Key themes revealed in Dutch C-Suite survey

The robust measures taken in the Netherlands to mitigate the economic impact of the COVID-19 pandemic were largely successful. However, like other European economies, the Netherlands has been adversely impacted by supply chain and energy disruption since Russia’s invasion of Ukraine. High inflation and insecurity among Dutch consumers and businesses has followed. Within the Netherlands, consumers and businesses now pay the highest gas prices in Europe. Further pronounced issues, such as the refugee asylum crisis, the nitrogen emission crisis and elevated cost of living means confidence in the government has declined, and post-COVID-19 optimism in the Netherlands has considerably waned.

WORKFORCE SHORTAGES
Nearly one in three (29%) business leaders identified workforce shortages as the most concerning scenario for their business in 2022. Although workforce shortages and the skills gap are an EU-wide issue, the situation in the Netherlands is particularly acute. By the end of March, the Dutch Central Bureau of Statistics reported that for every 100 people unemployed in the Netherlands there are 133 job vacancies, the highest unemployment to vacancies ratio ever recorded in the country. Indeed, the Netherlands is the only European country in which the total demand for labour has surpassed pre-pandemic levels - hence rising unemployment is a much more muted concern among respondents at only 10%.

The inability to fill vacancies is a consequence of several factors, including the considerable number of Dutch workers on flexible or part-time contracts. The pool of skilled graduates has also decreased in recent years, tightening competition for the best talent. Although wage pressures are expected to remain modest over the next year, Competition for talent and rising inflation will ensure that workforce shortages and talent retention remain key areas of concern for business leaders beyond 2022.

When looking at areas in which their company had increased commitment in the last 12 months, the Netherlands was as an outlier from the totals for Europe and the G20 from the October 2021 survey.

IMPACT OF THE WAR IN UKRAINE
The ongoing conflict in Ukraine, its potential to cause geopolitical disruption and the sustained impact on energy and commodity prices are further concerns for business leaders in the Netherlands. The war’s impact on energy prices in particular has only become more severe as winter approaches. The Dutch government has already added its name to a list of countries imposing a windfall tax on oil and gas firms as one measure to finance a raft of cost-of-living reforms. Unsurprisingly, other issues tied to the war in Ukraine are also high on C-suite agendas.

of senior business leaders cited workforce shortages as a concern during 2022

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The COVID-19 pandemic instigated a profound shift in the way businesses operate, with increasing pressure on businesses to digitally transform and undertake organisational change.

TRANSFORMATION: THE KEY TO MAINTAINING COMPETITIVENESS
15% of business leaders in the Netherlands agreed that their business model has become outdated in the last 12 months, whilst a considerable 78% agreed that their business model needs to fundamentally change in order to maintain or restore competitiveness. It is surprising, therefore, that just 1 in 10 businesses are concerned about the potential damage caused by their business model becoming outdated in the coming year. Although the threat of business models becoming outdated is not a particularly acute concern for Dutch business leaders, at least relative to other considerations, sufficient credence does not appear to be placed on the issue. Only half of business leaders in the Netherlands agreed that their company takes a proactive approach to their business model becoming outdated, with 37% stating that their business takes a primarily reactive approach to it.

REMOTE WORKING AND DIGITALISATION – AN EMERGING DISHARMONY?
Beyond simply mitigating risks and responding to change, a proactive approach towards transformation – including embracing new remote working trends and using predictive analytics – will enable companies to be more flexible and take full advantage of new opportunities, affording a competitive advantage. When it comes to remote working, the Netherlands is on a par with wider G20 trends, with 45% expecting employees to work from home 50% of the time or more.

of Dutch respondents agreed that their business model needs to fundamentally change in order to maintain or restore competitiveness.

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While the Dutch unemployment rate is one of the lowest in the EU, structural changes to the labour market are continuing to impact Dutch businesses, leading to severe challenges and intensifying competition to retain talent.

RECRUITMENT AND RETENTION
Workforce shortages are currently the chief concern among business leaders in the Netherlands. This concern is reflected by the fact that 32% of leaders said that they are aware of a shortage in workforce and skills within their business in the last year, while 4 in 5 agreed that they are struggling to fill vacancies. A quarter of Dutch businesses also reported that they are falling short in relation to talent recruitment and retention, with this obstacle being especially pronounced in the Consumer Goods sector.

ALL EYES ON THE COMPETITION FOR TALENT 
In addition to being an obstacle to operational efficiency, the competition for talent and people is also perceived as a key reputational issue that Dutch businesses will face in the coming 12 months; a quarter of business leaders state that they expect to face media scrutiny in this area. Again, this concern is particularly acute in the Consumer Goods sector.

