Operating through volatility: Five pillars to manage business continuity
May 27, 2022
10-MINUTE READ
May 27, 2022
10-MINUTE READ
The war in Ukraine continues to have deep human, economic and business impacts, compounding headwinds and protracted challenges that companies were already facing in the aftermath of COVID. Forced to cope with rising inflation, supply chain pressures, skills shortages and shifts in consumer behavior, business leaders are now dealing with the unprecedented scale, scope and impact of the crisis brought about by the war. Continued volatility is set to frame a new business landscape.
Growing uncertainty about inflation, price pressures and the economy are weighing on consumer sentiment.1 With rising energy prices, households expect to spend more on utility bills and petrol (gasoline), leading companies to consider the tradeoff in purchase decisions that consumers are faced with for certain products and services.2 As of March 2022, inflation reached 8.5% in the United States, 7.0% in the United Kingdom and 7.4% in the eurozone.3 Rising interest rates coupled with a recent decline in global goods production persist in weighing down global markets.4 And even before the war, 70% of CEOs indicated they expected to experience inflation in 2022, with associated impacts to profitability anticipated due to rising costs and wages and the ability to attract and retain employees due to wage inflation.5
The impact of the war will continue to take on many different forms, creating widespread ramifications for the way the world thinks, lives and operates so business must adapt, as its ability to navigate crisis both now and in the future has never been more important.
Leaders are re-thinking business resilience and continuity, seeing these two elements as critical to the future of their organizations, customers, people and communities.
As leaders seek to understand immediate and potential future risks to their business, assess impacts across the organization and develop contingency plans, this five-pillar framework can help inform cross-enterprise decisions around business continuity. It spans foundational aspects of the business, beginning with the most critical consideration, an organization’s people.
In thinking about how the ongoing war in Ukraine and resulting broader volatility may affect operations, there are a range of potential scenarios, which can be grouped into three categories:
When planning for business continuity in the current environment, leaders should initially consider three key questions, exploring their different dimensions as they relate to continued business operations:
1. How do we manage the effects from decisions made regarding continuing or discontinuing operations in the affected regions?
Although most businesses have already made the short-term decision around whether to continue or discontinue operations, some of these decisions continue to evolve. McDonald’s for example initially announced in March it would temporarily close its locations in Russia; more recently, the company announced a permanent exit from the country and the sale of its Russian business.6 Likewise, Starbucks announced on May 23 that it will exit the Russian market and wind down operations there.7 And because many companies with operations in Russia have suspended operations rather than completely exiting the market,8 mid- and long-term decisions on this issue will likely continue. The key to success going forward is being prepared to evaluate future scenarios through a consistent business continuity framework.
Economic factors to consider:
Key questions to ask when assessing the impact of this decision:
2. How can we prepare for downstream impacts of the geopolitical environment?
The severity of downstream impact may depend on the duration of the war. Understanding how this affects businesses—even ones that aren’t located in the region of conflict—is critical for business continuity.
Economic factors to consider:
Key questions to ask when assessing the impact of this decision:
3. What are the impacts on the rest of our business?
Economic factors to consider:
Key questions to ask when assessing the impact of this decision:
Although more than 80% of leaders say they have updated business continuity plans, the complexity of today’s landscape and the current crises stemming from the war in Ukraine are emerging more rapidly than ever before, with implications for both operational and financial risks.17 The following framework can help inform cross-enterprise decisions around business continuity. It spans five foundational pillars of the business, starting with the most important area for leaders to address: their people.
Start with an understanding of how critical your timelines are. There may be two paths to consider, depending on your level of exposure.
Determining which path to take which will require input from a variety of sources as well as insights around exposure and mitigation, including:
The use of objective data which is critical to making analytically driven and accurate decisions. Learning to use your data now can help prepare to assess business continuity issues in the future.
The inclusion of subjective data from across the company, including internal or customer interviews. Subjective data can enhance and validate the general picture that objective data initially creates.
A detailed assessment of your exposure along the five pillars. This can help you quickly focus to shore up the business where needed.
Mitigation and scenario planning which will solve for the problems identified and help the business continue to operate despite the challenges.
A multifaceted strategic approach allows for a holistic view of your largest areas of threat.
Companies now find themselves in a world with persistent levels of disruption, increasing inflationary pressures and the specter of further uncertainty. This changes what “business as usual” looks like. Business continuity planning is no longer a discrete, point-in-time exercise but rather requires ongoing and integrated efforts across the enterprise, from people to strategy to the ecosystem at large.
Contributors: Gregg Couch, Ryan Mathias, Hajir Sailors, Chris Tomsovic
The material in this document reflects information available at the point in time at which this document was prepared as indicated by the date provided on the front page, however the global situation is rapidly evolving and the position may change. This content is provided for general information purposes only, does not take into account the reader’s specific circumstances, and is not intended to be used in place of consultation with our professional advisors. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. Accenture and its logo are registered trademarks of Accenture.
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References
1 University of Michigan consumer survey (April 2022): Economic Sentiment and Employment Expectations further down in the EU and the euro area, European Commission (2022).
2 “Global growth is slowing, but not stopping—yet,” The Economist (May 2022).
3 Accenture, How business can survive and thrive through high inflation, May 2022 (US Bureau of Labor Statistics, UK Office of National Statistics, Eurostat; data surveys as of March 2022)
4 JPMorgan Global Manufacturing PMI, IHS Markit (May 2022).
5 Accenture global survey of 3,200 C Suite executives, data collected June-July 2021 and December 2021-January 2022,
6 McDonald’s name to vanish from Russia,” CBS News (May 2022).
7 Starbucks to exit Russia after nearly 15 years,” Reuters (May 2022), Starbucks news website, Update to Starbucks partners on our business in Russia (May 23, 2022)
8 “Almost 1,000 companies have curtailed operations in Russia, but some remain,” Yale School of Management (2022) and Accenture assessment of corporate websites and press releases.
9 “Almost 1,000 companies have curtailed operations in Russia, but some remain,” Yale School of Management (2022).
10 “Russia lowers key rate sharply to 14%, eyes more cuts,” Reuters (2022).
11 U.S. Treasury announces unprecedented and expansive sanctions, U.S. Treasury announcement (2022).
12 “Sixth EU sanctions package vs Russia is close, Germany says,” Reuters (2022).
13 “U.S. unveils additional sanctions targeting Russian media, financing and elites,” MSN (2022).
14 Accenture Research: Russia-Ukraine Macro Economic Impact and Industry Analysis, April 2022.
15 Ibid
16 Statistical review of world energy, BP (2022).
17 Accenture, Global risk management study, 2021.
18 “Needs Growing for Over 8 Million Internally Displaced in Ukraine”, UN International Organization for Migration (May 10, 2022).
19 “How many Ukrainians have fled their homes and where have they gone?”, BBC News (2022).
20 Accenture global survey of 3,200 C Suite executives, data collected June-July 2021 and December 2021-January 2022,
21 Ibid
22 Accenture, Elevating the cybersecurity discussion, 2022 and Accenture, State of cybersecurity resilience, 2021.
23 Ibid
24 Ibid
25 Accenture, From disruption to reinvention: The future of supply chains in Europe, 2022; Accenture Research analysis of Oxford Economics data.
26 Accenture, From disruption to reinvention: The future of supply chains in Europe, 2022; Oxford Economics Global Economic Model results for scenarios designed by Accenture Research.
27 Accenture, Global risk management study, 2021.
28 Accenture, Fast-track to future-ready performance, 2021.