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Business Resilience
Actively adapting
to preserve value
5
Economic uncertainty
Regulatory
scrutiny
Technological
innovation
Aggressive capital
Market
uncertainty
► Impact of increasing
regulation and
intervention from
regulators and
governments
► Rapidly changing
landscape of winners
and losers driven by
disruptive technology,
changing consumer
behaviours and habits
and globalisation
► Shareholder activism is on the rise in Europe,
with over $100bn of
capital to invest
► Innovation and new
market entrants
impacting existing
business models
► Traditional and
alternative capital
providers have huge
amounts of capital
ready to invest in high
yield opportunities
► Customer trends and
behaviours continue
to drive rapid market
transformations
► Economic uncertainty
and geopolitical risk in a
number of markets
► Political uncertainty and fiscal austerity constraining growth
across Europe
► Volatile commodity
prices and exchange
rates creating a
challenging business
environment
► Revised 2014 Corporate Governance Code requiring companies
to form a robust
assessment of the
risks threatening their
business model over
an extended period
► A connected economy
with multiple
information channels
means business
situations spread
quickly and information
is difficult to contain
► Capital is targeting
undervalued businesses
and capital inefficiency, including excess
fixed assets and working capital
► A clear vision for the business,
supported by market trends and
organisational capabilities
► Operational risks, e.g., key supplier,
input prices, IT and disruptive
innovation are understood
and managed
► Absence of clear strategy or significant changes in existing strategy
► Profit warnings and earnings underperformance versus peers
► Market concerns on credibility of corporate strategy
► Operating cash flow negative or poor cash conversion
► Credible management
r
lde
ho nce
e
► Active engagement and alignment with
equity, financial and other stakeholders
Market resilience
► Revenue risks, e.g., customer, product,
market, competition and pricing are
understood and managed
► Market and trading data regularly used to align customer facing activity
► Clear strategy regarding disruptive
technologies
Op
e
res ra
ili
Business
resilience
en
ke
t
ce
it
en al
ce
4
Operations
tify
en
Id
3
Stakeholders
l
na
tio ce
en
2
Operational resilience
r
Ma li
i
res
1
What are the warning signs?
Stakeholder resilience
Sta
k
res e
ili
The 5 big issues
Active management is critical to adapt in
a changing environment
Adapt
There has never been a greater need for a
company to assess its own business resilience
p
Ca ili
e
r s
g
M iti
a te
► Stakeholders disunited
► Commodity or other input price risk
► Sudden or unexplained departure of CEO or CFO
► Over-dependence on key supplier or technology
► Operational capabilities built
to deliver business vision, with
safeguards against challenges to the
operational footprint
► Threat or emergence of shareholder activism
► IT is not effectively integrated and fails to support
the business
Capital resilience
Markets
Capital
► Flexible long term financing and achievable debt covenants supported
by robust cash forecasts
► Loss of market share, revenue deteriorating or growth rate behind peers
► Risk of, or actual, covenant breach or missed
interest payment
► Over-dependence on major market or customer
► Refinancing required within 24 months
► Flexibility in the cost base to be able to
react rapidly to change
► Strong working capital performance — building cash balances and
capital efficiency
► Robust management of legacy
liabilities
► Failed IPO or exit
► Market price pressure
► Excess or deficient working capital
► Inability to pass on input price changes
► Core lenders selling debt or debt trading at discount
► Disruptive technologies, new market entrants or
competitor behaviour
► Lack of forward visibility re cash or cash targets
► Regulatory change
Business resilience
► Cumbersome organisational structure
► Return on capital employed indicates excess capital