Businesses have been awakened to a new post-pandemic reality, in which new working practices and employee demands are rendering the business models and physical footprints of yesteryear redundant. They are having to digitally transform to support these new working practices, increase agility and boost productivity. Yet digital transformation brings with it a whole host of challenges. Talent, too, remains a key concern.

Download our fourth perspective to learn more about the steps organisations are taking to address these challenges.

The year 2022 represents a critical inflection point in the way we think about energy and the global systems needed to find, produce, deliver and decarbonise it.

Significant, era-defining events are happening all around us, all around the world, and all at a breakneck pace – shaping both short- and long-term structural considerations around energy and sustainability.

of energy companies surveyed experienced supply-chain disruption in 2021

The realities of climate change are in greater evidence than ever before. As the world emerges from the COVID-19 pandemic, governments and businesses are facing crucial questions about how to best maintain and expand energy access in all corners of the globe in a manner that is sustainable and equitable.

Meanwhile, the threats from rising temperatures and a failure to adequately address climate change have intensified. New policy frameworks are emerging that challenge the status quo, creating both risks and opportunities for companies across all industries.

Read more

The January 2022 Resilience Barometer reflects a story of increased resource allocation towards ESG and sustainability. However, two-thirds of respondents reported insufficient expertise to manage the increased scrutiny from a broad range of stakeholders, including regulators, customers, employees, local communities and shareholders.

These concerns, coupled with the fact that nearly one-third of respondents are experiencing or expect to face ESG-focused investigations in the next 12 months, create significant risk that companies must mitigate to promote sustainable growth. While the focus on managing ESG-related risks is top of mind, there is also a commercial opportunity for businesses. 88% of respondents said they are changing their approach to ESG from managing risk to identifying new business opportunities.

OF G20 COMPANIES ARE ACTIVELY ALIGNING THEIR BUSINESS STRATEGY TO SOCIAL PURPOSE

  • 36% of G20 business leaders claim that they are under extreme pressure to improve ESG and Sustainability over the next 12 months.
  • 31% expect to be investigated by regulatory or government bodies in relation to their sustainability and ESG practices.
  • 86% agree that they have been spending more resources on ESG and sustainability, however, 28% still agree that their company is falling short when it comes to their climate action plan and 66% agree that they do not currently have sufficient ESG or sustainability expertise to cope with increasing scrutiny.
  • 88% say they are shifting their approach to ESG from managing risk to identifying new business opportunities, an increase from 85% in the September 2021 report.
  • G20 companies expect media scrutiny on a range of areas, with significant areas of concern relating to ESG related topics, including employee wellbeing (38%), sustainability and environmental impact (35%), and diversity, inclusion and equality (30%).

As economies begin to rebound post-pandemic, global business concerns will diversify – away from Covid-19, and towards the macroeconomic and societal threats that pose a broader risk to resilience and growth.

A wide range of intertwined issues are already posing new challenges. Surging energy prices – combined with climate change issues and geopolitical uncertainty – are some of the challenges now facing G20 businesses. Inflation, unemployment, changes to tax regimes, unsustainable government debt levels and a talent crisis represent other considerable threats to G20 companies.

The diversity of these concerns demands that businesses be proactive and fully prepared, including through greater engagement with social issues: 84% of G20 business leaders believe they should publicly engage with pressing social or political discourse. Will 2022 be the year that more G20 companies start to speak up?

