Three Key Challenges For Executives Today

Updated on

It is a turbulent time for investing. Companies are facing disruptive forces in a variety of areas simultaneously. In A.T. Kearney’s 2018 Views from the C-Suite survey, global executives pointed to three key changes that are front of mind as they seek to navigate this turbulent time. Executives’ ability to respond and adapt to these changes will affect both their companies’ short-term performance and their long-term relevance in the market.

The first key change is that executives see a long shadow from geopolitics. Just two years ago, an unstable geopolitical environment ranked near the bottom of the challenges that executives saw in the external environment. But this year, for the second year in a row, an unstable geopolitical environment is the top external environment challenge. Executives are particularly concerned about less stable global governance and rising populism in key markets this year. As one example of how this will play out, 61 percent of executives believe the United Kingdom will have a “hard Brexit” from the EU in March. Such geopolitical volatility will create challenges for business operations, as well as rising costs.

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q3 hedge fund letters, conference, scoops etc

Importantly, this year marks the first time that executives believe this shadow from geopolitics will affect the global economy. Almost two-thirds of executives say that more countries will put up protectionist barriers in the coming year, resulting in declining globalization. In part as a result of this, weak macroeconomic performance is seen by the C-Suite as a top challenge in the external environment. This is a notable shift from last year, when the global economy was seen as a top opportunity-despite the unstable geopolitical environment.

The second area of turbulence that executives identify is technology. This is a persistent area of focus for the C-suite in recent years—with good reason. Technological advancements are happening at a rapid rate and affecting a wide array of business functions, such as digital platforms for marketing, blockchain in supply chain management, and artificial intelligence assisting in both hiring and customer relations. It is therefore no surprise that executives point to technological disruption within one’s industry is seen as top opportunity for the second year in a row. Executives are particularly bullish about their company’s ability to respond or adapt to disruptive technology.

But technology is not only seen as a positive force for companies. It also presents risks. While many executives point to adopting new technologies as a top opportunity, a similar share see it as a top challenge. Big data and artificial intelligence top the list of technologies on both sides of the ledger, highlighting the uncertain effect that these technologies will have on business. Executives point to cloud computing as a greater opportunity overall, while they see the Internet of Things (IoT) as more of a challenge. Given these devices’ connections to the internet and their often-lax security protocols, it appears that executives now realize the important role that IoT plays in cybersecurity.

In fact, rising cybersecurity risks is the top business operations challenge for the third year in a row. Again, it is not hard to understand why the C-suite is focused on this issue. Executives at more than 85 percent of companies admit to having had a cyber breach in the past three years. But despite this, only 39 percent of them have a fully developed and implemented cyber defense strategy. Companies that have a cybersecurity plan have disproportionate success in both avoiding cyber breaches and quickly identifying and resolving those that do occur. The imperative for the rest of the C-suite to put such a strategy in place is clear.

The final shift that executives see today is their own role in the world. The vast majority of executives say that they will be expected to play broader leadership roles in society beyond narrow business interests. This expectation likely stems in part from the disillusionment that many people have with government leaders today. For instance, the most recent Edelman Trust Barometer shows that citizens trust business more than government in 21 out of 28 countries around the world. And many investors are also increasingly focusing on company’s social license to operate, pushing executives to incorporate social issues into their business strategies.

Executives have rightly identified these three areas of turbulence in the global business environment. They must now rise to the challenge of responding and adapting to each of them simultaneously. This will require both strategy shifts and agility in executing these new strategies in a fast-changing world. The companies at which executives effectively rise to meet these three challenges are likely to present the best investment opportunities in the year ahead.

Signup to ValueWalk!

Get the latest posts on what's happening in the hedge fund and investing world sent straight to your inbox! 
This is information you won't get anywhere else!