Navigating The Current Economic And Geopolitical Climate

Navigating the current economic and geopolitical climate whilst remaining competitive and planning for the future

The theme of this year’s World Economic Forum in Davos was “History at a Turning Point: Government Policies and Business Strategies”. It is Spring 2022 and our world has not seen such uncertain times for several decades. With a pandemic, the war in Ukraine, disturbed supply chains and rising inflation, the economic outlook and its implications for businesses and consumers will be challenging for the coming years. Add to this the climate change crisis and a need for a more sustainable development model, it is evident that the world as we knew it, only a few years ago, has disappeared. How can businesses navigate these tumultuous times and remain competitive whilst anticipating and planning for the future?

Economic rebalancing is going to be a considerable task and with inflation at its highest for 40 years in the UK, many companies will need to transform their operations and their model to remain competitive and reach their sustainability goals.

The global disruption caused to the supply chain by Covid and the current geopolitical uncertainty has had an enormous impact on the cost of transport and goods. In a high inflation environment, leadership teams will need to reassess their business model to prevent profitability from being hit without discontenting customers. Is the product offering still adequate? Can it be curtailed or tweaked to reduce costs inherent to procurement and production? Should new products be designed to answer emerging needs or shifting consumer demand?

Building agile cross-functional teams that can quickly identify and implement changes to the supply chain will support the company through a realignment with the market conditions. Managing operational risk will be a top priority to assess bottle necks and pain points in the supply chain. The continual increase of logistics, energy and material cost might mean that “just in time” supply chain and manufacturing will have to be reviewed. Procurement leaders can make a considerable impact and create value by coordinating across all functions to improve the efficiency and resilience of the procurement process. Streamlining the number of SKUs and the range of raw materials purchased could also contribute to a cost saving initiative. Finally, a tactical repricing as opposed to a blanket uplift might be a better option to protect margins without alienating customers.

All those changes will be underpinned by talent. Creating innovative products will require a skilled workforce. In a competitive work market where talent is sought after, companies will have to adjust to retain their existing talents and attract new ones. Rethinking the compensation model might not be enough. Companies will have to focus on culture, inclusion and sustainability initiatives as talent will join firms that share their values. The ability to tap into new pools of candidates that might not have the “traditional” profile but have potential will also be key in this war for talent. Revising role requirements, rewriting job descriptions and addressing unconscious bias will help attract new profiles. Innovation comes from diverse teams so being creative in appealing to new employees will make a difference in the current market and for the years to come.

Whilst adapting to public health and geopolitical pressures, companies will also need to act on climate change. A clear sustainability agenda will help attract talent. It has become a key topic and without sustainable development, economic growth in the coming decades will be compromised. However, this will require significant investments from companies. Businesses that can build operational and reputational resilience will adapt more quickly to shifts in consumer demand and economic landscape. They will therefore be in a better position to invest in evolving their business model whilst protecting the planet and supporting the local community.

At Partner Executive we think that building resilience is key to ensure that businesses are proactively preparing themselves for future changes. It is about creating the capacity to adjust and innovate in response to disruptions. In order to do this, companies will have to use multiple levers. Growth is needed to deliver a sustainability agenda, transformation and innovation are required to deliver growth whilst talent and diversity of thoughts are key to deliver innovation.
Crises trigger change and it is often in the middle of turmoil that original and inventive business models or opportunities emerge. Leadership teams will have to be ready to think differently.

June 21, 2022