Executives should regularly stress test for multiple event scenarios simultaneously. These can include both internal issues, for example a new product that fails in the market or a badly perceived leadership statement that goes viral on social media and causes major reputational harm to the company. These can also include external events akin to the broad-based market crash seen in 2008 or a major trade war. The stress test should look at situations holistically, taking into account the interdependency of events.
Executives should also conduct regular portfolio reviews to identify assets that are ripe for future disruption. These can include businesses that have few barriers to entry from new, digitally enabled competitors and business lines that could be disrupted by unexpected competitors (e.g., a consumer electronics company entering the medical devices field, an online retailer buying a bricks and mortar chain, or a ride share company taking on food delivery).
Then executives can make changes to be able to survive various scenarios, including reallocating capital to shore up core areas, divesting assets that are likely to face disruption, and making sure the organizational structure can respond to an immediate threat. This includes an examination of the entire supply chain and considering whether outsourcing some manufacturing, rather than owning it in house, can help make a company more nimble without diminishing its reputation for quality.
Among the companies that have successfully reshaped, EY analysis shows 66% have made leadership changes, whether in the C-suite or at the business unit level. Meanwhile, 46% actively reshaped their portfolios, either through acquisitions or divestitures.