Emerging market executives can’t predict the future, but they can plan for disruptive events. For executives, what if you had already built a contingency plan for the US housing bust in 2007? What if your strategic planning team had a framework that suggested the emerging-markets financial crisis of 1997 was imminent – in 1996? 2015 could be a year to remember for similar reasons, in that the business environment documented in strategic planning assumptions is not the one we will likely be living in by year’s end. 2014 has already been characterized by change at a breakneck pace; from upheaval in Crimea and political instability in Gaza to elections in India and Indonesia…imagine all the events that could impact business next year.
Emerging markets continue to underperform, exposing political volatility in countries like Brazil and Russia, and financial vulnerability in countries like China. Mature economies such as Germany and Japan are muddling through at best. Too many regional and country leaders at multinational companies are hoping to do the same, enshrining optimistic expectations about their markets’ growth and stability into their 2015 plans.
As volatility in emerging markets becomes the “new normal,” surviving and thriving amid uncertainty requires a more proactive approach. Leading multinationals are increasingly looking to incorporate scenario and contingency planning into their strategic planning process in an effort to better prepare their teams. As many multinational company leaders are wrapping up their strategic planning process, now is the time to implement this process.
To anticipate and plan for the events that could impact business, business leaders should undertake the following three-step exercise:
- Identify – Disruptive event assessment
- Prioritize – Risk prioritization
- Plan – Contingency plan building
The imperative for contingency planning is only growing stronger as global risk increases. FSG clients not only receive detailed recommendations on how to respond to a specific disruptive event by using our contingency planning framework, but also customized support on all three steps of the process. This methodology of prioritizing events based on their likelihood, velocity, and impact allows scarce resources to be deployed most effectively, and can lead to breakout overperformance while competitors flounder.