McKinsey Quarterly 2023 Number 1

The research indicated that companies that win through resilience do three things well in a disrupted environment:

• They make faster and harder moves in productivity, preserving growth capacity.

• They create more operational and financial optionality in their balance sheets, adjusting leverage or cleaning legacies.

• They act swiftly on divestments in the downturn phase of disruption and on acquisitions at the inflection point of recovery.

Not only do leading companies do these three things well, they also do them at the most decisive time for their future well-being. They react in the downturn when it matters most and are therefore able to open an early lead in comparison with peers that can be widened significantly during the recovery and growth period. Recovery and growth periods following downturns are often longer than the actual downturn, so leading compa nies are well positioned to outperform the others in the long run. A turn in the cycle is - a moment that requires true leadership to embark on either offense or defense. But the best-performing companies don’t wait for that turn to finally reveal itself—or not. They act with intentionality and courage in the face of profound uncertainty about the macroeconomy.

Q1 2023 Print Euro CEO Exhibit 2 of 3

Exhibit 2 Resilient companies play defense and offense simultaneously.

TSR of 1,140 global companies, 1 2007–09 financial crisis, index (2007 = 100)

400

Winners through resilience 2 S&P 500

Downturn

Recovery

Growth

300

Bottom quintile companies

159

200

Gap: 15 basis points

78

100

0

2007

2009

2011

2013

2015

2017

1 Calculated as average of subsector median performance. Includes 1,140 companies (excludes financial institutions groups and real-estate investment trusts). 2 Defined as top geometric mean TSR quintile, by sector. Source: MSCI; Corporate Performance Analytics by McKinsey; McKinsey analysis

A defining moment: How Europe’s CEOs can build resilience to grow in today’s economic maelstrom

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