TODAY'S CHALLENGES
The challenges that CEOs perceive include creating and preserving value in a highly compe-titive environment, navigating a wave of new regulation, and motivating and taking care of key people.
Collective Thinking
- Creating a Sustainable Business
- Doing Deals
- Improving Business Performance
- Managing Assets
- Managing Crises
- Managing People
- Managing Risk
- Operating Globally
- Reducing Costs
- Reporting Performance
- Responding to Change
- Strengthening Governance and Regulatory Compliance
Creating a Sustainable Business
Is your company a good corporate citizen? Shareholders expect your company to generate profits. But, they also want your company to have a positive impact on society while minimizing any negative effect on the environment. This so-called "triple bottom-line" approach to business which balances economic interests against social and environmental concernsgoes by the name of sustainability. Over the past decade, sustainability has moved from the fringes of the business world to the top of shareholders' agendaand those of your employees, regulators, and customers, too. Consequently, any miscalculation on sustainability-related issues can now have serious repercussions on how the world judges your company and values its shares.
Sustainability covers a wide range of difficult issues ranging from pollution to child labor. While stakeholders can be forgiving of past lapses, they do want companies to go forward ready to deal with sustainability issues in an honest and open fashion. So, as a first step toward sustainability, companies must establish a sufficient level of trust between themselves and their various stakeholder communities. Sometimes, the process of establishing trust can be a painstakingly slow. But it starts by understanding stakeholders' concerns and acknowledging their legitimacy. Only after you've mapped the spectrum of stakeholder issues can you start to prioritize them and develop suitable responses and outreach programs.
Doing Deals
How do you make a smart deal? First, start with your deal strategy it's got to be flexible enough to adjust for the unexpected, aggressive enough to win highly competitive business terms, and broad enough to envision the challenges that will confront you from the moment the contract is signed. As you move down the path toward reaching agreement on your deal, you'll also need access to the right information at the right time. Tax issues, legal risks, conflicts of interest, market fluctuations all need to be taken into account with each decision you make.
But in a business environment where information can easily overwhelm and confuse, which advisor can help you fashion a deal that works? To start, look for someone with sufficient experience and judgment. Plenty of patience and stamina is also recommended as is the capability to add value across the entire deal-making continuum, from strategy through post-deal integration.
Improving Business Performance
Innovate and implement for better performance. Global flow of information, technology, capital, goods, services and people has never been greater. Unprecedented growth in the developing world, the increased need for consistency, standards, controls, compliance and governance and the cost, risk and management needs associated with evolving supply chain issues, are just some of the challenges and opportunities businesses face today. Improving performance has become a persistent need for companies striving to remain competitive and effective in this environment
Managing Assets
Are your assets working hard enough? In order to effectively allocate capital, a companymust be able to measure and manage all its assets, both tangible and intangible. Its financial officers must build a comprehensive view of the company's assets; and manage the relationships among those assets in a way that maximises shareholder value.
That goal may sound simple enough, but in practice, asset management presents a host of challenges. For many companies, asset planning, budgeting, and forecasting is a slow and expensive exercise. Recent studies indicate that asset managers spend only a fraction of their time actually analysing useful data. The rest is spent collecting and integrating data as well as trying to reconcile consolidated data.
How can you start managing your assets more wisely?
Managing Crises
There are many reasons why a company may suddenly find itself facing a serious financial crisis. Economic downturns, changing markets and competitors, outmoded technology, strategic errors, cross-border disputes, fraud, or regulatory investigations can all put fundamentally sound businesses at risk. Sudden natural or human disasters can also endanger operational stability.
Whatever the cause, a crisis can trigger serious financial problems, including underperformance, declining earnings, and liquidity and cash-flow blockages. It can also unleash a host of non-financial challenges: lack of confidence and pressure from stakeholders, suppliers and customers; regulatory scrutiny; demoralization of staff; and reputational damage. Left unchecked, the results can be extremely serious, and sometimes, irreversible.
In most cases, however, a downward financial spiral is not inevitable. With expert support, it can be arrested. Early detection and swift, decisive action are the keys to regaining control, restoring performance, and rebuilding value. Equally important, early action can help prevent or mitigate the risks of serious business crises. That's why timely advice and intervention are critical.
Managing People
The world of work is changing. Outsourcing. International mobility. Talent shortages. New labour laws.
Globalisation. Shifting demogra-phics. An ageing workforce. Where, how, and for whom, people work is, in turn, transforming company structures and cultures. Over the next decade, the convergence of dominant business, demographic, and social trends will only accelerate the changes sweeping through today's workplace.
The HR function is also changing and HR leaders are under more pressure than ever to demonstrate results from their workforce practices and policies. Business leaders recognise the link between business performance and the people within their organisation. And they understand that people-related issues need to be at the heart of the boardroom agenda. As a consequence, HR managers are being encouraged to implement people strategies that support the organisation's business objectives and increase accountability and transparency around people management and reporting. The bottomline: HR is increasingly seen as a strategic linchpin one that needs to work closely with operations, finance, and other corporate departments to help drive business strategy and success.
