The CEO’s Dilemma – Building Resilience in a Time of Uncertainty

Global disruptions and an increasingly complex macroeconomic outlook will be key elements of the strategic environment for the foreseeable future. For leaders, the only certainty is that waiting for clarity is a losing move. The best organizations know how to turn uncertainty into opportunity. Their playbook relies on two critical elements:

• a shared and clear view of the world and the strategic challenges/opportunities it presents
• and a resilient and adaptable plan to win.

A view of the world

Today’s global disruptions (e.g., geopolitical tensions, supply chain and economic headwinds (e.g., soaring inflation, rising interest rates, decelerating growth, and currency fluctuations)) have created a complex, once in a generation, competitive environment with significant variations across geographic areas and sectors.

Navigating this unprecedented complexity requires business leaders to develop a dynamic perspective not only on the most likely scenarios for how their operating and economic environments will evolve, but also on the distinct opportunities and risks these scenarios present for their organizations.

This research shows that “winners” in economic uncertainty do not just sit back and wait for recovery instead, they are proactive and turn ambiguity into opportunity.

A plan to win

There is no “one size fits all” solution to today’s complex strategic challenges. But this research suggests that the best companies do two things well in crafting their unique plans to win:

• First, they have a clear understanding of their strategic starting point that takes into account nuanced and deaveraged perspectives on the economic and operational stability of the markets in which they operate as well as on their own organizations’ financial strength (e.g., profit volatility, free cash flow to debt ratio) ultimately falling into four high level starting point archetypes
• And second, they embed a “dynamic strategy” mindset into their planning, comprising three elements:
  • Sensing: Observing trends, defining and monitoring critical uncertainties, and outlining a set of scenarios against which to assess business decisions
  • Adapting: Building operational and financial stability by shaping and reshaping strategies based on market trends and data driven forecasts
  • Thriving: Moving rapidly from assessment to action to seize growth opportunities and strengthen competitive advantage

Increasing uncertainty driven by a set of global disruptions and exacerbated by macroeconomic headwinds needs to be met head on.

Different sectors are affected differently by macro uncertainties

Sectors like agriculture are typically less vulnerable to business cycle shifts, while other sectors (e.g., media, tech, fashion) tend to be more affected. But this varies by recession depending on drivers.

Some sectors (e.g., retail), which were less vulnerable in the early 2000s recessions, are showing greater vulnerability in the current environment.

With the current disruptions and uncertainties, it is imperative for business leaders to reevaluate:

1. The stability of their portfolio against economic downturns & market disruption
2. The internal financial stability to cope with uncertainty

Each business context is distinct, but four starting-point archetypes can help leaders understand the moves most relevant for their organizations.

Take 3 key steps to navigate uncertainty and win in a downturn:

1. Sensing macroeconomic and disruptive trends to shape (and reshape) future scenarios that guide strategic decisions
2. Adapting business and functional strategies in response to new insights and to market, economic, and competitive developments
3. Thriving by building competitive advantage to turn adversity into opportunity

Actions should be based on the specific business context.