Executive
Perspectives

The CEO’s Dilemma
Building Resilience in a Time of Uncertainty
Version 2

December 2022
(Data refresh only)Global disruptions and an increasingly complex'polycrisis' macroeconomic outlook will be key
elements of the strategic environment for theforeseeable future
For leaders, the only certainty is that waiting forclarity is a losing move

In this BCG Executive
Perspectives edition,
we address what it
takes to win in theface of uncertainty

The best organizations know how to turn uncertainty
into opportunity. Their playbook relies on two criticalelements: a shared and clear view of the world andthe strategic challenges/opportunities it presents—
and a resilient and adaptable plan to win

2

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Introduction to this document

Executive Summary | The CEO’s Dilemma: Building Resilience in a Time of Uncertainty

Today's global disruptions (e.g., geopolitical tensions, supply chain bottlenecks) and economic headwinds (e.g.,soaring inflation, rising interest rates, decelerating growth, and currency fluctuations) have created a complex 'polycrisis',a once-in-a-generation, competitive environment with significant variations across geographic areas and sectors

A view of
the world

Navigating this unprecedented complexity requires business leaders to develop a dynamic perspective not only on the most
likely scenarios for how their operating and economic environments will evolve, but also on the distinct opportunities andrisks these scenarios present for their organizations

There is no “one size fits all” solution to today's complex strategic challenges. But our research suggests that the best companies
do two things well in crafting their unique plans to win

A planto winFirst, they have a clear understanding of their strategic starting point that takes into account nuanced and deaveraged
perspectives on the economic and operational stability of the markets in which they operate—as well as on their own organizations'financial strength (e.g., profit volatility, free cash flow to debt ratio) ultimately falling into four high-level starting-point archetypes
And second, they embed a “dynamic strategy” mindset into their planning, comprising three elements:• Sensing: Observing trends, defining and monitoring critical uncertainties, and outlining a set of scenarios against which toassess business decisions• Adapting: Building operational and financial stability by shaping and reshaping strategies based on market trends and datadriven forecasts• Thriving: Moving rapidly from assessment to action to seize growth opportunities and strengthen competitive advantage
3

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Our research shows that “winners” in economic uncertainty do not just sit back and wait for recovery—instead, they areproactive and turn ambiguity into opportunity

In the News | How geopolitics, the pandemic, and policy choices continue tofeed an increasingly complex economic and competitive environment
Oct 17, 2022

China appears to ditch Zero-covid inoverhaul to pandemic rules

Despite lower volumes, supply chain
challenges persist

Dec 6, 2022

Dec 8, 2022

Dec 3,2022

Dec 7, 2022

Dollar struggles as recession worries
simmerDefault looms as poor countries facean economic storm

A key indicator of a coming economic
downturn is pricing in nearly 100%chance of a 'Powell recession' in 2023

IMF to cut China's medium-term
growth estimate

Oct 27, 2022

World close to 'irreversible' climate
breakdown, warn major studies

Dec 7, 2022

Russia trying to 'freeze' war before
spring assault: NATO Chief

Sources: BCG, press search from Forbes, NRF, The Guardian, Barron's, Financial Times, Wall Street Journal, Economic Times.com, New York Times, Business Insider, The World Bank

Dec 8, 2022

Global regulators calls for 'urgent
action' on clearing houses & insurers

Nov 30, 2022

Remittances grow 5% in 2022,
despite global headwinds

4

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Dec 7, 2022

AGENDA

5
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BCG Executive
Perspectives
A view of the world

A plan to winIncreasing uncertainty driven by a set of global disruptions and exacerbated bymacroeconomic headwinds needs to be met head on
Global Disruptions

Macroeconomic Headwinds

Geopolitical tension

1

With tension unlikely to ease soon, organizations need to rethink—not justde-risk—their business models for greater advantage in a multipolar world

Soaring inflation

Inflationary pressure and consumer demand shifts continue to affectglobal businesses with impacts on labor, energy, and materials costs.
How will inflation evolve globally and how can leaders blunt its impact
on their businesses?

