Exploring the Eurozone: Take Cover or Take Advantage?

What effect is the eurozone crisis having on business globally? Research from Accenture shows that the majority of companies see the crisis as a source of opportunity for both organic and inorganic growth inside the eurozone. Accenture identifies 10 steps that companies with direct exposure to the eurozone should consider taking.

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As the economic crisis continues on, black clouds of uncertainty remain over Europe. With continued speculation that one or more countries may withdraw from the euro, global executives could be forgiven for an ongoing dampening of their spirits—and investments. Yet, new global research from Accenture shows that the majority of companies are actively accelerating their efforts to seize organic and inorganic opportunities inside and outside the eurozone.

Following on from our earlier interviews with C-suite leaders around the world, Accenture has surveyed 450 executives to understand their perspectives on existing and future business growth. We asked what effect the financial crisis was having on decision making and how executives might gain competitive advantage in challenging times.

• Two-thirds of respondents perceive the financial crisis as an opportunity to gain competitive advantage.

• Fifty-six percent have accelerated their investments as a result of the eurozone crisis.

• Forty-two percent of executives are actively seeking to expand organically in the eurozone and exactly half of respondents within the eurozone are actively seeking acquisitions within the currency area.

• Response to the eurozone crisis is largely determined by the country in which the respondent operates.

• More than half of the executives surveyed believe that the capital portion of the European banking industry is exposed, with an equal number believing their own bank’s position is sound.

• Many companies are taking advantage of turbulent times to invest in areas such as outsourcing and risk management. Extremes of opinion include US respondents, where more than half fail to see the crisis as an opportunity, and China, where an average of 64 percent of executives said they aim to invest more in outsourcing, flexibility measures and risk management capabilities.

• It is not only surprising that high-growth emerging markets continue to be attractive to all our respondents, but also it is interesting that there appears to be a willingness to invest in Europe. In part, this represents a natural home bias for investments: 29 percent of executives from Germany say they are investing at home and 35 percent are investing within the eurozone; however, 25 percent of Chinese executives are seeking investments in the eurozone. Respondents from the United States were reluctant to invest in the eurozone and did not see the crisis as an opportunity for gaining competitive advantage.

• A substantial number of respondents from our survey (42 percent) are seeking to expand organically in the eurozone. For executives from China and Germany, there is an even higher degree of enthusiasm for investing in those countries where the cost of debt is high; 64 percent of Chinese executives and 45 percent of German executives believing such an organic expansion is prudent.

• While all respondents agree that at least one country will exit the eurozone within the next two years, opinions vary considerably over the likelihood of two countries leaving the common currency—and these geographic variations were far more pronounced when compared to an evaluation of responses by industry sector or company size.

In the past nine months, Accenture has been discussing the implications of the eurozone crisis with executives from a wide range of companies, and, more crucially, we have developed plans to help organizations cope with the possibility of a country leaving the eurozone and the related uncertainties surrounding this crisis.

Here are 10 steps that Accenture believes executives whose organizations have a direct exposure to the eurozone should consider taking:

• Accelerate receivable payments within areas that might be affected through a direct exit of the eurozone.

• Where possible, draft supplier and customer agreements in English or New York law rather than local law.

• Investigate or seek out the possibility of alternative vendors where key materials or services are sourced from countries at risk.

• Assess which counter-parties may be in financial difficulty.

• Make a judgment on how to handle cash holdings.

• Physically move inventory from potentially affected countries.

• Seek out banks with a dynamic and flexible approach.

• Discuss the organization’s contingency plans at a senior or board level around how to deal with the eurozone crisis.

• Give serious consideration to the effects of a new currency.

• Build confidence among customers and suppliers.

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