UCD Smurfit School ‘Executive Agenda’ study finds firms “woefully underprepared” for tangible macro-economic risks but optimistic about growth prospects
UCD Smurfit School has today launched a major study of business executives from public, private and semi-state leading firms in sectors that are of strategic and systemic importance to the Irish economy entitled, The Executive Agenda. Led by UCD Smurfit School’s Professor Patrick Gibbons and Associate Professor Ciaran Heavey the study of 225 senior executives from 180 of Ireland’s largest companies along with a series of in-depth, open-ended interviews with 31 CEOs and other senior executives from 23 major companies, found that firms surveyed are significantly under-prepared for several tangible macro-economic risks. These risks include: political uncertainty; geopolitical tensions; additional border controls; tax policy amendments; regulatory changes; and increased trade barriers.
The findings are part of a wide-ranging analysis of seven key themes namely: Envisioning and Responding to Macro Risks; Managing Competitive and Industry Risks; Recognising Evolving Customer Preferences; Architecting Growth and Expansion; Ensuring Financial Stability; Adapting to Technological Change; and People and Capabilities.
In respect of the first key theme, Envisioning and Responding to Macro Risks, the findings point to firms prioritising contingency planning around the issues that they can directly control rather than perceived risks that may have a high impact but are more challenging to plan for. For instance, the top five areas in which companies have contingency plans are in readiness for cyber-attacks, economic growth, data fraud, currency and customer confidence. The areas of least preparedness were border controls, trade barriers, tax policy, geopolitical tensions and political uncertainty, many of which are perceived to be bigger risks in terms of likelihood and impact.
Patrick Gibbons, Jefferson Smurfit Professor of Strategic Management at UCD Smurfit School said: “Senior Irish executives are managing businesses at a time of unprecedented change in an uncertain world and this research provides a unique insight into their views on a range of issues that impact the companies and organisations they lead”.
Ciaran Heavey, Associate Professor of Strategic Management continued: “Some of the issues they face are within their control but many are not and what comes as both a surprise and a concern is that, while contingency planning is in place for many risk areas, it is primarily centred on those risks perceived as most controllable rather than those that could potentially have a significant impact. It is hoped that this insight and others from the report will challenge conventional thinking to not only help executives identify the risks and challenges they face but to allow them to kickstart strategic planning to counter the challenges of today’s volatility, uncertainty, complexity and ambiguity they face.”
In the context of Recognising Evolving Customer Preferences, The Executive Agenda also identified that one of the main issues for corporate executives is the impact of millennials and the strategic challenges they pose around technology, increased demand and changing customer requirements, particularly in the banking sector, where they challenge the model of customer lifetime value (CLV), due to their willingness to experiment and change banks. Millennials were also identified as a challenge in the real estate sector, where it was noted that they want to interact in new ways and to view properties remotely, while the food industry mentioned that millennials are concerned not only about what’s in the products they consume, but also how these products are produced.
In the thematic area of Managing Competitive and Industry Risks the report also found that firms are better prepared for industry risks, with 61% of those sampled having a contingency plan in place to deal with potential increases in rivalry, which is the biggest risk in this theme identified by the report. Interestingly given that many companies are investing in growth, expansion and innovation, the issue of managing costs did not feature prominently among the companies studied.
The theme of Architecting Growth and Expansion looked at priorities executives have in driving the growth agenda. While it was expected that top-line revenue growth was respondents’ biggest strategic priority, the authors were surprised by executives’ reliance on the development of new products and services to deliver growth as opposed to increasing presence within new product and geographic territories to which executives attached a lower priority.
In terms of Ensuring Financial Stability, the dominant priority cited by respondents was exploiting existing assets in terms of managing balance sheet risks and finding more profitable ways to exploit the company’s assets. Far less of a priority was attached to finding new, lower sources of capital and diversifying firms’ revenue streams and cash flows.
Of greatest importance in the Adapting to Technological Change theme was adopting new technologies to simplify business processes followed by adopting technologies to appeal to new customers/customer segments. The report’s authors highlighted that in an increasingly data-driven economy, mining and leveraging customer data was of lower importance, ranked fourth in this topic area.
In the context of People and Capabilities the biggest priority for executives is retaining talent followed by improving the productivity of employees and attracting talent. Those surveyed attached less importance to developing capabilities for risk management and regulation/compliance.
The full Executive Agenda Report can be downloaded here: Executive Agenda