McKinsey Quarterly 2023 Number 1

specific nature of resilience levers and their relative importance is also a function of the industry a company is operating in.

Foresight: Moving beyond targeted responses As companies weather the storms of today, they must also anticipate and prepare for larger and possibly stranger events to come. To anticipate and respond to crises and oppor tunities, scenario analysis has proven to be the most effective tool, as long as it is supported - by the required data and state-of-the-art analytics. Scenario narratives should be accord ingly developed, stress-tested in analytics-based simulations, and connected to early-warning - systems based on key indicators. Crucial variables (including, for example, the evolution of semiconductor prices, energy costs, and the availability of critical raw materials) must be factored into the scenarios. Management decisions have to be based on more than purely qualitative discussions. To understand the impact of hypothesized scenario inputs on financial outcomes (such as EBITDA, for example), an analytics-based approach can produce a reasonably accurate data-driven fact base in a timely manner. That is the approach taken by financial institutions in response to the stringent regulation (such as stress-testing requirements) set off by the financial crisis of the early 2000s. Companies can take the approach as a starting point, widening the scope of the scenarios, thinking outside the box on possible inputs, and increasing the depth of analytics engines across a large number of industries. It is crucial to embed such an approach—data- and analytics-based scenarios and stress testing—into the ongoing strategic-planning process and management dialogue. This process must also be revisited regularly and assumptions and scenarios adjusted to the

Q1 2023 Print Euro CEO Exhibit 3 of 3

Exhibit 3 The key levers of a resilient response lie across six enterprise dimensions.

• Profitability, pricing, and costs • Liquidity and leverage • Treasury, including hedging • Tax, including regulation • Risk management

• Business continuity management and production stability • Third-party and supply chain management • Quality standards • Flexible production • IT strategy and delivery, including cloud • Cybersecurity and information security • Data and analytics • Stakeholder management and communications • Brand and reputation • Environmental, social, and governance alignment

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A d

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Financial resilience

Operational resilience

• Strategy and

workforce planning

Digital and technological resilience

Resilient growth

Organizational resilience

• Structure • Processes • People and talent

Business model and innovation capabilities

Brand, reputation, and climate resilience

• Market structure and position • Products and customer needs • Business model adaptability • Innovation • Ecosystems and alliances

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

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