Business Pulse

Dual perspectives on the top 10 risks and

opportunities 2013 and beyond

Snapshot presentation

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Are you confident

that your company

is well placed

to meet the risks

and challenges

currently on the

horizon?

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How can you really

know that

opportunities aren’t

passing you by?

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Start exploring now

The top 10 risks and

opportunities

What lies ahead?

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What is Business Pulse about?

Business Pulse explores the top 10 risks

and opportunities faced by global

organizations over the next few years.

Ernst & Young’s Business Pulse report

is based on a large sample survey

of companies in 21 countries and across

various industry sectors.

The report takes the pulse of:

► Current thinking on risks and

opportunities and emerging challenges

► Dual perspective on the themes arising

from the top 10 lists

► Expectations from industry executives

and Ernst & Young specialists

Business Pulse key findings

► There has been a shift in thinking

among companies this year. Rather

than waiting for developed markets

to recover, they now accept that the

duration of the downturn is uncertain.

► Companies continue to focus on

controlling costs and optimizing

agility to survive in an intensely

competitive market.

► What is different, compared with two

years ago, is that companies are

once more looking for growth

opportunities, both geographically,

i.e., in rapid-growth economies, and

in innovation across products,

services and operations.

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What is the Ernst & Young risk and opportunity radar?

Customer

reach

Cost

competitiveness

Stakeholder

confidence

Operational

agility

At the center of the radar are the risks and opportunities that

our survey respondents felt were having the biggest impact on

major organizations worldwide. Arrows indicate the extent to

which the ranking is expected to increase, decrease or remain

the same between 2013 and 2015. The radar is divided into

four sections, corresponding to Ernst & Young’s

Growing Beyond model. The sections are:

Cost competitiveness

Customer reach

Stakeholder confidence

Operational agility

► Sustaining companies’ economic

viability

► Allowing companies to build

stronger relationships with

stakeholders

► Maximizing potential market

opportunity for products and

services

► Improving organizations’ ability

to deliver effectively in a quickly

changing market

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Are these your

top risks?

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Global business risks (2015 expected ranking in brackets) Cost

competitiveness

Stakeholder

confidence

Customer

reach

Operational

agility

Political shocks

Sovereign debt

Emerging

technologies

Expansion

of government’s role

Regulation and

compliance

Managing talent and

skill shortages

Market risks

Macroeconomic risk

Cost-cutting and profit

pressure

Pricing pressure

1. Pricing pressure (1)

2. Cost-cutting and profit pressure (2)

3. Markets risks (3)

4. Macroeconomic risk (4)

5. Management talent and skill shortages (5)

6. Expansion of government’s role (7)

7. Regulation and compliance (6)

8. Sovereign debt (10)

9. Emerging technologies (8)

10. Political shocks (9)

2013 ranking and expected 2015 ranking

Up in 2015 Same in 2015 Down in 2015

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Are these your top

opportunities?

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Global business opportunities (2015 expected ranking in brackets)

Excellence in investor

relations

Leveraging CSR and

public confidence

Innovation in products,

services and operations

Investing

in cleantech

Emerging market demand

growth

New market channels

Investing in process, tools

and training to achieve

greater productivity

Investing in IT

Improving execution of strategy

across business functions

Global optimization and

relocation of key functions

1. Innovation in products, services and operations (1)

2. Emerging market demand growth (2)

3. Investing in process, tools and training to achieve greater productivity (3)

4. New marketing channels (4)

5. Improving execution of strategy across business functions (5)

6. Investing in IT (6)

7. Excellence in investor relations (8)

8. Leveraging corporate social responsibility (CSR) and public confidence (7)

9. Investing in cleantech (9)

10. Global optimization and relocation of key functions (10)

Cost

competitiveness

Stakeholder

confidence

Customer

reach

Operational

agility 2013 ranking and expected 2015 ranking

Up in 2015 Same in 2015 Down in 2015

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Plan your risk and opportunity agenda

Relevant business risks

and opportunities

identified

Specific areas of concern

and risk

What would you like

to achieve?

(short term)

What would you like

to achieve?

(mid term)

1

2

3

4

5

6

7

8

9

10

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Start preparing your business by asking these questions

The following slides detail

a series of self-assessment

questions relating to the

top 10 risks and opportunities.

To access the full list of questions

and insight into each risk and

opportunity:

Download the report at

ey.com/businesspulse

The risk and opportunity

self-assessment questions relate

to the four radar quadrants.

They give a snapshot of which

risks and opportunities are most

relevant to the following themes:

► Cost competitiveness

► Stakeholder confidence

► Customer reach

► Operational agility

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Cost competitiveness To see the full list of self-assessment questions, download the full report

Pricing pressure has become the biggest risk noted by companies

this year, up from fourth place in 2011.

Cost cutting and the related pressure on profits is cited by

respondents as the second-biggest risk they face.

Market risks have risen to third place as companies accept that the

increasing reliance on emerging markets for growth brings new risks.

Macroeconomic risk is ranked fourth as the shocks of 2008–09

continue to reverberate.

Sovereign debt and the impact of austerity enters the top 10 list

for the first time.

Political shocks is also new to the top 10 list, with uncertainty and

economic volatility affecting not just emerging markets but also Europe.

Risks

Insights

Self-assessment questions Cost competitiveness covers:

Ernst & Young estimates that cutting costs by just 1% can help improve

bottom-line results by as much as a 10% boost in sales.

Firms are using technology to improve productivity, introducing more

flexible working practices and re-engineering supply chains to service

emerging markets growth.

1. How do you ensure you focus

on the right strategic relationships

(e.g., encourage innovation

to design the right products from the

best materials and secure critical

supply)?