Supply chain bottlenecks
Bottlenecks will continue, increasing strategic importance of agile &sustainable supply chains to support strategies and boost advantage

Tech disruption

Consumer behavior shifts

2

Uncertainty

Consumers are rapidly changing purchasing behavior as a resultof recent disruptions (e.g., COVID-19)

Rising interest rates

Central banks are moving carefully and decisively to tamp down
inflation via higher interest rates with knock-on effects forborrowing costs, investment levels, and relative currency values.
How will rising interest rates affect capital access for businesses
and consumers, and will they create tectonic shifts incompetitiveness around the world?

People challenges
Talent is a critical source of advantage; companies focused on people,
culture, and new ways of working perform stronger in uncertainty
3

Climate change
The climate crisis, the defining challenge of our time, is challenging companies
to step up with ambitious ESG and net-zero strategies and commitments

Uncertain recession outlook

Global economic sentiment has been gloomy, with recession
indicators mixed and a wide range of forecasts.
What is the economic outlook, how does it differ from previous
downturns, and how will it play out across sectors?
6

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The inexorable rise of new technologies (e.g., AI, Quantum)
will raise the bar for disruptive innovation and reinvention

1

Inflation levels have risen sharply around the world but are expected to comedown in the next two years
Global inflation trends by country

Forecasted inflation ranges by region

CPI Y/Y (%)

CPI Y/Y (%)

SwedenGermany
UK

10%
8%

US

6%

France4%

Inflation levels rising around the world with drivers varying by geography
Japan

2%

China

0%
-2%
2000

2002

2004

2006

Legend:

2008

2010

Actual inflation

2012

2014

2016

2018

2020

2022

Historical recessions

Current high inflation levels are geographically broad-based, with many
countries matching or exceeding peak levels seen in past recessions

But early indicators might suggest inflation slowing as the economy
cools in various parts of the world

5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

Eurozone
7%

6%
5%
4%
3%
2%
1%
2023 F

2024 F

2025 FJapan

2023 F

2024 F

Legend:2025 FMedian forecast

0%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

2023 F

2024 F

2025 F

China

2023 F

2024 F

2025 F

Forecast range

Analysts do not expect inflation to become entrenched, however
An aggregation of recent inflation forecasts suggests a gradual inflation
slowdown over the next several years barring any shifts or additional
external shocks

Note: Inflation data through 11/2022 for US, China, Sweden, Germany, France, Japan, UK; US—CPI full-year % change, Eurozone—HICP full-year % change, Japan—Core CPI fiscal-year % change, excluding fresh food core inflation; China—CPI full-year % change.
Source: NBER, Institut National de la Statistique/Economique, Istituto Nazionale di Statistica, Office for National Statistics, Bureau of Labor Statistics, Deutsche Bundesbank, Ministry of Internal Affairs and Communications, China National Bureau of Statistics, Statistiska
Centralbyran, Refinitiv, Oxford Economics, BCG analysis

7

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12%

US

1

Dramatic shifts in inflation drivers vary across regions and countries withenergy emerging as one of the strongest drivers
Legend:Central bank inflation target

EnergyDurable goods

Services

Housing

Nondurable goods

USEurozone

Japan

China

12%

12%

12%

12%

10%

10%

10%

10%

8%

8%

8%

8%

6%

6%

6%

6%

4%

4%

4%

4%

2%

2%

2%

2%

0%

0%

0%

0%

-2%
2019 2020 2021 2022

-2%
2019 2020 2021 2022

-2%
2019 2020 2021 2022

-2%
2019 2020 2021 2022

US inflation drivers shifting fromdurables to energy, services,
nondurables, and housing

Energy costs are the primary
driver of Eurozone inflation—accounting for nearly half ofthe headline number

While surging on energy andnondurables, inflation in Japanis low compared with the US
and Eurozone

Apart from energy, inflation in
China is running well below thecentral bank target

Given the significant variability in the intensity and drivers of inflation from market to market, leaders need to understandinflation's impact across their operating footprint and develop mitigation strategies
8

