The new risk landscape
One in five G20 businesses say their business model has become outdated in the past 12 months and 80% agree their business model needs to fundamentally change to maintain or restore competitiveness. Meanwhile the increase in remote working, with its heavy reliance on third-party systems, has, for the first time, become the greatest cybersecurity risk factor cited by companies.
FTI Consulting’s Resilience Barometer report contains c-suite insights from 2,869 large G20 companies representing 58 million people and with $37 trillion global turnover. The G20 is the international forum that brings together the world’s major economies and its members account for more than 80% of world GDP.
The research finds 72% of G20 businesses saying that the pandemic has caused lasting damage to their industry and a third estimating the pandemic has seen revenue losses of 30% or higher (13% have suffered losses of 70% or more).
Companies are under extreme pressure to make changes across a wide range of business practices – including to integrate technology (41%), strengthen reputations (37%), improve environmental, social and governance ESG/sustainability practices (34%) and improve corporate culture (29%). At the same time there is a growing demand from stakeholders to increase profits: 51% expect significant pressure in this regard over the next year while 40% say they are under extreme pressure to increase market share and 44% to increase revenue.
And with the global pandemic placing great stress on companies and their employees over the past 12 months, G20 companies expect post-pandemic employee wellbeing to be the greatest area of media scrutiny over the next 12 months, with over a third of companies expecting scrutiny in this area.
The good news is that 97% of those surveyed say they are actively investing in preparation for future crises and they recognise the need to transform to optimise operations and drive greater efficiencies. Most (87%) also believe their leaders are better prepared for future crises and nearly half (46%) are updating their business continuity plans.
The bad news is that it is clear there is a gap between businesses understanding this imperative and their understanding of how to do so and taking action to do so. According to the research one in five companies have experienced an inability to plan for the future and only half of all G20 businesses are addressing pressing transformation issues actively. As a result a growing number of companies (39%) are increasingly employing AI analytics to monitor for risk scenarios to ensure better preparedness.
In some areas where companies have invested they are failing to reap benefits – especially digitalisation. Digital decentralisation, where organisations operate in a wider ecosystem of partners, workers, suppliers and customers, has been accelerated by the pandemic. While these third-party systems have helped organisations create efficiencies, they have also increased digital vulnerabilities and expanded attack surfaces, says the report.
According to the data, 81% of organisations say cybersecurity has risen up the board’s agenda and 85% that employees are more aware of cyber threats compared to the previous 12 months. However, 62% admit they do not fully understand the cyber risk posed by their vendors and only 27% say third-party risk is a pressing concern. Of those organisations concerned with this area of risk only 32% believe they effectively understand it.
“Many leaders recognise that they are only at the beginning of the transformational journey and worry that the forward momentum achieved in transforming their business model – made necessary by the pandemic – may wane as their teams are tired and look to adjust ways of working back to patterns that existed pre pandemic,” says Ian Duncan, FTI’s senior managing director digital science.
Nearly a third of businesses highlight a shortage in workforce and skills as an issue. However, 90% say they will need to apply a hybrid working model (which may help counter a workforce shortage), 44% expect at least half of their employees’ work to be done remotely and 99% are using workplace productivity analytics to manage their remote workforce or are considering using them. Meanwhile three quarters of G20 companies have permanently changed their real estate footprint, or intend to in the next 12 months.
How to build business resilience via transformation
Leaders need to consider two key components to build business resilience via transformation, says the report. Firstly, the ability to redesign their business model to adapt agile practices and, secondly, the building of data-driven decision-making capabilities.
Adapting agile practices involves restructuring and organising teams for fast and effective decision making, it says, including the delegation of key decisions to teams and individuals who are best placed and equipped to respond to those specific issues.
Employees are increasingly seeking autonomy, purpose and learning and agile enables them to be increasingly empowered. The role of a leader becomes one of mentor and storyteller – by providing autonomy and empowering others. “The rules of engagement between businesses and employees are therefore changing, and we are seeing the development of a new relationship between business leaders and their teams,” the report says.
The building of data-driven decision-making capabilities means businesses can make better, more timely decisions. Technologies such as AI and machine learning help businesses to better understand their customers, manage supply chain disruption and better anticipate risks. By making data-driven decisions businesses are also able to increase their agility — one of the key hallmarks of resilience.
The report concludes that the pandemic may have accelerated change but the process of business transformation is an ongoing one. Continuous change to business models may be required in the future.
All images © FTI Consulting
Many leaders recognise that they are only at the beginning of the transformational journey and worry that the forward momentum achieved in transforming their business model – made necessary by the pandemic – may wane as their teams are tired and look to adjust ways of working back to patterns that existed pre pandemic