Executives worried about geopolitics, declining economy, and cybersecurity

25 October 2018 Consulting.us 4 min. read
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According to this year’s edition of A.T. Kearney’s ‘Views from the C-Suite,’ global execs are increasingly concerned about geopolitical tensions, declining economic outlook, and cybersecurity. While execs in last year’s survey saw a strong macroeconomic environment, continued unstable geopolitics have cooled growth expectations at the same time that the US approaches the end of its business cycle.

For the second consecutive year, geopolitical instability was the top external challenge identified by global executives – with 36% selecting it as the most pressing issue. According to the A.T. Kearney report, executives are growing more uneasy about rising populism in key markets, as well as related trade tensions and rising protectionism. As the US pulls back from its role as the leader of global political and economic architecture, a worrying vacuum in global governance leadership remains – though the EU and China are seeking to fill it.

Meanwhile, 61% of executives believe that the UK will leave the EU without a trade relationship in place. The slow pace of negotiation between the UK and EU means that a hard Brexit is likely to arrive in March, disrupting supply chains and trade, while leading to the relocation of many EU-focused firms to continental Europe.


External environmental challenges

Global executives are split on the cost and availability of capital in the next twelve months. One-third believe that they are entering a high-cost environment with less available capital, while another third expect low costs and plentiful capital. Execs in the Americas are more optimistic, while those in Asia expect higher costs for capital. Relatedly, tightening capital could mean less investment in emerging markets as investors concentrated on the safer haven of developed markets. Two-thirds of executives, as such, expect economic growth challenges to stifle investment levels in the BRICS markets.

Execs also see weakened macroeconomic performance on the horizon, with executives seeming to conclude that increased geopolitical tensions can’t continue to exist with strong economic growth. As such, weak macroeconomic growth was identified as the third most pressing external challenge. Executives from all regions and industries see North America as the biggest economic trouble spot, hampered by US trade wars with China, Europe, and Canada/Mexico. 42% of execs who anticipate weak macroeconomic growth listed North America as the top concern.

The US seems to be heading to the end of its business cycle, with some economists predicting a recession in 2020 after a decade of strong growth. Meanwhile, the Canadian economy is in the midst of a massive housing bubble combined with an underperforming manufacturing sector. East Asia and Latin America tied for the second-most concerning regions economically, but both were 15% lower than North America.

Rising from the eighth-most cited challenge to tying for the number three spot was the issue of talent/labor shortage. At the same time that labor force participation rates are declining due to shifting demographics, firms are fighting for slim pools of talent with in-demand technology and digital skills to take advantage of emerging trends. Low unemployment rates have further pushed up wages for in-demand professionals, spurring firms to invest in their own training programs while urging governments to skill and re-skill workers for the demands of tomorrow (and today). The further pressures of closing borders and stricter visa allocation have further limited the talent pools of firms in the West.


Two-thirds say they have a fully developed cyber defense plan

Meanwhile, technology remains a top opportunity and top challenge in the minds of executives. Though 37% of execs identified the successful adoption of new technologies like artificial intelligence as the top ranked opportunity for business operations, rising cybersecurity risks were also identified as the top business challenge (at 44% of respondents). Election hacking and massive breaches at Equifax and Facebook have kept the issue top-of-mind for many executives who fear the regulatory, financial, and reputational implications of a major breach.

Though a striking 85% of execs responded that their firms had a cyber breach in the past three years, only 39% said that they have a fully implemented cyber defense strategy. A further 24% said they have a fully developed strategy, but have not fully implemented it.

"The benefits of having a cyber plan are clear, as those companies are more likely to have resolved recent cyber breaches within one month—or have avoided such breaches altogether,” said Courtney Rickert McCaffrey, manager of thought leadership for the Global Business Policy Council and co-author of the study. 47% of executives who had a fully implemented cyber defense plan were able to identify and resolve cyber breaches within a month, compared to 26% of those without an implemented plan. As well, 18% with a fully implemented plan experienced no cyber breaches in the last three years, compared to 6% of those with a partially or not developed plan.