Three-quarters of companies need to 'fundamentally change' business models
A new study has found that more than three-quarters of companies need to fundamentally change their business models as a result of the Covid-19 pandemic and subsequent economic fallout. The pandemic’s unexpected onset significantly impacted business resilience across the world, with more than half of companies saying they are facing challenges servicing their debt requirements.
The sudden advent of the coronavirus crisis left businesses across the world scrambling to adapt to the unpredictable economic and social environments of the last year. Firms subsequently more heavily relied on digitalisation and organisational restructuring to survive the pandemic, leaving many drastically transformed from their pre-pandemic status.
Despite this, according to a new report from FTI Consulting, even more radical change may be needed for the coming period. Out of more than 2,000 large companies across G-20 nations surveyed, the researchers found that 78% of companies now use artificial intelligence and analytics to monitor for scenarios that impact risk and compliance – however, 78% of companies need to fundamentally change their business models as a result of the Covid-19 pandemic and subsequent economic fallout.
Illustrating why this might be, firms reported that the most common negative impact on their falling turnover at present was cyber-crime – something which their hasty digitalisation during the pandemic has exposed them to more than ever before. Around 11% said cyber-attacks were stealing or compromising assets – ahead of major new competitor entering the market on 7% and trade restrictions on 6% – along with 6% who said the leak of sensitive internal communications had cost them.
Caroline Das-Monfrais, a Senior Managing Director and Global Resilience Lead at FTI Consulting, said, “Covid-19 has shattered preconceptions about what a resilient company or economy looks like… From debt servicing to cyber threats, businesses have never faced so many compound crises occurring at once. If 2020 has taught businesses anything, it is that those businesses that invest in resilience will be well placed to succeed when we emerge on the other side.”
Firms are also having to respond to heightened regulatory expectations which their dramatic shifts have made them privy to. As a result of changing regulatory pressures, 43% of companies said they had moved to adapt internally to develop our competitive advantage, while 34% said they had invested in R&D to cope.
“If companies do not change themselves, seismic shifts in the market will do it for them,” said Kevin Hewitt, Chairman of the Europe, Middle East and Africa region at FTI Consulting. “Longstanding assumptions are being questioned, and the answers will impact employees and consumers alike. One such lesson will be ensuring that businesses are better prepared to respond to future escalations and are not caught unaware.”
Simply investing will be easier said than done for many firms, however, and many will need to reassess strategic actions like mergers and acquisitions as well as the integrity of supply chains, which three-quarters of respondents believe have been permanently disrupted. Illustrating this, three-in-10 companies surveyed across G-20 nations requiring restructuring or refinancing due to Covid-19’s impacts.
At the same time, according to FTI, the pandemic’s unexpected onset significantly impacted business resilience, with 60% of companies surveyed saying they are facing challenges servicing their debt requirements, and companies are seeing an average revenue decline of 10% and headcount decline of 12%.