Note: Data through 11/2022; US latest CPI weights – Non-durables ex-energy at 22%, Durables ex-energy at 12.8%, Housing ex-energy at 32.5%, Services ex-housing at 24.4%, Energy at 8.3%; Eurozone data through 11/2022, EU latest CPI weights- non-durable ex-energy at 32%, Durables ex-energy at 12.7%, Housing ex-energy at 11.3%, Services
ex-housing at 33.1%, Energy at 11%; Japan data through 11/2022; Japan latest CPI weights – Non-durable ex-energy at 34.3%, Durables ex-energy at 13.1%, Housing ex-energy at 21.5%, Services ex-housing at 24%, Energy at 7.1%; China data through 11/2022, China does not publish its CPI weights so the weighting estimated through Bloomberg
and may differ from headline- nondurable ex-energy at 38.2%, Durables ex-energy at 5.8%, Housing ex-energy at 28.2%, Services ex-housing at 23.8%, and energy at 4% For 'Energy' we chose 'automotive fuels' as the closest comparison in China
Source: Bureau of Labor Statistics, Eurostat, Ministry of Internal Affairs and communication, NBS, BCG analysis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Breakdown of headline inflation by driver (%)

Varied central bank policy shifts curbing consumer & company spending power
and access to 'cheap' capital—and many analysts expect high rates to persist
Interest-Rate Policy (%)

Interest rate policy forecast ranges
ECB

US Fed

BOJ

4%

5%

3%

2%

Interest-Rate Policy (%)

Inflation levels rising around the world with drivers varying by geography

US FED

4%

3%

3%

2%

2%

1%

1%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
22 23 23 23 23 24 24 24 24 25
5%
4%

0%

Forecast Range

ECB

5%

4%

0%

1%

Average Forecast

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
22 23 23 23 23 24 24 24 24 25

BOJ

3%

0%

2%
1%

-1%

0%

2015

2016

2017

2018

2019

2020

2021

2022

Central banks are seeking a delicate balance, hoping to slow inflation
without triggering a deep recession. The US Federal Reserve and theEuropean Central Bank have announced some of the sharpest increases
in recent years—and many countries and businesses with significant debt
are beginning to feel the squeeze-1%

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
22 23 23 23 23 24 24 24 24 25

Analyst consensus is that today's higher rates will persist into the medium
term implying decreased demand, higher debt service costs, continued
currency pressures, and lower profits
This raises interesting questions around sustainability & healthiness of debt
levels and the burden of higher interest rates for governments & businesses

Note: Eurozone- ECB main refinance operations announcement rate; US fed, Federal Funds Target Rate-Upper Bound; BOJ Policy-rate statement/loan/discount rate; Range includes highest and lowest forecast; aggregated average forecast as of Nov 30
Source: Bloomberg, BCG Analysis

9

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Current interest-rate policies22Strong currency moves are driving tectonic shifts in competitive advantage
and access to capital across the world
Diverging policy regimes and geopolitical factors drove
currency moves, mostly strengthening the US dollar…
Mean

EUR/USD

0.73

0.68

0.72

0.75 0.72 0.78 0.75 0.75

0.89 0.88
0.85
0.85

JPY/USD
116

121

118
103

94

88

98
80

106

134
109

112

110

109

107

137

127

110

High interest rates in US translate into a greater interest in dollardenominated investments in general, strengthening the dollar and increasingliquidity and access to capital in US
Emerging economies historically have weakened and lost competitivenesswhen the US dollar appreciated relative to other major currencies—there may be
discussion around what will happen this time, including, if emerging
economies could benefit from global economic slowdown

80

CNY/USD
7.97

7.61

6.95 6.83 6.77

7.11
6.73
6.65 6.75 6.62 6.91 6.90 6.45 6.78
6.46 6.31
6.29
6.16
6.15

5.16

3.95
3.34 3.48 3.19 3.66

5.40

2.18 1.95 1.84 2.00
2.16 2.36
1.76 1.67 1.96

5.16 5.24 5.27

(dollar index, investment flows to emerging markets in B$)
100
80
60
40
20
0
-20
-40
-60
-80
-100
2006

USD index

2008

Portfolio flows to/from emerging markets (excluding China)

2010

2012

2014

2016

2018

2020

125
120
115
110
105
100
95
90
85
80
75
2022

Correlation coefficient = -0.67

10Note: Yearly average exchange rates shown; Source: BCG analysis; Bloomberg FX data as of Nov 30

Source: International Monetary FundUSD Index

BRL/USD

Portfolio flows to/from emerging markets(excluding China)

Correlation USD index and capital flows to/from emerging countries

Copyright © 2022 by Boston Consulting Group. All rights reserved.

