Recession playbook for CEOs

August 16, 2024

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Dramatic financial market volatility may tempt CEOs to dismiss it as a tempest in a teapot.

Market turbulence can feel like a distraction when the sales pipeline is healthy. But the market gyrations can't entirely be dismissed; they may signal the economy is slowing.

Refreshing their recession playbook is a smart CEO move after August’s volatility — just in case the economy rapidly declines. The playbook should go beyond managing costs to support profits and consider options for bold transformational change, including dealmaking during a downturn.

Controlling expenses is often the only reliable lever a CEO and CFO can pull to help meet short-term profit targets in uncertain times. But managing costs can be much more: it’s an opportunity to imbue long-term strategic planning into a core annual decision. Putting modern cost management practices in place now can set the stage for faster growth when the economy rebounds.

Flip the cost-cutting script: 3 questions to help CEOs make a company fit for growth
Reactive cost cutting won’t put your company ahead of the curve. Worse, it can damage long-term growth. CEOs should reorient the organization’s expense management so that costs are seen as an investment in the business.

How focused investment can help drive business growth strategies in turbulent times
"Focused investment” means every dollar deployed works for the company’s strategy and growth agenda. In PwC’s analysis, "focused investment” companies averaged an 18% higher EBITDA margin and a 10% higher enterprise-value-to-revenue multiple compared to their industry peers.

A new, multidimensional playbook for strategic cost management
A new playbook for strategic cost management is emerging. It combines rapidly improving costs with the establishment of capabilities for recurring cost control. The goal? Helping CEOs and CFOs avoid reactionary responses to macroeconomic changes.

A company armed with new business models and revenue streams coming out of a recession isn’t based on luck; the CEO drives and encourages that kind of innovation at all levels of the organization. A transformational leadership style can accomplish that kind of positive change, and it’s a skill that every CEO and C-suite member can hone.

The obsession advantage in transformation
As a leader, do you facilitate collaboration, camaraderie and conviction or instill fear and build barriers? The first set of traits becomes more valuable in a downturn — leadership success depends on energizing trusted lieutenants to translate vision into action, create value for customers and keep employees engaged and productive. Six questions assess the strength of your transformational leadership qualities.

Transformative leadership for extraordinary times
In a world constantly in flux, business growth rests more and more on continuous business reinvention — where a company reimagines what it does and how it functions. Five transformative leadership differentiators are essential to driving and guiding reinvention at all levels of a company.

An economic slowdown is an opportunity for CEOs and COOs to optimize their business portfolio for sustained growth. It impacts valuations, potentially driving down the price of attractive acquisition targets while making marginal businesses less desirable. In our experience, companies that create value in these circumstances tend to display a mindset of continuous business mix transformation, including the use of both acquisitions and divestitures.

Transact to transform
Investors can often be impatient with lagging performance during an evolving business environment. A transaction can more quickly boost financial outcomes than relying on organic change. A CEO’s success in dealmaking comes from understanding market trends and focusing on a cohesive, connected, holistic vision for the future across strategic, operational and financial measures.

Feel the power of portfolio renewal and divestitures
Trying to fix problematic business units can be frustrating for executives, board members and investors. A PwC survey found that 57% of respondents that tried to fix a business unit said the unit’s value deteriorated or stayed the same. Continuously reviewing businesses to determine if you’re their best owner can help avoid that situation, but it’s up to CEOs to lead portfolio management.

Create meaningful business ecosystem strategies
During periods of economic uncertainty, CEOs tend to reconsider partnerships and focus on protecting market share. Counterintuitively, ecosystems can provide better financial outcomes by capturing revenue that might otherwise be left on the table.

What’s your M&A dealmaking identity?
M&A is all about the numbers, right? Wrong. Go beyond the bottom line and take our brief assessment to discover your dealmaking identity. You’ll learn more about your approach to the overlooked factors in deals and how you can make sure you’re capturing value throughout the entire M&A process.

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Recession playbook for CEOs

Dramatic financial market volatility may tempt CEOs to dismiss it as a tempest in a teapot.

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