As businesses have faced volatile global conditions since 2008, CEOs have crafted new approaches to risk management and new strategies in response, according to the 15th annual Global CEO Survey conducted by PricewaterhouseCoopers. But they’re not going back on the defensive, as they did in 2008.
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Risk is not being ignored, but other issues are higher on the agenda. This year, CEOs are focusing on better execution in those markets which are important to the future of their business while also seeking stability and more certainty in their domestic markets.
“We adopted a strategy called ‘protect’ in most cases in the mature markets. We pay more attention to profit making and how to transfer the core business into cash cows,” said Yang Yuanqing, CEO of Lenovo. “In emerging markets, we have primarily adopted an ‘attack’ strategy. That means we have to pay more attention to market share at the beginning instead of profit. We would say that it is difficult to make money if market share is less than 10 percent.”
Similarly Keith McLoughlin, president and CEO of AB Electrolux pointed out: “Our goal is to maintain market share in the mature markets. Those markets generate a lot of earnings so we have no plans to shrink our presence there. On the other hand, we are planning to invest substantially in the emerging markets.”
CEO respondents to the survey identified three areas to prioritize in 2012:
Reconfiguring operations to meet local market needs: CEOs are simultaneously building local capabilities in important markets, extending operational footprints, building strategic alliances and creating new networks for new markets that include R&D, manufacturing and services.
Addressing risks that greater integration amplifies: In 2011, global businesses had to confront a portfolio of unrelated high-impact global risks – from political upheaval and a nuclear disaster to massive floods and a sovereign debt crisis. CEOs have learned that risk management should focus less on the probabilities of particular events, and more on understanding the potential consequences they have to prepare for.
Making talent strategic: Not having the right talent in the right place is a leading threat to growth for many CEOs. One in four CEOs said they were unable to pursue a market opportunity or have had to cancel or delay a strategic initiative because of talent constraints. There are short-term issues, such as an acute shortage of trained managers and technically skilled workers. And there are long-term concerns with the capacity of educational systems everywhere to keep up with business needs.
