Fleet of foot: how risk leaders can get ahead of populist, protectionist and policy uncertainties, part of PwC’s 22nd Annual Global CEO Survey trends series
We’re all getting whiplash from the rapidity and unpredictability of change. Although most industries have been dealing with disruption — often from new technologies — for some time now, external factors such as the new trade and tariff ecosystem, a fluctuating regulatory environment and geopolitical volatility have led to a sharp increase in pessimism across sectors.
Jim Woods, Partner, PwC Hong Kong, and Sam Samaratunga, Partner, PwC UK, outline three strategies to help manage risk in turbulent times.
This year, PwC's 22nd Annual Global CEO Survey found that threats that are top of mind for CEOs are less existential and more related to the cost of doing business.
This dramatic turnabout from last year’s exuberance, when the economy was more robust and the geopolitical environment more stable, is a result of threats that are perhaps less existential but more pressing than they have been in the past, with tangible effects that can be felt in real time. But now, the more immediate threats of overregulation, continued fallout from Brexit, global trade disputes and national policy uncertainties will have a more direct impact on the ease and ultimate success of doing business. Pervasive digital transformation also continues to increase risk, although innovations such as AI and robotics are creating operational efficiencies that help offset these challenges.
These new, government-related threats, including protectionism, populism and exchange rate volatility, are pushing CEOs to stick closer to home and turn inward to drive revenue growth. Indeed, 77% of leaders say they are planning to focus on operational efficiencies over the next 12 months, and 72% report relying on organic growth to drive revenue. As a result, they are adjusting their supply chain and sourcing strategies, shifting production to alternative territories and delaying capital expenditure and foreign direct investment.
There are three key strategies to better manage your risks in this fast-paced environment.
Large or small, organisations need to pay attention to the weak signals that hint at unexpected conditions to come, becoming more fleet of foot and agile as they consider the options under a variety of circumstances and test out different models. As everyone else pulls in their horns and retreats, be mindful of opportunities, as well as inherent risks. Selective investments in foreign markets may position companies for growth beyond the more predictable revenue generation from organic growth strategies. There will be winners and losers but, ultimately, these headwinds will blow businesses in the right direction. There always will be opportunities amid the turbulence.
Global and China/Hong Kong Risk Assurance Leader, Partner, PwC Hong Kong
Tel: +(852) 2289 2316
EMEA and UK Risk Assurance Leader, Partner, PwC United Kingdom
Tel: +44 (0)7710 058286
Global Risk Consulting Leader, Partner, PwC United Kingdom
Tel: +44 (0)207 804 3364