An increasingly volatile world means Kiwi businesses need to plan for the 'unthinkable', a leading business consultant believes.

Paul Nickels, a partner with the business advisory firm PwC, says as we now know only too well the unexpected can happen at any time: "When it does bad news travels more quickly than ever before and a lot of businesses can be heavily impacted."

"We operate in a volatile world and I think this is why businesses ought to allow for all possibilities when managements are developing risk resilience strategies to safeguard their organisations.

"They need to think proactively and 'imagine the unimaginable' if they want to develop effective resilience," he says. "The unthinkable can happen."

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Nickels says risks can emerge in many ways. "It could be an environmental impact like the recent floods in the South Island or the issues over Brexit. The UK has always been a good entry point for New Zealand companies wanting to expand into Europe and the consequences of that being unwound, for example, will be profound.

"So, in a world of massive volatility it is advisable for companies to consider all possibilities."

Nickels says business leaders have always had to grapple with complex challenges - recruiting talent, anticipating competition and driving profits - and risk taking is an integral part of business activity.

Paul Nickels, PwC Partner. Photo / Supplied
Paul Nickels, PwC Partner. Photo / Supplied

"But in recent years we've seen global shifts such as the rise of new disruptive technology, swift political changes and the collapse of old systems spark shockwaves that are reshaping once stable industries," he says.

"This accelerating pace of change is creating insecurity, uncertainty and risk for business leaders. They need to plan to meet these challenges and develop resilience in the face of them.
"Boards and management teams need to assess their organisation's risk capacity; what they can withstand when risk materialises."

Nickels comments come as PwC's 2019 CEO survey shows many business leaders are not overly confident about the coming year. Nickels says the words 'uncertain' and 'volatile' were used repeatedly by CEOs when asked about 2019, while 51 per cent of those surveyed believe global economic growth will decline.

Brexit and trade agreements were also of concern with 56 per cent of CEOs believing trade conflicts are a threat to business, although this was well behind those who fear cyber threats with 84 per cent believing their organisations will be affected by geopolitical cyber activity.

The survey was released at the World Economic Forum's annual meeting in Switzerland in January, The New Zealand findings were the result of an online survey completed by 57 CEOs and a further eight who participated in in-depth interviews.

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And there were also warnings in PwC's New Zealand Macroeconomic Summary and Outlook released last week. It suggests the country's superior economic performance is past its peak, saying businesses confidence "remains heavy" as profit margins are squeezed.

"A number of tailwinds supporting the domestic economy over recent years are subsiding while more dark clouds quietly gather on the global horizon," the Outlook says.

Nickels says business leaders are continually operating in areas of high ambiguity - the disintegration of the status quo has created a climate that is increasingly defined by anxiety - putting the creation of an organisational strategy to handle risk "front and centre" in their duty to customers.

"Failure to manage risk can lead to a breakdown in trust with customers," he says. "It's a predicament that's exacerbated by the speed of the news cycle and the presence of numerous digital touchpoints like social media.

"Whether we're talking about data breaches or ethical wrongdoings, information moves lightning-fast destroying hard-earned reputations and credibility and so it is important businesses refocus on their most important stakeholders, their customers."

Nickels says having an effective plan gives businesses the opportunity to grow stronger and emerge clear-eyed from a crisis. In particular he advises company leaders:

• Align purpose to technology and systems. A purpose-led organisation is usually an effective one. Problems arise when values that define a workforce are reflected in company systems, a situation that can create conditions making it easier for corporate negligence or unethical behaviour to go undetected.

• When setting strategy, think carefully and compressively about the risks that might be encountered; stress test underlying assumptions.

• Seek opportunities to simplify processes. Because business is increasingly complicated it is a good time to go back to basics to ensure the processes, accountability and working relationships are clear, simple and responsive.

• Learn again to heed small details. Losing sight of seemingly minor issues – a staff member failing to comply with regulations, ailing software obscuring critical data – can add up to serious crises over time and threaten the future of the business.

• Remember risk also provides opportunity for those who are prepared.