69%

OF G20 BUSINESS LEADERS AGREE THE PANDEMIC CAUSED LASTING DAMAGE TO THEIR INDUSTRY

  • 36% of G20 companies cite a surge in energy prices as a concerning resilience scenario. This is intertwined with growing concerns amongst G20 business leaders around climate change – including alarm at the rate at which economies are tackling the issue (cited by 26%) and how measures to tackle this might cause economic damage if they are implemented without a clear strategy or strong coordination across fragmented markets (cited by 24%).
  • Across the G20, other major C-suite concerns include changes to global tax regimes (cited by 25%), the risk of large-scale cyber attacks (24%), escalation of US-China political tensions (23%), unsustainable government debt levels (23%), sanctions, export controls and tariff increases (23%) and an increase in corruption (18%).
  • There are also concerns regarding disruptive megatrends, with 21% of G20 companies worried about technology rendering their company’s products obsolete (21%) and industries becoming unattractive to the next generation of talent (16%).
  • Data privacy issues (which 55% are preparing for) and cyber attacks (53%) are the top risks which G20 companies are demonstrating the greatest proactivity in addressing in 2022.
  • The diversity of these concerns demands that businesses be fully prepared, with a 360-degree perspective of different types of risks, to ensure comprehensive resilience in the face of uncertainty.

Data privacy breaches and cybersecurity threats – coupled with an ever-evolving array of global data protection laws, the growing capabilities of malign actors, the rise of remote working practices and a complex regulatory environment – means companies must be more proactive in their digital risk management than ever before.

How can business leaders best keep pace with this shifting threat landscape? Countering threats and maintaining resilience require a holistic, 360-degree strategy. As our perspective outlines, however, the vast majority of G20 companies still report some form of weakness in their incident response capabilities – thereby limiting their ability to appropriately react to a digital threat.

OF G20 COMPANIES EXPECT TO ASSESS OR RE-ASSESS THEIR CYBERSECURITY PROGRAMME IN 2022

  • The number of G20 companies impacted by a cyber incident rose by 6% over the last year, and 85% report some form of weakness in their incident response capabilities.

  • 37% expect media scrutiny on data privacy, and 58% do not fully understand the cyber risks posed by third-parties.

  • 29% of G20 business leaders report that their crisis communication plans for cybersecurity are not sufficient, yet 88% state that their organisation has become more agile by using predictive analytics to respond to change in real time.

  • 43% of Chief Information Security Officers said new and emerging technologies, like blockchain and artificial intelligence, are the top cybersecurity risks.

  • 34% of companies are still managing the risks of cyber attacks reactively, and 9% are not managing these risks at all.

The combination of the pandemic, changing consumer patterns, digitalisation and new means of working is presenting companies with unique opportunities to transform - as well as increased vulnerabilities and risk. The transformation businesses require to face these challenges and maintain competitiveness will be underpinned by a resilience based on flexibility, future planning, M&A activity and new technological tools.

AGREE THAT THEIR COMPANY HAS BECOME MORE AGILE THROUGH THE USE OF ANALYTICS, AI AND MACHINE LEARNING

  • Business model innovation, customer experience reinvention and the integration of new technologies have become a key priority for all resilient organisations: 80% of companies agree that their business model needs to fundamentally change in order to maintain or restore competitiveness.
  • 30% of companies have experienced a shortage of talent and skills in their business over the last 12 months, and 95% expect to continue with hybrid working – with 45% of G20 business leaders expecting their employees to work remotely at least 50% of the time as part of the ‘new normal’.
  • 18% of G20 companies report that their business model became outdated in the last 12 months, whilst 37% say they are mainly reactive rather than proactive when it comes to addressing this issue.

  • 88% state that they are planning on adjusting their approach to retain and attract top talent in 2022.

  • 42% of companies are under extreme pressure to integrate technology into their working practices, and 66% report that they are struggling to embrace digital transformation.
  • The changing risk landscape is also underpinned by  disruptive economic models driven by blockchain-powered technologies such as cryptocurrency, NFTs and other digital assets: 66% of G20 businesses are currently piloting or exploring how blockchain and digital assets can play a role in their products or services.

A complex arena of disputes, investigations and regulation – and the knock-on effects of these risks – represents a clear risk to G20 companies. More and more business leaders expect to face investigations by regulatory or government bodies, and more expect to face media scrutiny as a result – especially in relation to ESG.

Our data clearly indicates that G20 firms are aware of the direct legal and regulatory risks they face and are proactively preparing for them – by increasing legal budgets, conducting financial crime reviews and by investing in dedicated technology to increase preparedness.

