From crisis to crisis revisited: how does focusing on fundamentals help companies survive in an age of crisis?

This time last year, ?I wrote a post about how CEOs have to develop a new skill set to manage from crisis to crisis. Looking back on that post today it looks like it was from a far more innocent age. The world now appears to be entering an age of permanent crisis.

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The list of issues that CEOs today must deal with can look overwhelming. On top of the continuing fallout from the COVID-19 pandemic we can add to that a whole host of new and elevated challenges.

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CEOs need to recognize the interconnected nature of these crisis they are now facing in this highly uncertain environment. The spectre of the COVID-19 pandemic continues to stress supply chains through China’s zero-COVID policy and the war in Ukraine has exacerbated pressures in energy and agricultural markets. Both are feeding into inflation, which is causing central banks to move faster and further in their policy moves.

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There is also the stark reminder over the past few months that the climate emergency is a business continuity crisis. The drought and heatwaves in China and Europe are also shuttering factories, either due to a lack of hydro-electric power or snarling water-borne trade routes. These are all combining to compel governments globally to take a more interventionist stance in strategic industries, further elevating geopolitical and supply chain pressures.

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As an example, the underlying drivers of the current spike in inflation vary by geography and industry. It is critical that CEOs understand what levers they can pull to manage these input price pressures. CEOs need to fully understand how each of these issues impact their business directly, and how secondary and tertiary spillovers from other industries or geographies will have an effect. They will need to focus on what they can control and mitigate where possible the other sources of impact.

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The first step that CEOs need to take is to understand the criticality of these issues to their business and operations. While the headlines can paint a particularly dark picture, not all issues apply equally to all industries or geographies. The main issue is the complexity of the modern world and the interconnected issues that flow across the highly networked environments that individuals, companies and countries operate within, and with each environment rapidly evolving and morphing.

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What CEOs should be adopting is monitoring and scenario planning to play out their actions and reactions to these and other potential major disruptions. Companies should be assessing their portfolio of assets, operations, ecosystems and supply chains, including routes to customers, and considering how each aspect of their business is impacted at a fundamental level. Fine-tuning each area will bring benefits across the whole organization.

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They also need to keep a keen eye on disruption in their industry. There is an investment arms race happening. CEOs and companies that have not yet positioned for the future will be left behind. The massive investments, especially in technology and digitalization, will begin to widen the gap between winners and losers over the near- and mid-term. We will start to see it surface in financial results.

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However, while the environment now may seem very dark there could be a silver lining. If CEOs embrace crisis management and response as an accelerator of the transformational imperative, and reveal its “productive” nature, there may be a common denominator of these issues, which lies in a redefinition of success.

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Inflation slows down growth, which puts the breaks on unnecessary consumption and energy price rises (it looks now unlikely that prices will return to prior levels). This helps individuals and corporates become more aware of their energy consumption and source of energy used.

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In short, the solutions to these problems will ultimately lie in a more sustainable business, more regenerative and social investment, and enhanced circular consumption behavior. With a redefined definition of success that combines financial with social and ecological elements, this denominator can be found and serve as a valuable north star for the transformation required.

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As I said previously, being better prepared for an outlook that keeps changing will have to entail an adaptation of mindset for many CEOs. Moving from just-in-time to just-in-case, or intentionally building agile cost and asset structures, redundancy and safety margins into previously fine-tuned global operations will require a different mechanism for balancing risk and return.

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The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.