0.80

Forecast range
1.01 1.03 1.01

0.90 0.90 0.88

…and leading to tectonic shifts in competitive advantage
and access to capital across the world

3

While recession remains a risk, recent forecasts suggest that a period of
relatively flat growth is more likely

GDP growth (Y/Y %)… however, aggregation of GDP forecasts points tosome downside risk, but not near-term recession
Real GDP forecast (Y/Y %)

15%

12%
10%

10%

5%

6%

6%

4%

4%

2%

2%

0%

0%

-2%

-2%

2000

2005
World

US

2010
Eurozone

2015
China

2020
Japan

Global growth slowed from 5.7% in 2021 to 3.1% in 2022, 1% lower thanforecast in January 2022

Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24

Japan

-4%

10%

8%

8%

6%

6%

4%

4%

2%

2%

0%

0%
-2%

-2%
-4%

Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24

Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24

China

12%

10%

-4%

Forecast range

Eurozone

10%
8%

12%

-5%

12%

8%

-4%

0%

US

Mean

Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24Interpretation of these forecasts is not as simple as we wish
For instance, US economy shows conflicting indicators, clouding the outlook.
Implication of China's flatter GDP growth for the global economy may create
diverse interpretations and hence different strategic choices

What's worse, another disruption could immediately impact the forecasts
Source: IMF GDP Actual Growth Y/Y % including combined 2022 actual & H3 2022 average forecast as of De, Bloomberg GDP quarterly forecast consensus data as of Dec 08; BCG Analysis

11

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Recent GDP deceleration suggests significant
recession risk…

3

US Deep Dive | Conflicting indicators cloud the outlook for the US economy
Not exhaustive

Monitoring indicators that are…

Increasing recession risk

Decreasing recession risk

Households
savings

Purchasing manager indexes,
while not yet at troublinglevels, have recently weakened
PMI indexes

Current EPS estimates for2022/2023 remain very highproviding a buffer to withstandsome downgrades
Earnings pershare

US fiscal policy

GDP forecasts point todownside risk, but not necessarily
to a near-term recession
GDP growth

Employee compensation
growth beats inflation aided bylabor force growth
Real wages
Source: BCG analysis

Fiscal policy contribution to
GDP growth will likely remain
negative for the next two years

Unemployment
rate

Inversion of yield curve is themarket's favorite recession
signal, but weakened bynegative term premiums
Yield curve

The labor market remains
strong, although hiring and wages
are easing, potentially indicating a
slowdown in the economy

Drawdown of ~25%,
although not necessarily aprecursor of recession
S&P index
12

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US consumers well positioned toabsorb shock given significant
cash on hand

3

US Deep Dive | In contrast to the lead-up to previous downturns, the economy
remains strong with unemployment at historic lows
Decreasing risk

Neutral
Unemployment rates are back to
pre-COVID-19 levels…

… while wage growth is slowing fromrecent peakHousehold cash and equivalents—and cumulative excess
savings

Unemployment rate (%)

Change in average hourly earnings (%)

14%

7

12%

6

10%

5
4

Household cash,
checking, and money
market accounts

14%

8%
6%

3
4%

2
1
0

Cumulative
excesssavings

2%

Pre-COVID-19 min.

0%2015 2016 2017 2018 2019 2020 2021 2022

Cash and equivalents held by US households
nearly doubled between 2020 and 2022, providing asignificant buffer against near-term recession

Nearly record low unemployment could be asign either of a strong economy or that theeconomy is overheating

12%
10%
8%
6%
4%
2%
0%
-2%

Slowing wage growth makes hiring more
attractive after a significant wage uptick overthe past few months

13
Note: Savings and household wealth data as of Q4 2022; unemployment data through 11/2022; wages data through 11/2022
Source: NEBR, Federal Reserve Board, BLS, BCG analysis

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8

Average hourly earning Y/Y (%)$ trillions (SAAR)

US consumers well placed to absorb shockwith significant savings

3

US Deep Dive | Expiration of COVID-19 stimulus eliminated a significant
tailwind for GDP growth
Increasing risk

