Ireland remains the fastest growing EU economy for the fourth year in a row. However, PwC’s recent survey of Ireland’s finance leaders highlights caution over the prospects of our economy in the year ahead. While growth is on the agenda, many are struggling with cost competitiveness and maintaining the bottom line. For example, 72% believe that costs will increase in the year ahead while just 44% expect profits to rise. Clearly finding new profitable growth opportunities will be critical in the year ahead.
This is even more important as a small, open economy dependent on international markets. Commentators are suggesting global growth will slow and uncertainties around Brexit, potential for global trade wars and the changing tax landscape are likely to disrupt Irish businesses as we move forward. In these more uncertain times, it is important that businesses remain resilient, be ready for shocks and manage the challenges that are within their control.
There are some key actions for Irish businesses to get right to continue to be fit and healthy in this changing environment:
1. Intensify plans for no-deal Brexit: Over two-thirds (68%) of Irish finance leaders reported to either not being prepared or not having made extensive plans for the consequences of Brexit. With continuing political uncertainty in the UK, the risk of Brexit without a deal remains and would seriously disrupt trade between Ireland and the UK. We advise businesses to step-up their plans for a no-deal Brexit and the worst case scenario while hoping for a better outcome. Doing nothing is not really an option.
2. Innovate for growth. Look for opportunities for new markets and new products or adapt the products you have for new markets. While expanding into new markets needs investment and time, in the context of Brexit, there may be demand for your products in places you never thought of with little adaption.
3. Embrace constant disruption, keeping a firm eye on costs. Disruption looks like it’s here to stay. Organisations that have flexible and nimble operating models will be the winners. It serves any company well to anticipate and prepare for disruption. Our research highlights that top performing companies take disruption more seriously than their peers. Set your priorities and have strategies that can cope with change. Use digital to review core business models and redefine operations.
4. Prepare for the future of work: 68% of Ireland’s finance leaders are of the view that automation will shrink people numbers in their finance function in the next three years. While the majority of businesses recognise which capabilities are important for their future success, many are failing to take the actions needed today to build or even introduce them into their organisations. These actions include using data analytics to make workforce decisions and creating a compelling work experience for employees. This gap will put these organisations at risk in the future when it comes to attracting, developing and retaining the talent they need to succeed.
5. Seize the opportunities of automation and artificial intelligence. Over half (57%) of Ireland’s finance leaders said that automation/artificial intelligence will have a significant or very significant impact on their businesses in the next three years. Yet less than one in five (16%) admitted to being ready to seize the opportunities. It will be really important that organisations have the tools and skills to embed emerging technologies into their businesses to create operational efficiencies and enhance customer experience.
6.Understand your customers: Our experience shows that changing consumer habits remains a key challenge for businesses. Consumers are complex, conflicted and highly segmented by age, bringing consumer markets to a turning point. Consumer habits are being reshaped and replaced at an almost frantic pace – fueled by mobile and artificial intelligence - and businesses who want to capitalise on them will have to keep up and keep ahead. The winners will be the businesses that most successfully anticipate these new habits and capitalise on the new trends to improve their customers' experiences.
7.Recognise the value of culture: Organisational culture continues to rise as an important agenda item for business leaders. A recent PwC global survey revealed that 65% of global business leaders viewed culture as more important to performance than their organisation’s operating model. The research further highlighted that an organisation’s culture is key in attracting top talent. Focus on adopting the few critical behaviours that matter most - tangible actions, for example such as to enhancing collaboration or teamwork, that if practiced more often at every level, can help shift the culture.
Notwithstanding the external risks, Ireland’s FDI flows continue, we have a strong export sector, robust job growth and low inflation. With a strong international and domestic economy, a highly talented skills base and, as the only English speaking country post-Brexit, Ireland is in a good position to manage any global slowdown. However, we need to continue to work hard on our infrastructural deficits including housing, watch our competitiveness, including wage inflation, and ensure that we are as prepared as we can be for a possible no-deal Brexit.
PwC 2018 Irish CFO survey: www.pwc.ie
PwC 2018 Future of Work report: www.pwc.com
PwC 2018 Global Culture Survey: www.strategyand.pwc.com