The velocity of change coming out of the pandemic is generating new forms of financial and operational risk as companies grapple with inflation, capacity constraints, and supply-chain disruptions. Higher inflation has returned to the United States and the European Union, with volatility in prices for commodities including lumber and steel. To strategize for both the near and long term, companies are wise to establish ‘procurement nerve centres’ that bring together specialists in supply chain, planning, finance, operations, and engineering, reports Katy McLaughlin, senior editor, McKinsey & Company.
She writes, in the next two decades, competition for global influence is likely to reach its highest level since the Cold War. Current tensions are most apparent in the unfolding competition between China and the United States, the homes of 76 of the world’s 100 most valuable companies. To manage geopolitical risk, boards should devote time to big-picture questions. Companies also need to think critically about their corporate narratives and decide whether they are global entities or whether ties to a specific country or region are more important.
The Covid-19 pandemic ushered in the opportunity to rethink how we work. It’s a sea change that occurs less than once in a generation and has the potential to reshape society in countless ways.
Companies risk alienating their employees—and even losing them—if they refuse to acknowledge the disconnect between how employers and their workers see the future. Employers want to re-establish normality by bringing workers back to the office; employees want far more work-from-home. For employers, the risks are high: recent surveys found 40% of workers globally are considering leaving their current employers by the end of the year. Companies must acknowledge that figuring out a hybrid working model will be a long-term project and require a significant period of testing and learning.
According to McKinsey’s Global Survey on digital strategy (May 2021) technology capabilities will be critical to companies’ Covid-19 exit plans as well as to what comes next.
It claims the importance of digital poses a challenge for company leaders: few are used to engaging with technology, even as it is transforming the requirements of nearly every role and becoming part of everyone’s job. Boards are being asked to communicate to market about their organization’s investments in digital technologies and how that will enable them to keep pace with competitors. CFOs need to make faster decisions on investments in digital technologies. They need to become ‘technology leaders’ rather than ‘enablers’ or ‘obstructors’ at their respective organisations. Only a small subset of organizations is likely to thrive—and even these companies have much more room to strengthen their technology endowments.