Business risks: five ‘what if?’ questions you need to ask to prepare for future shocks
- Published: Thursday, 23 September 2021 08:28
More than 18 months into the COVID-19 crisis and still facing countless uncertainties, it is more important than ever that businesses widen their apertures beyond conventional wisdom, identify plausible and powerful contingencies, and plan and prepare for the unexpected. It is for this reason that Kearney's Global Business Policy Council has launched a new report, ‘Walking the tightrope’, which throws the spotlight on five crucial ‘what if’ questions that business leaders should be considering as they plan for the future.
The first question explores what might happen if the world fails to recover fully from the pandemic. Using econometric analysis, the Council projects that a persistent COVID scenario could cost the global economy up to $9.5 trillion in cumulative output through 2024. The report also explores a scenario in which inflationary pressures prove structural rather than transitory. Again, the economic impact is striking, as the findings suggest that cumulative output could be $6 trillion lower than baseline forecasts within the three-year time frame.
"The economic implications of our analysis are profound," said Erik Peterson, managing director of Kearney's Global Business Policy Council and co-author of the report. "Persistent COVID and structural inflationary pressures together could create a serious drag on the global economy, and the repercussions for specific countries could be even greater. For companies, the key will be embracing digitalization and new technologies, bolstering supply chains, and considering automating key processes to reduce long-term costs."
The report also analyzes the implications of extreme economic protectionism, noting that countries have taken many steps to boost self-sufficiency in key sectors such as food and energy. Taken too far, these policies could mean more than $10 trillion in cumulative output losses compared with the baseline. And cyber attacks—a growing threat to companies around the world—could become an even greater challenge if a large-scale attack on multiple industries were to occur. As a result, public–private sector cooperation will prove vital in confronting these threats.
Lastly, managing demographic change remains a crucial question that companies must consider.
More generally, the authors highlight the need for businesses to engage in contingency planning. "While we surely hope none of these negative contingencies emerge, we must be prepared to manage unprecedented challenges in a world of continuous, convulsive change," concludes Paul A. Laudicina, chairman emeritus of Kearney and founder of its Global Business Policy Council.
The list of questions considered in the What If? report are:
- What if the world fails to recover from the pandemic?
- What if inflationary pressures are structural rather than transitory?
- What if today's cyber attacks are mere opening salvos of what could morph into full-blown digital wars?
- What if the pandemic triggers a worldwide demographic inflection?
- What if the pandemic leads many of the major economies to reimpose protectionist policies under the pretense of national self-sufficiency?