Business leaders in Davos say they are increasingly turning to scenario planning to safeguard supply chains and lessen the potential hit from unexpected geopolitical crises.
Many CEOs and executives told Reuters they foresee an upbeat U.S. economy in 2024, but are concerned about China and Europe, and the impact of unexpected global shocks on inflation.
The World Economic Forum (WEF) this year took place against the backdrop of conflicts in the Middle East and Ukraine, as well as impending elections in dozens of countries.
"Just when governments and companies get their arms around how to deal with one flare-up, another emerges," said David Garfield, Global Head of Industries, adding a big issue at board level and executive leadership level is scenario planning.
"Sophisticated companies are saying: 'What happens if raw materials for critical production cuts off?" Garfield added.
With supply chain disruptions caused by the pandemic barely in their rear-view mirrors, CEOs are now grappling with the impact of Houthi militant attacks in the Red Sea.
Many described the global situation as unusually worrisome.
"In terms of scenario planning, the last few years has upped the ante," said Ishaan Seth, Senior Partner at global consulting group McKinsey. "It is not about forecasting the future but it is about having a perspective on how the world may play out. The key is: How do you pivot an organization quickly?"
An Alix Partners survey showed 68% of CEOs report U.S.-China tensions are causing them to adjust their strategy, while 66% worry about the U.S. presidential election.
"The (board level) concerns are geopolitics and elections around the world," said BCG Global Chair Rich Lesser. "When there is so much uncertainty, CEOs and boards ask 'What can I do to be better prepared,'" he added.
Some have been looking to diversify supply chains.
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