SIGNS OF ACTION?
Almost 9 out of 10 Dutch business leaders agreed that their business is having to adjust its approach to attracting and retaining talent. 29% also reported that their business has increased its commitment to workforce and human capital in the last 12 months, with 26% saying the same about improving management quality.

While these are positive signs of action, continued investment in human capital and improvements in corporate culture have become essential for Dutch businesses as the competition for talent shows no signs of abating. At least 50% of respondents across all industries have been using strategic workforce planning analytics over the last 12 months.

of leaders agree that they had to adjust their approach to retaining and attracting talent.

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While the Netherlands rebounded from COVID-19 with strong economic growth in 2021, so far 2022 has further tested Dutch businesses as the energy crisis continues to unfold, resulting in higher inflation compared to other EU countries. As a result, businesses are facing new challenges to their operational and financial resilience.

FINANCIAL HEALTH – AN OVERVIEW
59% of Dutch businesses are currently growing, while 30% claim to be sustainable or covering expenses. More Dutch businesses report growth than most of their European counterparts stated in October 2021. The proportion of businesses in the Netherlands that answered ‘sustainable/covering expenses’ was lower than any country in the comparison set across any time period that was looked at - this is in part attributable to the high number of organisations reporting growth. Notably, the proportion of organisations reporting distress is closer to the July 2021 sentiment and further evidence that post-COVID-19 optimism is at an end.

FINANCIAL RESTRUCTURING
70% of business leaders in the Netherlands expect to require financial restructuring in the next year, rising to around four in five among business leaders in the Technology and Food & Beverages sectors. The Food & Beverages sector tends to over-index across most financial resilience measures when compared to the Netherlands as a whole, with nine in ten agreeing that their company is being impacted by the ongoing energy crisis. By contrast, the Consumer Goods sector appears to be in better financial health, even if growth is less apparent, with much lower levels of expected refinancing and securities/debt-related disputes and litigation.

OPERATIONAL RESTRUCTURING
Around three in four business leaders in the Netherlands expect operational restructuring to be required in the next 12 months, with this figure being caused at least in part by ongoing changes in how people work. Indeed, 83% of respondents expect to deal with changes in working practices, which has created, and will continue to create, numerous logistical and structural challenges.

SUPPLY CHAINS
Another key facet of operational health is supply chain resilience. Approximately one in four Dutch organisations have experienced supply chain disruption in the last 12 months, with those materially affected attributing 13% of lost turnover to this disruption. Only shortage in workforce and skills was attributable to a greater proportion of lost turnover (18%). This shows few signs of abating, with more than one in five concerned about sustained or accelerated supply chain disruption in the coming year. 19% of Dutch organisations rated this eventuality as likely and are wary of the potential harm this will have on their company. In light of the likely, and concerning, fallout from this disruption, 27% of Dutch businesses have invested in conducting regular supply chain health checks, or intend to over the next 12 months. 23% have increased the commitment to supply chain sustainability over the past year.

3 in 4

expect operational restructuring to be required in the next 12 months

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As the pandemic and more recent geopolitical and geo-economic issues have inhibited growth, many Dutch businesses have been the target of M&A. The reasons for businesses undertaking M&A reflects both the fundamental need for growth, as well as wider trends in ESG and technology adoptions.

TARGET OF M&A
Two in three Dutch businesses agreed that their company has been a target of M&A over the last 12 months, rising to three in four in the Tech & Comms sector, and four in five in the Food & Beverages sector. This is not surprising given the superior growth of these sectors relative to Consumer Goods.

M&A DRIVERS & CONCERNS
The main reason respondents gave for conducting M&A in the last year is to increase their share in current markets, at 29%. This corresponds to the outcomes Dutch businesses are under pressure to achieve, with 28% reporting that they are under pressure to increase their market share.

One in four companies said that they plan to conduct M&A as a means of improving existing ESG credentials and capabilities, with a similar proportion saying they will do so to acquire technological platforms and systems. In both of these areas, however, the Tech & Comms sector strongly over-indexes compared to other key sectors and the Netherlands as a whole.

