Managing uncertainty: should your organisation prepare for a break-up of the Eurozone?

As part of its research into managing uncertainty, PA Consulting Group has surveyed over 200 international business leaders since the height of the financial crisis in 2008. We found that the highest-performing companies during this period exhibited some common behaviours, which we believe are similar to those that will lead to success following a Eurozone break-up. These behaviours saw winning companies:

• respond faster than their competitors – the best-performing companies identified the financial crisis early and responded quickly, but many took 18 months to react

• remove inefficiency while protecting competitive advantage – the best-performing companies had a scientific approach to cost reduction

• plan to come out of the crisis with a sustainably higher market share than they had going in – the best-performing companies viewed the crisis as an opportunity rather than a threat.

Getting these critical responses right requires careful preparation. Without this, in the immediate pressure of a crisis-response phase, there is likely to be either paralysis or a tendency to reach for standard or tried-and-tested approaches. But there is little reason to believe that these other approaches will work well in response to a major discontinuity in the structure of a single currency area, an event outside the experience of most executives and unprecedented in a European context.

So what can you do to prepare?

Our team has experience of working with leading financial institutions on their most challenging issues and deep knowledge of wholesale financial-market infrastructure. We also have expertise in risk diagnostics to help organisations tease out and assess their readiness for inherently unpredictable events and prepare accordingly.

We would recommend an effective diagnostic approach that would see a company have:

• the right response team in place with appropriate support and resources

• an understanding of which areas of its business will be directly affected and which indirectly

• clarity on and a clear definition of the scenarios for which it is preparing

• plans in place to keep the business running and plans to seize advantage

• testing procedures in place to keep these plans up to date.  

A disciplined approach to asking the right questions can be just as valuable as getting the answer.  For example, by considering and refining your understanding of potential impacts on your customers, you can position your business for a burst of customer-focused innovation following a market discontinuity.

Companies which begin forming their response team, or defining scenarios, only when standing at the precipice will struggle to assert control of their situation – and risk playing catch-up to better-prepared competitors. Alternatively, while others dither, you can seize advantage. 

Read and listen to BBC World Service, Business Daily programme where PA’s Mark Thomas, strategy expert, was interviewed about Managing Uncertainty.

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