US fiscal policy contribution to real GDP growth (Q/Q SAAR, % pts)
Chart Title
Futurequarters
15

Fiscal stimulus was the largest driverof US GDP growth during the earlystages of the pandemic

10

The last stimulus package was in 2021,
creating a high base period forcomparison, followed by a sharp
inversion as stimulus programs
end

5

0

-5

-10
2007

2009

Taxes & benefits

2011

2013

State and local spending

Source: Brookings Fiscal Impulse, BCG analysis

2015

2017

Federal spending

2019

2021

2023

Total fiscal impact on growth(Q/Q SAAR)

2025

Assuming no additional legislation, we
estimate the fiscal policy contribution
to GDP growth will remain negative
for the next two years, reaching 0%
by Q4 2024

14

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Fiscal policy contribution to real GDP growth (SAAR, %-Pts)

20

3

Different sectors are affected differently by macro uncertainties

Current cycle vulnerability1
Vulnerable in historic cycles

Oil & Gas

0.2

Insurance

DefenseManufacturing-0.2

FashionTourism
Automotives
Med Tech

MiningInfrastructure

Building Materials
Tech

Agriculture

Biopharma
Banking

Telecom

Sectors like agriculture are
typically less vulnerable tobusiness cycle shifts, whileother sectors (e.g., media, tech,
fashion) tend to be more
affected. But this varies byrecession depending on drivers

Power & Utilities

Asset Mgmt

0.0

In general, less vulnerable
to business cycles

Consumer Goods

RetailChemicals

Media

-0.4

In general, more vulnerable
to business cycles
-0.4

-0.3

Vulnerable in current cycle
0.0

0.1

0.2

0.8

Vulnerability to early 2000s recessions2Size of circle: # total companies

Industrial goods

Health careTechnology, media, & telecom

Financial institutions

Consumer

EnergySome sectors (e.g., retail),which were less vulnerable in
the early 2000s recessions, areshowing greater vulnerability
in the current environment

Insurance

Note: This graph reflects the delta between the sector and S&P index. X & Y axes are normalized against the group average. Used publicly listed major companies. Major companies:
companies with market cap above $5B USD; 1. Measured by % downturn of publicly listed major companies in each sector between Nov 21 – Nov 22, compared with S&P 500. 2. Measured byaverage % downturn for major publicly listed companies during 2 cycles between 2000-2009 (03/00-03/03, 06/07-08/09), compared with S&P 500; only downturn periods of historical cycles
were analyzed; to make the size of companies comparable to S&P 500, only top 10% of companies in each industry were selected for this analysis. Source: Capital IQ, BCG analysis

15

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0.4

3

Top performers in economic uncertainty do not just wait for recovery; instead,they build competitive advantage and turn ambiguity into a source of opportunity
Total shareholder return of ~1,000 international companies
Comparison of top vs. bottom quintile TSR

Key moves top performers maketo grow and thrive over the long
term:

300
296PP

200

Taking advantage of lower valuations
to double down on M&A2
• 4.6% one-year RTSR on core industry
acquisitions• 8.5% one-year RTSR on non-coreindustry acquisitions

100

0

Scaling digital solutions to drive
significant impact1• 3X higher returns• 15-20% revenue growth• 15-20% cost savings

2010

2015
Top quintile

S&P 1200

2020
Bottom quintile

Note: S&P 1200 (ex. financials and real estate companies)
Source: Capital IQ, BCG analysis; 1. BCG Digital Enablement Score; 2. Refinitive, BCG analysis; 3. BCG Global Innovation Survey; BCG i2i teamCommitting to innovation3• Innovation leaders invest 1.4X andtake more time, but deliver ~4X
outperformance compared with
innovation laggards

16

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Total shareholder return (%)

400

BCG Executive
Perspectives
A view of the world
A plan to win

17

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AGENDA

Business leaders must balance contrasting priorities amid strong macroeconomic
headwinds
Global disruptions

Macroeconomic headwinds

Evaluate and shift geographic footprint for
conducting business across value chain

Geopolitical tension
unlikely to ease

Leverage derivative tools to counter the risk offorex charges while maintaining business model

