The business landscape heading into 2016 will be one of increasing operational difficulties and continued economic and geopolitical volatility, mixed with growing opportunities, according to A.T. Kearney's "Views from the C-Suite," an annual study that surveys global business executives.
"This year's results confirm a world of unprecedented opportunity, on the one hand, and compounding risks, on the other," said Erik Peterson, Partner and Managing Director of A.T. Kearney's Global Business Policy Council, which conducted the study. "In assessing risk, we found it striking that 82 percent of global business executives in this year's study believe that both economic volatility and terrorism will intensify throughout 2015 and into early 2016. More broadly, 43 percent of senior business leaders we surveyed this year identified geopolitics as an important business challenge compared to only 29 percent who felt that way in 2014."
Some 76 percent of executives foresee a more difficult overall global business operating environment in the coming year. On the operational front, their biggest concern is worsening policy and regulatory environments, cited by 46 percent of respondents as one of their two foremost operational challenges (see figure 1). While executives globally rank the sub-issue of trade regulations as the highest policy concern (20 percent), the top policy challenges vary by region.
Regional Findings
European respondents point most often to environmental regulations as their primary source of concern (24 percent); executives based in the Americas highlight labor regulations (24 percent); and those in the Asia-Pacific region cite product safety and standards (25 percent). In addition, 43 percent of executives globally identify changes in tax policy as a key operational challenge in the coming 12 months.
The outlook for the global economy varies regionally. Executives in Asia Pacific (46 percent) and the Americas (44 percent) generally believe that this year the global economy will not accelerate beyond the 2014 growth rate of 3.3 percent, while those in Europe (34 percent) are more bullish on global economic growth.
Opinions about the U.S. and Chinese economies diverge. This year, 73 percent of those surveyed believe that U.S. economic growth rate is more likely than not to exceed 3 percent, compared to 68 percent who thought that the U.S. economy would accelerate in 2014. Regarding China, executives continue to be less optimistic: in 2014, 64 percent of executives thought a dramatic economic slowdown was more likely than not to occur, while this year 77 percent foresee China's economic growth rate slowing to less than 6 percent in the next 12 months.
Bright Spots
Despite expected volatility and business difficulties, executives identify potential bright spots on the global operating horizon: the possibilities that emerging markets could stage a comeback (77 percent), energy and commodity prices will remain low (76 percent), and economic growth in the U.S. will exceed 3 percent (73 percent) (see figure 2).
In fact, executives point to investment opportunities in emerging markets as the primary external business opportunity in the next 12 months (see figure 3), highlighting China and East Asia and Latin America as regions with the most opportunities. For the second year in a row, global executives identify business model innovation as the primary operational opportunity, with almost half pointing to it as one of their top two operational opportunities over the next 12 months.
Other major findings:
Technological innovation emerges as the second highest operational opportunity, just behind greater business model efficiency. In particular, executives point to cloud computing (21 percent), big data (17 percent), and mobile technology (16 percent) as potential areas of technological advancement that could help improve business model efficiency.
Yet technology is eyed as double-edged. Executives surveyed point to the same three technology areas (cloud computing, big data, and mobile) as the greatest areas of operational concern, particularly given fears of increased cyber crime. However, only 37 percent identify challenges stemming from technological disruption as an important challenge.
"Technology has emerged as an all-encompassing driver of change that demands business leaders' undivided attention," said Paul Laudicina, Partner and Chairman of the A.T. Kearney Global Business Policy Council. "Every organization that hopes to prosper must develop a comfort and conversant knowledge across the technology spectrum. Ignoring what will be continued, rapid, and sweeping technological innovation is not an option."
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