their business that may not be working while also ensuring that cutting them will not stifle long-term growth when the economy recovers.
We spoke to five leading strategists about the key things to remember when negotiating an uncertain economic climate.
Zekeriya Bildik, Industrial Controller of Ferrero
‘Volatility and uncertainty are absolutely the main challenges for controllers in today’s business environment. Customer trends, market trends, macroeconomic view, competitor behaviours-reactions, technology, regulations have been changing day by day at enormous pace. This widening range of threats continue to test even the strongest organizations and force them to be elastic against all possible conditions. Great contribution is expected from controllers as strategic business partners from forming new business processes through having elastic business plans for all possible scenarios.’
Clive Tillotson, Director of Business Operations & Strategy at Fujitsu
‘In the past, a lot of us might have made this slightly breezy observation that uncertainty equals opportunity. Something feels very different this time, and I’m not sure that geopolitically and economically, there’s currently much latent opportunity. In fact, we’re entering a period when it’s going to be very difficult for companies to find the conviction to make a call and implement something bold. The simple reason is that there is so much ‘wait-and-see’ building up in the world at the moment.’
James Lemon, VP Commercial Strategy at Travelport
If we’re looking at the broader economy and global politics, it’s about periodically sitting down and looking at the broader context through a ‘what-if’ exercise. Would your plans be robust if key markets went into recession? Or if trade tariffs emerged and labour costs went up?
David Cope, Director of Strategy & External Affairs at Royal Botanic Gardens, Kew
Stop, look, and listen on a regular basis. Pay attention to how the world is changing and be prepared to be agile and change with it. When the world is changing rapidly, customers and stakeholders may improve their loyalty to a strong brand that is clearly keeping true to itself and yet, demonstrably responding and reacting to those changes in a positive manner.
Ignaas Caryn, Director, Corporate Strategy at Air France-KLM
No one can predict the future, but by developing potential future scenarios (based on key drivers and uncertainties) and their implications, a company can reflect on how it would perform in those scenarios, and what actions could help to improve its performance (preferably across some or all scenarios). Consider involving people from different parts of your organization, and even your suppliers and customers.