OF G20 BUSINESS LEADERS EXPECT REGULATORY OR GOVERNMENT INVESTIGATIONS IN 2022

  • Almost a third of G20 businesses (31%) are either currently facing, or expect to face, investigations by regulatory or government bodies in relation to ESG and sustainability in 2022. This makes it the most commonly reported area of concern around investigations, followed by tax practices (28%) and use of third-party data (27%). Over one in five (22%) expect investigations related to market dominance and/or antitrust, and 79% expect increased regulatory pressure around virtual assets in the next 12 months.

  • 44% of G20 companies have invested, or plan to invest in the next 12 months, in dedicated technology to conduct due diligence, monitoring and investigations.

  • However the risk of compliance vulnerabilities being exploited by bad actors is not managed proactively by half of the G20 businesses surveyed: Only 51% are fully proactive when it comes to financial misstatement and fraud. In addition, 33% of G20 business leaders stated that their detection and analysis capabilities are weak. A further 13% state that they do not have adequate resources to manage financial crime and sanctions risks.

  • G20 companies' top 3 priorities for legal spend in 2022: Adapting to new regulation and legislation (16%), internal investigations and remediation (both 14%).

Whilst companies may have increased their financial resilience over the last 12 months, they continue to be plagued by operational issues, and are struggling to establish operational resilience in the face of growing supply chain and climate change threats. 

Cyber attacks and threats, workforce shortages and issues related to digital transformation also risk undermining businesses’ resiliency and their ability to remain competitive. Companies seeking operational resilience in an ever-shifting business environment therefore face the choice of changing tack or being left behind. As such, will 2022 be the year of the Great Restructure?

OF TURNOVER LOST IN THE PAST 12 MONTHS WAS CAUSED BY DISRUPTION TO SUPPLY CHAINS

  • While more than two thirds (69%) of G20 companies agree that the pandemic has caused lasting damage to their industry, our data shows that companies have developed greater financial resilience over the past year, with 58% having returned to or exceeded pre-pandemic levels for turnover and number of employees.
  • Considering the resilience-damaging scenarios, more than 10% of the turnover lost by G20 companies surveyed was caused by disruption to supply chains – the highest proportion after shortage in workforce and skills (12%) and cyber attacks and threats (11%). Despite this, only 49% are taking proactive steps to manage supply chain disruption risk. In addition, 66% report that they are struggling to embrace digital transformation. As a result, 72% expect to require operational restructuring in 2022.
  • Our data also reveals a strong rebound in expected M&A activity, which serves as a further indication of financial recovery. In February 2021, 13% of G20 companies said they did not expect to conduct any M&A – this has dropped by 5 percentage points to just 8% in January 2022. G20 businesses are most driven to conduct M&A to enter new markets (40%), to acquire new products (37%), and to increase share in current markets as well as acquire new technological platforms and systems (both 35%).

Protecting your digital ecosystem

Data privacy continues to be a major area of concern for G20 organisations. Sonia Cheng, Head of Information Govenance Privacy & Security, discusses the ever-evolving array of global data protection laws to contend and their impact on organisations.

The Vocal CEO

It is not just about communication but also what you are communicating about. Nick Emmons interviews Lauren Burge, Head of Corporate Reputation, on the need for business leaders to publicly engage with pressing social or political discourse.

Negative macroeconomic scenarios are creating additional significant challenges

Chief concerns of G20 business leaders, and the perceived risks to their companies over the next 12 months, are diversifying. Nick Emmons interviews Simon Lewis, EMEA Vice Chairman on which macroeconomic scenarios will challenge business resilience in the upcoming year.

Organisations are battling to meet ESG targets

As this edition of our Resilience Barometer highlights, ESG has become one of, if not the, greatest area of disruption, and transition - but also opportunity - for G20 businesses today.

PREVIOUS REPORTS

Q3 2021

DOWNLOAD

Q1 2021

DOWNLOAD

2020

DOWNLOAD

2019

DOWNLOAD