Diversify supply chain and material
sourcing for increased flexibility

Supply chain
challenges are strong

Strengthen existing supply chain to cope with
inflation and uncertainty

Accelerate tech innovation and digitaltransformation of existing business model

Tech continues to
disrupt the world

Postpone digital and tech investments topreserve cash balance

Adapt business model and invest in e-commerce
to meet rapidly shifting consumer demand

Consumer demand shiftcontinues to evolve

Accelerate hiring and upskill existing talent
to fit business needs and new ways of working

People challenges
persistFreeze recruiting efforts to bolster
bottom line

Climate changepressuring our future

Postpone ESG capital commitment,
risking brand equity

Commit and fulfill net-zero targets
through significant investments
Note: List not exhaustive

Maintain current business model while
adopting dynamic pricing to increase profits

18

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(interest rates/inflation/recession)With the current disruptions anduncertainties, it is imperative forbusiness leaders to reevaluate:
1.1 The stability of their portfolio
against economic downturns &market disruption

Each business context isdistinct, but four starting-point
archetypes can help leaders
understand the moves most
relevant for their organizations

2.2 The internal financial stability
to cope with uncertainty
19

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Understanding the “starting point” is critical to successfully navigate
this uncertainty

Four starting-point archetypes for organizations faced with uncertainty
High

Fortress
Strong position with minimal risk:
positioned to thrive through high market
stability and high financial stability

Marketstability
Unprepared

Fortress

PreparedModerately vulnerable: significant financial
stability to mitigate risk and seize opportunity
in an unstable market

UnpreparedAt risk

Low

Weak, but relatively fortunate, position:
more stable markets reduce risk from low
financial stability

PreparedFinancial stabilityHighAn outside-in view of the ability of the company's
finances to withstand drastic change2

At risk
Most vulnerable archetype: operating involatile markets with minimal financial safetynet
20

1. E.g., supply chains, labor pools, geopolitics, consumers, investors, rival moves; 2. E.g., profit volatility, free cash flows, debt levels, funding options, leadership readiness

Copyright © 2022 by Boston Consulting Group. All rights reserved.

An outside-in view of how
much key disruptions1
will affect themarkets (e.g., countries,
sectors) in which thecompany participates

Defining starting point based on archetype characteristics & related inaction risk

Prepared

Fortress'Fortress' companies should take anaggressive stance to leverage & further
solidify their advantageous starting
position
They should capitalize on their favorable
market situation & strong financial
foundation to pursue bold initiatives suchas:
• Proactive M&A• Explore new business models
through innovation• Accelerate digital & ESG
transformation'Prepared' companies should
consolidate their existing market
position & seek to leapfrog competitors'Unprepared' companies should focus
on creating financial stability &safeguard existing operations

They should leverage their strong
financial foundation to buffer against
unstable market conditions throughdynamic initiatives such as:

They should improve their weaker
financial position in a relatively stable
market through strategic initiatives
such as:• Diversify business & organizationalmodel• Transform business model with afinancial focus• Enhance supply chain• Utilize data driven strategicplanning• Create ambitious agenda arounddigital, tech, & ESG

Inaction Risk:

Inaction Risk:• Decline in competitive advantage bysimply resting on an initial strong
position•• Lose unique growth opportunities
that uncertainty exacerbates•

At Risk

Unprepared• Consolidate supply chains & vendor
relationships

Inaction Risk:

Lose financial buffer during thenext global or market disruption•

Lose out on unique growth
opportunities that economic
downturns can create•

High burn rate and opportunity to'run out of cash'
Lack of ability to invest in key
growth areas or support strategic
agenda'At risk' companies should focus on afull-scale transformation that willstabilize their position and limit
severe consequences
They should improve their poor
financial position in an unstable
market through transformative
initiatives such as:• Implement risk assessment systems• Build strong financial foundation• Reexamine & transform business
model
Inaction Risk:•

High risk of insolvency•

Potentially insurmountable
position with additional disruptions•

Potential 'easy prey' for stronger
positioned companies

How to navigate uncertainty:
Enhance resilience and secure clear pathway for sustained growthHarness data to discern market trends & evaluate potential
impact and develop scenarios to support business decisions

