What the Future holds
Most economists may have predicted another year of economic turbulence globally, but hope remains for companies eyeing growth in the coming year. According to Ernst & Young’s latest report on risks and opportunities, many CFOs believe there is scope for boosting revenues – provided they avoid the likely pitfalls along the way.
There are few absolutes in today’s harsh corporate climate, but organisations will always face risks and encounter opportunities, irrespective of whether market conditions are solid or unstable. How they choose to protect themselves from any threats, or take advantage of situations that could improve their bottom line, differs from one company to the next. To prepare for what lies ahead, organisations need to understand the risks and opportunities that await them over the next few years.
According to Business Pulse, our recent study of 641 companies from 21 countries, the three biggest threats for companies are pricing pressure; cost cutting and profit pressure; and market risks. For the 127 CFOs surveyed, macroeconomic risk and a weaker or more volatile world growth outlook comes in at number three, pushing cost cutting and profit pressure to fourth place. CFOs and the broader participant base agree, however, that the three top opportunities which will offer the greatest rewards over the next few years are innovation in products, services and operations; emerging markets; and investing in processes, tools and training.
Risks are a-changing
Clearly, the risk environment is changing fast. Few businesses considered pricing pressure a major threat when it ranked 15th in our 2010 risk and opportunities survey. But three years on, it is in the top three for both CFOs and the overall survey base for companies that are under increasing pressure to outpace their rivals. The fallout from the global economic downturn is forcing businesses to revise their prices in order to secure and retain existing clients. Whether operating in shrunken mature markets or rapidgrowth ones, businesses are cutting costs and prices to stay competitive. Dealing with pricing pressure is a major challenge for companies, but it can be helped with the right corporate strategy.
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