Greg Case: How Business Leaders Are Preparing for the “Great Volatility”
January 4, 2023
As 2023 begins, many of the risks and challenges of 2022 remain. Organizations continue to address the effects of the COVID-19 pandemic, global economic uncertainty and workforce changes. Aon Global CEO Greg Case examines what steps business leaders should take to confront ongoing volatility and plan for business growth and resilience.
Over the past several years, the world has been experiencing increasing levels of volatility, and the growing awareness that risks once thought on the horizon — like climate change, the health-wealth gap, and cyber threats — are now here on our doorstep.
Recently, the world’s leading economists gathered in Jackson Hole, Wyoming, to discuss the extraordinary economic volatility of the last few years, including how this is likely to persist for many years to come. A member of the European Central Bank Board dubbed our current period the “Great Volatility” — contrasting it with what has been known as the “Great Moderation,” a period defined by consistent growth and relative stability.
Given this changing paradigm, the importance of making better decisions has never been greater.
What we have heard from our clients and have seen through our research is that the COVID-19 pandemic has forever changed the way leaders think about volatility and confront risk. So, while we all may be facing the challenges posed by this era of “Great Volatility,” there is also great opportunity.
We recently conducted our third annual survey of 800 C-suite and senior executives from around the world to identify the risks they are most concerned about and how prepared they are to turn that risk into opportunity.
Four in five leaders we surveyed expect a recession, but only 35 percent feel very prepared for one. We know that prepared leaders are essential to protecting an organization’s resilience and finding growth opportunities in the face of heightened volatility. What sets the leaders who are very prepared for an economic slowdown apart? And, just as importantly, what actions can leaders take to make better decisions that protect and grow their organizations in this environment?
Our research revealed that leaders who consider themselves prepared to weather these challenges share three fundamental characteristics.
1. Embracing risk presents a challenge and an opportunity.
Data shows that the most equipped leaders today view taking risks as an engine of growth. Sixty-two percent of the leaders we surveyed agree that their company’s appetite to address risk has increased in response to the current macroeconomic conditions.
This era of “Great Volatility” has changed how the best leaders approach risk and understand the true interconnectedness of risks today — in fact, 61 percent of leaders agree that risks are interconnected. Most executives don’t see the pandemic as a one-time event, but rather as a catalyst that exposed a myriad of new risks and strengthened their crisis response as leaders. In fact, the majority (73 percent) of the best-prepared leaders strongly believe that the pandemic prepared them to respond quickly to emerging interconnected risks, giving them added confidence as they head into a recession.
2. Building workforce resilience and a strong talent strategy is critical.
Talent recruitment and retention remains a top priority and challenge for C-suite and senior executives with the threat of a recession looming. How leaders make decisions around talent all comes down to the leaders’ appetite for risk. Our research showed that confident business leaders are resisting the impulse to slow hiring or delay long-term investments. Compared to other, less prepared leaders, almost double the percentage of very prepared leaders are spending a “great deal” of time on attracting and retaining top executive talent (42 percent vs. 22 percent, respectively). These leaders have a firm understanding that top talent is necessary to foster to build a resilient workforce for the future, regardless of market conditions.
Investing in the wellbeing of your workforce is just as critical as having the right people in place. It is why at Aon we created the position of Chief Wellbeing Officer in 2022, to not only drive our wellbeing and workforce resilience strategies for clients, but to also focus on wellbeing efforts for our own colleagues. Our research shows that 34 percent of prepared leaders say that stronger internal junior/mid-level resilience is helpful in responding to increased volatility, compared to 28 percent of other leaders.
3. Don’t hit the brakes on long-term investment — or ignore long-tail risks.
Business leaders are facing a long list of near-term risks like inflation and a potential recession. The best leaders are taking immediate action to respond to the economic slowdown, but they are not letting that get in the way of investing for long-term growth and managing long-term risks.
The way leaders are managing climate change risk is a good example of where prepared leaders are investing for the long term. Leaders who are very prepared for economic volatility are looking ahead and spending more relative time on longer-term risks like climate change.
The reality is that climate risk is not a probability, it is a certainty — and severe weather is becoming more and more a part of everyday life. It is the ultimate example of the interconnectivity of risk. The strongest leaders are looking at the challenges caused by climate change beyond regulatory compliance and reputation management and are digging into the related risks where the impact is immediate and measurable — business interruption, material scarcity, supply chain issues and reputation damage. And we are seeing that the leaders who are investing more time and resources in addressing this challenge are better prepared as a result.
There is an important and necessary path forward leaders can take to prepare for the challenges ahead in an undoubtedly more complex and risky future. And they can do so in a way that creates greater opportunity for their organization, and in the case of climate change, benefits society as a whole.
For more insights on navigating new forms of volatility, visit aon.com.