STRATEGY & CONSULTING
Forward-Looking Macroeconomic Insights
The foresight you need to anticipate change and understand how major global macroeconomic shifts impact your corporate strategy.
5-MINUTE READ
August 21, 2023
Overview
Business leaders need data-driven insights to continuously steer their companies along the path to growth.
We offer strategic advice to inform C-suite strategic planning, corporate development, customer strategy and M&A. Our goal is to translate complicated trends into simple, pragmatic recommendations for our clients.
We provide detailed business insights on key economic trends, such as how consumer behavior is changing, corporate finance developments and risk analysis. We help senior executives assess economic risks and monitor key trends, as well as support business-critical modeling and analysis.
We have hubs in the US, Europe and Asia and work across a wide range of industries to help businesses address the most important macroeconomic challenges for their sector. And our macro-analysis helps clients to carry out scenario and impact analysis, track industry value shifts and understand supply chain exposures.
How we work
In the Spotlight
Think like an activist: Fortify your firm, self-disrupt and drive stakeholder value
Leaders should think like an activist and look internally to evaluate how their business could be transformed to future-proof operations.
Executive Summary
Last year we witnessed an upward trend of activist campaigns, with a growth of over a third compared to 2021. The challenging global macro environment—characterized by rising inflation, high interest rates and geopolitical tension—has made it more attractive for activists to target companies with room for improved returns. Additionally, these investors hold significant capital, which provides them with resources to deploy.
While activist investors may focus on the goal of creating long-term value, their intrusion may be disruptive to the business. These investors use a variety of tactics to pressure management and force them to make changes.
To protect their companies from being targets, management teams should adopt an activist mindset and proactively assess vulnerabilities. Regular reviews of business performance, operations and strategy are essential—especially in a challenging economic environment
Key considerations
To self-disrupt and protect the business from activist capture, corporations should consider the following preventative measures.
1. Stress-test assets to confirm alignment with firm-wide strategy and return expectations.
2. Re-evaluate long-term value creation thesis.
3. Revisit corporate structure and unit economics to improve overall enterprise agility.
4. Put ESG risks on top of mind.
While making changes, transparent communication is key to maintaining clarity and building trust with shareholders. They should be engaging frequently with institutional investors to discuss long-term strategy, gather feedback and address any concerns in a timely manner.
So, while the pace may moderate, the rebound in activist campaigns driven by global economic conditions remains a prominent trend in the corporate landscape. Leaders need to be prepared and “think like an activist.”
Previous POVS
Executive summary
Carbon is now a mainstream topic in boardroom agendas. Leaders worldwide have set ambitious emission-reduction targets, responding to pressures from investors, customers, governments and a tightening regulatory landscape. But climate economics are complex, and although the imperative for climate action is clear, the cost of inaction is uncertain.
What is evident is that, as solutions for decarbonization evolve, carbon markets will play a critical role to balance a net zero system. Managing carbon exposure will be a key consideration for all corporations during capital allocation decisions, in the development of new business, and for managing corporate risk.
Voluntary carbon markets (VCMs) are growing fast, and as they become a critical tool to achieve net zero, an ecosystem of new participants, products, regulations and standards is forming. As such, companies need a basic understanding of VCMs, what they may mean, what role they play, and what capabilities they require.
Executive Summary
In 2022, the re-opening of economies created a consumer spending impetus that hit up against a high cost-of-living crisis. Consumers pushed through headwinds by drawing on savings accumulated during the pandemic, trading down to budget products, and cutting back spending on big-ticket durables. This allowed spending to remain mostly resilient, especially in the US. But this year, the consumer cycle will likely reach an inflection point. People are facing persistent inflation and high interest rates, increasing household wealth erosion from falling asset prices, and growing income and employment uncertainty. A significant slowing of consumer spending is likely, with high risk of whiplash and cliff effects. What does this mean for consumer-facing businesses?
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Monthly briefs
Our monthly briefs summarize key global macroeconomic developments and are intended to inform executive teams, boards and investors on the state of the economy.
October macro brief
Navigating “higher for longer”
Global growth continues to slow, but data shows conditions vary by geographic economies. Learn why.
Executive summary
The post-pandemic normalization of global economy continues to be marked by slowing growth, but also increasing geographic divergence.
- This divergence reflects, among other things, country differences in: (a) the maturity of post-pandemic services rebound, (2) pass-through of higher rates to economic activity, (c) extent of wage catchup to inflation, and (d) exposure to China’s economic slowdown.
- Latest data suggest the US economy continues to be among the most resilient (though growth is likely to downshift in Q4), whereas Europe is again flirting with recession (weighed down by a languishing German economy); India and GCC states remain outperformers.
- As markets have repriced to this likely “higher-for-longer” reality, financial conditions globally have re-tightened.
- Despite their divergent growth trajectories, most major economies are still contending with elevated core inflation. This is prompting central banks to err on the side of maintaining a tighter monetary policy stance.
- The Israel-Hamas war is contributing to higher geopolitical instability and risk of renewed supply disruptions. An escalation of this conflict to the wider Middle East region could further disrupt energy supplies and regional shipping routes and reverberate around global supply chains.
What should companies do?
Companies should plan for scenarios of increasingly divergent economic and financial outlooks across their geographic markets. This includes the possibility of certain economies, such as the US skirting recession, while others experience deeper downturns, climate-related shocks, or currency and debt crises. Certain regional geopolitical conflicts may also disproportionately impact their more proximate markets.
A higher interest rate regime reinforces the importance of stronger financial and operating discipline. Companies with large near-term refinancing needs, recent margin erosion, or unprofitable business models reliant on growth narratives will face the most market pressure.
Inventory management is also likely to become more challenging in a high cost of capital environment. Incentives for precautionary stocking in response to greater macro and geopolitical uncertainty will have to be balanced against higher inventory carrying costs.
Previous Briefs
Economic growth globally continues to trend lower and gathering headwinds suggest further slowing ahead.
Though the cyclical trend in manufacturing is negative, emerging shifts are improving the longer-term outlook.
The stickiness of inflation weakens growth momentum and pressures central banks to implement monetary tightening.
Global growth remained resilient but uneven in May as the divergence between a strong services sector and weak industrial performance widened further.
Data suggests major economies have not been significantly derailed by recent financial stress and remain on slow growth path.
Concerns about financial stress and instability cast a cloud over the global economy in March following the failures of several banks.
Global economic activity has exhibited some green shoots over the past two months and suggests an improved growth outlook in the near term.
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