Three in four business leaders in the Netherlands reported that data privacy concerns have impacted their M&A decisions, with higher proportions of agreement in the Food & Beverages and Tech & Comms sectors. While awareness of cybersecurity compliance requirements is high in the Netherlands at 84%, there still appears to be a competence or technology gap regarding cybersecurity systems, which if improved upon, might enable Dutch businesses to move forward with M&A plans.

of Dutch Technology & Communications business are considering M&A to acquire technological platforms and systems in the next 12 months

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ESG and sustainability issues have grown considerably in importance for businesses around the world. Increasingly, a more proactive stance is being taken to assess ESG risk, compliance and investment. This proactivity is essential as these issues increasingly involve wider stakeholder groups, from clients and shareholders to employees and communities.

ESG is now a key concern on the leadership agenda. As such, improving ESG credentials and capabilities is the second most cited reason for planned M&A over the next 12 months. The Netherlands is no exception, with 82% of organisations in agreement that they have shifted, or are planning to shift, their approach to ESG from managing risk to identifying new business opportunities.

Dutch companies, like their counterparts across Europe, have rightly increased spending on their ESG programmes, although Dutch business leaders remain unsure whether their ESG expertise is sufficient to cope with increasing scrutiny and associated risks in this area. There remains a lack of a unified ESG framework and clear regulatory guidance, which serve as roadblocks on the pathway to effective ESG programmes.

As the cost of inaction on ESG continues to mount, resilient organisations are increasing preparedness by developing dynamic ESG strategies and assessing and mitigating ESG-related risk.

Improving ESG credentials and capabilities is the second most cited reason for companies to conduct M&A in the next 12 months.

of Dutch organisations agree that their company has not had sufficient ESG/sustainability expertise to cope with increasing scrutiny over the past 12 months.

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Our data shows that Dutch organisations are struggling with both the impact of cybersecurity incidents and their response in relation to cybersecurity and data privacy. Nearly four-fifths (78%) of Dutch businesses have been negatively impacted by a cybersecurity incident in the last 12 months, while 82% of respondents reported at least one area of weakness in their incident response capabilities.

One of the key weaknesses for Dutch businesses concerns their understanding of the risk posed by third parties; 71% of Dutch companies cited this as an issue, compared to just 58% of businesses in the G20 and 61% in Europe. With businesses establishing an increasingly complex digital ecosystem in an age of digital transformation — including vendors, suppliers, partners, contractors and service providers — the ability to understand the risk posed by these third parties will only increase. Interestingly, this appears to be the area of least concern to chief information security officers (CISOs). Scrutiny in relation to cybersecurity and data privacy also continues to be a concern amongst Dutch businesses, albeit for a minority, with almost a quarter (22%) expecting an investigation into their use of third-party data or data privacy in the next 12 months, and 20% expecting media scrutiny over data privacy issues over the next year.

Organisations cannot protect their most valuable assets if they
are unable to identify that they have been compromised.
With only just over half (56%) of businesses managing data
privacy issues proactively, the lack of a strong programme that
covers cybersecurity, privacy and the protection of sensitive
information only serves to increase the likelihood of regulatory,
financial and reputational damage.

of Dutch businesses rate crisis communications as their weakest element of response capabilities.

of Dutch businesses have been negatively impacted by a cybersecurity incident in the last 12 months.

expect an investigation on their use of third-party data or data privacy in the next 12 months.

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Business Transformation Fact Sheet

As companies in the Netherlands continue to face disruptive forces, business
transformation will be critical to protect growth, adapt and compete amidst rapid change.

The data reveals a profound shift in the way businesses operate, increasing pressure to digitally innovate and undertake organisational change. As a result transformation will be key to maintain competitiveness in the market for Dutch businesses. 

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RESILIENCE BAROMETER® NETHERLANDS 2022

The 2022 FTI Resilience Barometer® Netherlands Report shines a spotlight on the Dutch economy and the issues that leaders across industries are facing. As well as exploring the challenges Dutch companies and consumers are experiencing, this report also considers the measures being taken to address them. Cross-disciplinary experts have offered their insights, developing a roadmap for future decision-making and a well-rounded business strategy.

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FTI-BOLD

FTI-BOLD is a leading consultancy firm in the Netherlands, helping businesses stay relevant and successful during crisis, change and mergers and acquisitions. 

Acquired by FTI Consulting in 2022, FTI-BOLD professionals have the knowledge, expertise, and experience to support and lead businesses by combining strategy with their hands-on “analyse, advise, execute” approach.  

The firm’s four key offerings are Turnaround, Transformations, Transactions and Digital. In addition, they provide clients with an “interim” service utilizing a network of experts who can be brought into assignments on an as-needed basis. 

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Enhancing financial resilience to thrive in uncertainty 

Senior Managing Directors David Morris, Lisa Rickelton and Alexis Anaman look at the financial restructuring landscape coming out of the pandemic.

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