Managing Risk
A world of risk. Business risk appears in a bewildering variety of guises credit risk, financial risk, geopolitical risk, operational risk and reputational risk, to name just a few. Of course, your business can adjust for risks through a variety of conventional mechanisms and strategies, but still there are no certainties. In fact, many risk management strategies often
spawn new, unintended risks of their own.
Risk management has come of age in recent years. Senior executives and, in particular, Boards have become more concerned with ensuring that the management teams which report to them have robust and "fit for purpose" risk management processes in place. Zero failure is impossible, if not too expensive to achieve. However, the expectation is that the risk profiles are known and that mitigating processes are in place to give reasonable comfort as to possible outcomes and impacts.
Risk management is now viewed as an integral component of how organisations are governed and how they comply with the external "rules and laws" of the sectors and territories they do business in. Embedding risk management in the "business as usual" operations of the business, is by far the hardest element of achieving enterprise-wide risk management, but getting it right delivers the most benefits.
Operating Globally
Think globally, act locally. In an increasingly competitive global marketplace, your ability to operate profitably in diverse geographic markets, and to shift operations flexibly between countries may be essential to the success of your business. But operating globally generates a wide variety of practical, legal, HR and finance issues. Multinational firms must comply with host countries' laws on tax, pensions, business practices and human resources. One country's entrepreneur may be another's antitrust violator.
Reducing Costs
Doing more with less. On one hand, your company seeks growth. On the other, the demand to reduce costs never goes away. You had better find a way to do both, simultaneously. Of course, developing a cost-reduction strategy that maximizes efficiency without compromising growth potential is a tricky proposition. You have to resist pressure to make indiscriminate cuts or slash headcount across the board. Your job is to trim the fat not cut into the bone. You need to identify core competencies where efficiency can be improved, trim and consolidate non-core functions, and reinvest the savings in critical business assets. And even before you start, you need buy-in from your company employees.
Outsourcing might seem to be an easy answer. In many industries, contracting out non-core business functions such as human resources, billing, or payroll to third-party providers is gaining acceptance. Some companies have even outsourced parts of their operating processes. But once a company decides to outsource, it also exposes itself to new forms of risk. For example, an inferior supplier of outsourced services can, overnight, inflict lasting damage on a company's relationship with its suppliers and customers.
Reporting Performance
Stake a claim to reporting excellence. Reporting corporate performance in a way that complies with all the complex corporate reporting regulations and laws of each country in which you operate has never been easy. And now, new regulations and standards such as Sarbanes-Oxley and IFRS as well as the continuing proliferation of guidance and regulations relating to `narrative' reporting accompanying financial statements, have made the task even more challenging.
And here's something else to consider: investors today are on guard against reporting that may pass regulatory muster, but fails to provide a fully transparent view of a company's health and prospects. Increasingly, investors also want companies to report on a broad set of non-financial measures, which, combined with financial reporting, might provide a better basis for judging corporate performance.
High quality corporate reporting is too important to be determined solely by the shape of externally-imposed regulation. To stake its own claim to reporting excellence and public trust your company must foster a culture that views reporting transparency as a worthy end in itself, independent of rules and regulations.
Responding to Change
Delivering change programmes effectively. Organisations are rightly expecting a measurable return on their change programmes and are becoming increasingly demanding with regard to achieved outcomes. Yet, we know from recent research (Source: CSC Index/AMA Survey) that 41% of change projects fail and that of the 59% that `succeed' only half meet the expectations of senior management.
Organisational change is complex because of the interdependencies between the stakeholders, the organisation, its' people and supporting technologies; any change in one aspect is likely to affect one or more of the others. The `softer' aspects of business change, such as changing behaviours, gaining buy-in of the staff, managing transfers into and out of organisations and providing training at the right time, are critical to achieving the desired outcomes.
Strengthening Governance and Regulatory Compliance
Bold ambitions, careful choices.
In recent times there has been a paradigm shift in many economies in the way that corporate governance, business ethics and compliance are approached. It is a shift that continues to be driven by demanding performance expectations, increasing stakeholder demands and growing public scrutiny after some spectacular failures around the globe.
Potentially, this is a highly positive development. An investment environment places a premium on solid performing businesses that are well-managed, conferring a competitive advantage on businesses that create and maintain a culture of "integrity-driven performance". However, it is also the case that managing the shift to this new level is not simple. It presents serious challenges not only for business, but for governments, regulators, investors and other stakeholders.
New levels of accountability, which come not just from new laws and regulations, but also from the expectations of a broader stakeholder group, have elevated the concerns at board level of ensuring that effective, robust and reliable governance and compliance tools are in place and being utilised. There is also an increased awareness that this needs to be underpinned with the right attitudes and behaviours to ensure people will still act in a manner which protects the organisation's reputation.
In this environment of rapid change and what can seem like ever increasing demands, management often finds it difficult to fully comprehend the total cost of compliance. It sees the potential for costs to escalate without the organisation realising the full benefit of such investment. Additionally, there is the need to provide more relevant and timely information in the public arena. This has heightened the focus on transparency, as well as an increased need to provide accurate and periodic reporting of issues/events and certifications.
Source: Adopted from PWC home page