Sensing

Data-driven
detection

Dynamic scenario-based
strategic planning1

Rapid assessment &resilience diagnostic

Build resilience across the value chain and functions

Thriving

Financialresilience2

E2E cost
management

Top-line
resilience3

Supply chain
resilience

Organizational
resilience4

Techresilience

ESG
resilience

Seize growth opportunities to build competitive advantage and medium- to long-term
market position
Portfolio
reshaping

The How

Transactions
Resilience

Tech and businessmodel innovation

Transformation
Excellence

1. Including sensing the macroeconomics and analyzing scenarios based on client situation; 2. Including revenue resilience, investment, liquidity, cash and cost management resilience; 3. Including pricing, sales and marketing efficiency, ecommerce, dynamic inflation, streamline customer experience; 4. Including future of work, talent management, organizational structures

22

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Adapting

Fortress | Water & waste management company acquired major industry player tosolidify global position and accelerate innovation
Recent example from the COVID-19 crisis with strong action:

Riding the wave of a very strong 2019 above-target revenue and profit performance in a historically less vulnerable
sector, this global water and waste management company sought to create cohesion to better fight off new global
challengers and increase tech innovation to support robust growth ambition and segment diversification. Through theacquisition of a major competitor, they increased their financial stability, expanded their global footprint, andharnessed innovative tech and ESG capabilities to accelerate their ambition

M&A

•
•

ESG
resilience•Techresilience•

Source: Press; BCG analysis

Acquired global competitor with 30,000+ employees operating across all fivecontinents
Created a new entity with real growth potential and revenues of ~€5 Bn yearly

Leveraged acquired company to accelerate ESG agenda through circular
economy blockchain, value creation in waste management through new
recycling techniques and support drive for sustainable agriculture

Strengthened digital tools though influx of new tech from acquired company
to optimize for management flow in real time, 24/7 monitoring of networks,
accident anticipation software and smart operation centers

Leading to significant impact+50% 1-year relative TSR
increase due to confidence in theacquisition
Share capital increase of +€2bn
confirmed the rationale andsupport of the acquisition• Total demand for sharesamounted ~200 million
sharesStrengthened ESG & tech
position, placing them in the top
players in the industry

23

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The water & waste management sector experienced huge demand shifts due to the Covid-19 pandemic. Thesechanges were compounded by a decrease in tariffs in the wake of unemployment, growing ESG pressure due toresource scarcity, and increased regulation interventionPrepared | Emerging biotechnology company led the way in groundbreaking R&D
to gain value and profile
Recent example from the COVID-19 crisis with strong action:

From the early onset of the Covid-19 pandemic, this emerging player seized the opportunity to be at the forefront ofinnovation by investing in R&D to provide a fast and highly effective Covid-19 vaccine clinical candidate, ahead of many
competitors. This biotechnology company strategically entered a partnership with a global healthcare leader to accelerateclinical trials, regulatory, manufacturing, and commercialization. Due to their investments in the 'right technology' andpowerful strategic partnership, the company's financial strength enabled them to leapfrog their competitors and lead in avery competitive COVID vaccine market
Business model
innovation

Tech resilience••

Entered a strategic partnership with one of the largest industry players
Leveraged partner's extensive experience in clinical trial conduct andregulatory to gain speed in approval and increased the probability of success•

Invested heavily in 'frontier' technology that far exceeded competitors enabling
revolutionary product innovation (e.g., cell therapy and multi-specific antibodies)
Diversified technology use cases across multiple segments (e.g., cancer
immunotherapy and vaccine)••

Supply chain
management••
Source: Press; BCG analysis

Expanded and diversified existing supply chain (e.g., raw material suppliers,
coating process) to ensure flexibility given the high demand from the Covid-19
pandemic
Together they operated one of the most sophisticated supply chains with >40
owned sites & >200 suppliers globally
Implemented comprehensive preparedness plans to control site operates

Leading to significant impact
x4 revenue growth between 2020
and 2021
4,000% increase in sales growth in
2021 alone>200% change in market cap
between 2020 and 2021
Considered as an emerging
leader and pioneer of innovation
within industry

24

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The Biotechnology industry is largely composed of companies that are "pre-revenue" and conduct "high-risk, high-reward"
innovation (e.g., new drug modalities) and are easily influenced by changing market conditions (e.g, liquidity, economic
slowdown). However, investing in emerging tech and founding strategic partnerships can be a critical source of advantage