2. How do you sustain margins

and operating results in the face

of increased global competition?

3. What factors should you consider

when expanding globally?

4. Which supply markets and

categories should you target?

Are you sourcing from the right

locations to be cost competitive?

5. How do you preserve value while

minimizing costs?

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Stakeholder confidence To see the full list of self-assessment questions, download the full report

Regulation and compliance is listed as the seventh-biggest risk facing

companies and remain a concern to the next few years.

Expansion of government’s role is cited as the sixth-biggest risk.

This is driven in part by tightening regulation.

Risks

Opportunities

Self-assessment questions Stakeholder confidence covers:

Excellence in investor relations is ranked seventh, highlighting the

importance of a broad funding base in today’s relatively tight credit

world.

Leveraging CSR and public confidence is ranked eighth overall and

expected to rise to seventh in the coming years. This is especially true

in developing markets.

Investing in cleantech is placed as the ninth opportunity, emphasizing

that institutional investors now demand greater transparency.

1. How do you develop insights into

the possible impacts of shifts in

government regulations on business

strategy and performance?

2. How do you evaluate the way in

which new regulations or laws can

create new markets for specialized

products or services?

3. What capability do you have

in scenario analysis and taking pre-

emptive action to offset any impact

of changes in a government’s role?

4. With whom do you collaborate

to track changing regulations and

seek compliance assistance?

5. How do you reduce your exposure

to share-price volatility?

6. How do you identify cleantech

investment opportunities that

are supported by proprietary

technologies and multiple

partnerships to minimize risk?

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Customer reach To see the full list of self-assessment questions, download the full report

Emerging technologies are still narrowly considered a top 10 risk,

ranked ninth, down from fifth in 2011: they remain a worry for many

firms due to the disruptive capabilities of ongoing technological

development.

Risks

Opportunities

Self-assessment questions Customer reach covers:

Innovation in products, services and operations is ranked in first

place. This is especially important for finding unexploited gaps in

existing markets, but it is also becoming increasingly important within

major rapid-growth markets.

Emerging market demand growth is the second-biggest overall

opportunity.

New marketing channels ranked fourth, a sharp increase from 2011,

as companies see increasing opportunities in this area.

1. How do you effectively evaluate

rapid-growth markets to ensure

that they fit with your competencies

and strategic objectives?

2. How is innovation embedded

in your business model?

3. How can you work more effectively

with channel partners to ensure

the value proposition is easy for the

market to understand?

4. How are you tracking t he risk

and adoption rates of emerging

technologies? Which ones are likely

to have limited value or high

deployment risk?

5. How do you assess changes

in factors such as adoption of IT,

workforce demographics and

the rise of social media in order

to identify which emerging

technologies are having the

most impact?

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Operational agility To see the full list of self-assessment questions, download the full report

Managing talent and skill shortages is a perennial challenge

for those seeking to expand and innovate. This risk fell to fifth overall

from third in 2011.

Risks

Opportunities

Self-assessment questions Operational agility covers:

Investing in processes, tools and training to achieve greater

productivity is cited by executives as the second-biggest opportunity,

ahead of growth in new markets.

Investing in IT is a crucial element of strategy implementation and

overall performance, and is seen as the sixth-greatest opportunity.

Improving execution of strategy across business functions is

considered more important by respondents in mature markets than their

peers in rapid-growth markets. This opportunity is ranked fifth overall.

Global optimization of key functions is a new opportunity on the top

10 list, as companies rethink operations from a global perspective to

help ease the pressure on skills shortages.

1. How do you minimize variability

in your supply chain while

introducing more cost effective

processes and solutions?

2. How do you plan and prepare for

the increased volatility of the market

you operate in?

3. Have you effectively consolidated

and standardized global activities –

including using a shared service

center?

4. How do you ensure you have the

right people with the right skills

in the right roles?

5. How do you ensure you have the

right solutions and integrated

systems and processes in place

to increase collaboration?

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For more information

For more information

and contacts go to

www.ey.com/businesspulse

Please share your feedback businesspulse@ey.com

Ernst & Young

Assurance | Tax | Transactions | Advisory

About Ernst & Young

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advisory services. Worldwide, our 167,000 people are united by our

shared values and an unwavering commitment to quality. We make

a difference by helping our people, our clients and our wider

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about our organization, please visit www.ey.com.

About Ernst & Young's Advisory Services

The relationship between risk and performance improvement is an

increasingly complex and central business challenge, with business

performance directly connected to the recognition and effective

management of risk. Whether your focus is on business

transformation or sustaining achievement, having the right advisors

on your side can make all the difference. Our 25,000 advisory

professionals form one of the broadest global advisory networks of

any professional organization, delivering seasoned multidisciplinary

teams that work with our clients to deliver a powerful and superior

client experience. We use proven, integrated methodologies to help

you achieve your strategic priorities and make improvements that

are sustainable for the longer term. We understand that to achieve

your potential as an organization you require services that respond

to your specific issues, so we bring our broad sector experience and

deep subject matter knowledge to bear in a proactive and objective

way. Above all, we are committed to measuring the gains and

identifying where the strategy is delivering the value your business

needs. It’s how Ernst & Young makes a difference.

© 2013 Ernst & Young

All Rights Reserved

EYG no. AU1454

This publication contains information in summary form and is therefore intended

for general guidance only. It is not intended to be a substitute for detailed

research or the exercise of professional judgment. Neither EYGM Limited nor

any other member of the global Ernst & Young organization can accept any

responsibility for loss occasioned to any person acting or refraining from action

as a result of any material in this publication. On any specific matter, reference

should be made to the appropriate advisor.

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EMEIA MAS 1427.0213