| Drivers of slow recovery and double-dip recession risks, asreported by organizations surveyed |
| Ranked by frequency of mention |
| Rank* | Driver |
| 1 | Decrease or stagnation in private sector demand |
| 2 | Rise in competition in sector, and associated downward pressure on prices |
| 3 | Dependence of sector on declining government spending |
| 4 | Economic impact of national austerity measures |
| * Based on 492 responses from our global multi-sector survey. Rank order may not reflect statistically significant differences in all cases. Unclassified/refused responses not shown. |
| Factors mitigating slow recovery and double-dip recession risks, as reported by organizations surveyed |
| Ranked by frequency of mention |
| Rank* | Mitigating factor |
| 1 | Increase in supply chain efficiency |
| 2 | Adjustments to pricing strategy |
| 3 | Expansion of customer reach |
| 4 | Well-developed finanace function |
| 5 | Increase in operational agility |
| * Based on 492 responses from our global multi-sector survey. Rank order may not reflect statistically significant differences in all cases. Unclassified/refused responses not shown. | shown
Slow recovery/double-dip recession
One in five organizations are enhancing their supply chains to manage the recovery risk.
Summary: Economic risks have fallen as expectations of recovery have risen. Still, 50% of respondents from Germany report concerns related to fiscal tightening, and 50% of US respondents report continued weakness in private demand.
After two years as the third-ranked risk, this risk has fallen to eighth. The global financial crisis brought home the potential impact of macro risks to companies and governments worldwide.
But in 2011, organizations are optimistic. They expect this risk to continue to fall as 2013 approaches. This is despite recent shocks in the Middle East, which occurred as this survey was under way; although the catastrophic earthquake and tsunami in Japan occurred after the survey was completed.
Key factors
Such positive findings about the outlook for this risk undoubtedly reflect growing levels of optimism about the global economy.
The perceived threat from this risk seems to have receded in France, Germany and the BRICs. However, executives in the UK give this risk a higher priority (fourth) than any other country or region covered, suggesting that the UK may have been slower than other developed economies to emerge from the financial crisis.
2013 forecast
Sector perspective
Looking to 2013, six of seven sectors perceived economic risk as falling in importance over time. The exception was power and utilities.
Geographic view
Variation by geography was greater.
- The BRICs were uniformly optimistic. But several European countries, including Germany and France, reported that the risk would rise in impact by 2013.
- Two-thirds of organizations in the Netherlands, and half of organizations in the US, reported that their exposure to this risk was driven by reduced private sector demand and downward pressure on prices.
- In Germany, where respondents are more positive overall about the current impact of the risk, 50% report concerns regarding fiscal tightening (even as apparently fewer than one in five report concerns regarding private demand).
Managing the risk
Across all respondents, the most popular mitigation strategy was to enhance supply chain efficiency, a measure adopted by approximately one in five organizations that rated this risk among their top concerns.
“Customer reach” strategies reflect measures to develop innovative market entry strategies and seek alternate distribution channels. “Operational agility” refers to measures such as accelerating speed of response and using data insight to support decision making.
Geographic approaches
- UK respondents appeared far more likely than those from any other country or region to be actively implementing measures to address the risk of a slow recovery or double-dip recession (nearly 90% had done so).
- Executives from China, India and the Middle East were relatively unlikely to have taken action to mitigate economic risks, reflecting economic confidence in these regions.
- In Australia, 50% of respondents indicated measures were needed but not yet implemented. This may reflect a recognition of the potential volatility of an economy with a sizeable commodity sector, coupled with the difficulty of mobilizing an organizational response to such a hypothetical vulnerability during a commodity price boom.
Sector strategies
Looking at the sectors, the degree of response to economic risks appeared to relate directly to levels of exposure.
- Banking and retail sectors, which are arguably the most vulnerable of the sectors we surveyed to sudden changes in economic conditions, were the most likely to have taken measures to increase their organizational resilience in the face of recession.
- Executives in health care, by contrast, were significantly less likely to manage this risk actively.
Percentage that have implemented measures to manage economic risks, by sector
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