Unprepared | Major chemical player temporarily pivoted to become the first mover
to meet global demand

The chemical sector has consistently outperformed the world index and has historically been shaped by long-term,
stable trends. However, recent emerging industry trends (e.g., green chemistry, sustainability demand, new technology,etc…) has pressured players to innovate, distancing the gap for those who cannot keep up
Despite an EBITDA below the chemical industry average, this company sensed the market changes and adapted its
production, organization, and supply chain capabilities to meet the rapid shifts in the market. They temporarily
adjusted their portfolio to meet global demand.

Supply chain
resilience••

Organizational ••resilience

Remained in close contact with suppliers and logistics providers to ensure
continuity of production and 'find practical solutions'
Diversified existing suppliers of a few key raw materials to reduce dependency
on single source and minimize supply risks

Pivoted workforce to accelerate production of hand-sanitizer to meet global need
Reduced working hours for lower demand products therefore freeing up cash andreducing costs

A strong uplift was achieved>100% EBIT increase
Return on capital employed was+10% compared to 1% theprevious year
+30% increase of sales and cash
flow; significantly strengthened
their financial stability+175,00 liters of hand sanitizer
were produced weekly throughQ4/2020

25
Source: Press; BCG analysis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Recent example from the COVID-19 crisis with strong action:

At Risk | Clothing manufacturer protects long-term financial outlook with aconservative approach to liquidity management
Recent example from the COVID-19 crisis with strong action:

Facing extreme cost pressure and an expected decline in Q1 of 2020, the clothing manufacturer assumed aconservative approach to liquidity management across several key dimensions

Financialresilience••

Implemented strict cost and working capital control measures to maintain healthybalance sheet and sustainable liquidity
Suspended a €1Bn share buyback program & dividend payments to shareholders

E2E margin
management•••

Implemented plans to reuse unsold inventory in the next financial year
Launched multiple targeted online campaigns to boost e-commerce sales
Slowly reopened factories, distribution networks, and brick-and-mortar retail storesSupply chain
resilience••

Gradually normalized and resumed operations with manufacturers
Suspended supplier orders for Q2 & Q3 of the year

Leading to significant impact>30% Y/Y increase in e-commerce
sales in Q1 2020
• Including triple-digit rise in ecommerce sales in specific partsof the world
Survived disruption by increasing
debt levels and implementing strict
cost-cutting initiatives+2M live-stream viewers during
online 'Brand Day'
• Generated ~$30M in the first 10
hours
Considered an e-commerce market
leader as a result of doubling down
on digital
26

Source: Press; BCG analysis

Copyright © 2022 by Boston Consulting Group. All rights reserved.

A leading global clothing manufacturer experienced major disruptions brought on by the COVID-19 pandemic includinga record decline in business activity, decreased store traffic, outlets & franchise store closures globally, and significant
supply chain disruptions (e.g., shutdowns of key suppliers of raw materials and manufacturing factories)

Take 3 key steps to navigate uncertainty
and win in a downturn

The time to act is now

shape (and reshape) future scenarios that guidestrategic decisions

2

Adapting business and functional strategies

3

Thriving by building competitive advantage toin response to new insights and to market,
economic, and competitive developments

turn adversity into opportunity

Actions should be based on
the specific business context
27

Copyright © 2022 by Boston Consulting Group. All rights reserved.

1

Sensing macroeconomic and disruptive trends toThe CEO's Dilemma:Transform for Resilience

The CEO's Dilemma:
Preparing Your Supply
Change for Resilience

Inflation Is Forcing B2BCEOs to Rethink Pricing

The CEO's Dilemma:
Competitive Cost
Position

Perspectives on Buildinga Resilient Company

Real-World Supply Chain
Resilience

Perspectives on Resilient
Leadership from AsiaPacific Board Chairs

An Index for Tomorrow's
Growth—and Today's
Resilience

The CEO's Dilemma:
Building Financial
Resilience

Click here to read additional editions of Executive Perspectives
28

Copyright © 2022 by Boston Consulting Group. All rights reserved.

Additional perspectives on uncertainty, resilience, and economic pressures

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