Enterprise Volatility At Lowest Point In Three Years As Some Industries’ Adaptation Picks Up, Says Genpact Research Institute
Volatility and Adaptation Index shows life sciences and consumer goods most impacted; restructurings sharply rise in fourth quarter of 2015
NEW YORK, March 22, 2016 – The Genpact Research Institute today announced the latest findings of its Volatility and Adaptation Index (VAI) which shows that enterprises continued to face lower volatility levels during 2015, as compared to the highs from 2013.
The VAI is based on data from a three-year ongoing study of more than 800 companies across multiple industries that monitors and analyzes large data sets for volatility events, such as changes in the industry, regulatory landscape, or financial environment, as well as related adaptation measures, including acquisitions or geographic expansions, corporate restructuring, and leadership changes. The VAI examines data over 36 months, through January 31, 2016.
Despite a downward trend, which is the lowest in three years, 42 percent of companies monitored still reported at least one volatility or adaptation event in 2015. However, 28 percent showed fewer indicators when compared to the trailing 12-month average.
Results reveal a disconnect between enterprises’ volatility and adaptation responses, and uncertainty and risk expectations highlighted by many economists and reflected in today’s jittery capital markets. Although the global economy remains somewhat unstable, the index’s continued decline indicates that volatility at companies does not always correlate to marketplace fears.
Leadership changes, financial pressures, and mergers and acquisitions (M&A) activity accounted for much of the changes in the 2015 results:
- Financial pressures more than doubled in 2015 compared to 2014.
- M&A activity increased in 2015 by 15 percent compared to 2014.
- Corporate restructurings declined by 80 percent year over year; however, increased 46 percent during the last three months of 2015.
Industry Triggers Vary
Triggers of enterprise volatility and resulting adaptation responses vary sharply across industries, with consumer goods and life sciences showing the sharpest increases. Sector findings include:
- Financial conditions and leadership changes are the top two drivers of enterprise volatility and adaptation for consumer goods companies.
- Leadership churn in life sciences rose dramatically compared to 2014.
- Retail banking and capital markets remain volatile but much less so than prior years; financial conditions, regulatory pressures, and leadership changes are the top drivers.
- High tech and manufacturing had the largest reduction in volatility and adaptation.
“Enterprise transformation typically occurs when the economy is neither too weak nor too strong. In the former, companies freeze into short-term reaction. In the latter, many simply lack the incentive,” said Gianni Giacomelli, senior vice president and head of the Genpact Research Institute. “The current situation is peculiar in that the macro outlook is bleak, and technology’s rate of change is the strongest in many years; however, we don’t see many businesses announcing big changes to leap ahead to prepare for disruption. One possibility is that most C-suite executives still prefer tried and tested actions, like returning cash to shareholders, instead of embarking more wholeheartedly on digital transformation.”
The Genpact Research Institute is the research arm of Genpact (NYSE: G), a global leader in digitally-powered business process management and services, which also corroborates the data with in-depth analysis of its client engagements in the industries studied.The 2015 full report is available at http://www.genpact.com/docs/default-source/resource-/genpact-volatility-and-adaptation-index-vai-2015_report.