Board Impulse Thoughts (BIT) – A little BIT for everybody

51st Board Impulse Thoughts with Dr. Ruediger Theiselmann and his views and assessments of the upcoming and last 12 months.

Versatility and adaptability will be key factors for resilience

1. Which were your biggest learnings over the past 12 months?

More than ever before, we have seen over the last 12 months that exogenous factors can have a massive impact on companies, no matter if the business model itself had been successful or stable before: geopolitical, environmental, regulatory or financial developments such as war, climate change, pandemics or inflation can lead to supply chain disruption, decreasing customer demand and consequently operational losses, imminent illiquidity and insolvency. Hence, we currently face a new degree of uncertainty.

2. Business has always been uncertain – what exactly is different now?

Over six decades, the world economy was predominantly characterized by growth driven by post-war rebound, liberalization, globalization and peace in Europe. However, after the financial market crisis in 2008, we have seen shrinking growth rates. This development has deteriorated in light of the Corona pandemic, the Russian war in the Ukraine, foreclosure of markets, high sovereign debt and inflation. At the same time, many traditional business models have been increasingly under change pressure due to digitization. The combination of all these factors has never occurred in the world economy’s history and has led to a new degree of uncertainty for decision-makers.

3. What are your observations on executives over the last 12 months, did they change their habits and attitudes?

Different from phases of stable growth, many executives are not agnostic anymore about long- or mid-term planning. It’s not that “planning replaces coincidence by error” as Albert Einstein once said but “driving by sight”, short-term forecasts and tight liquidity control in monthly or quarterly time frames is what I see and hear. In addition, more and more executive regard active risk-management as important in order to identify exogenous factors and threats that might hamper their business. Furthermore, many executive are currently working on diversification of revenue streams (i.e. various business models around a core business with less interdependencies), of markets, of the customer and supplier base is a trend I see happening. Instead of the former trend towards specialization, spin-offs and pure play business models, versatility and adaptability will be key factors for resilience in future.

4. What do you expect from 2023?

?Based on recent developments, I expect a recession of the world economy and an increasing number of insolvencies also in Germany and Europe. Some industries are likely to undergo a fundamental consolidation. Many executives will need to downsize operations to a suitable size, ensure access to liquidity and supply, stabilize processes and customer relationships. At the same time, diversification will play an incremental role. In a nutshell, restructurings will need to go hand in hand with transformations next year.

Dr. Rüdiger Theiselmann is a co-founder of the Board Academy and heads the corporate finance module. A German lawyer with investment banking background, he works on the intersection of restructurings, transformations, M&A and capital raisings. He also serves as an interim manager and non-executive director for and on behalf of large caps and blue chips regarding their start-up investments with focus on digital business models.