Key contacts
EY | Assurance | Tax | Transactions | Advisory
Jon Morris
+ 44 20 7951 9869
[email protected]
Amanda Blackhall O’Sullivan
+ 44 20 7951 7847
[email protected]
Richard Harrison
+44 20 7951 7295 [email protected]
Phil Dunne
+44 20 7951 7628
[email protected]
About EY
EY is a global leader in assurance, tax, transaction and advisory services.
The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop
outstanding leaders who team to deliver on our promises to all of
our stakeholders. In so doing, we play a critical role in building a better
working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of
the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information
about our organization, please visit ey.com.
Ernst & Young LLP
The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC300001 and is a member firm of Ernst & Young Global Limited.
Ernst & Young LLP, 1 More London Place, London, SE1 2AF.
© 2015 Ernst & Young LLP. Published in the UK. All Rights Reserved.
ED None
Gary Turner
+44 20 795 13311
[email protected]
Chris Lowe
+44 20 7951 0826
[email protected]
1592526.indd (UK) 01/15. Artwork by Creative Services Group Design.
In line with EY’s commitment to minimise its impact on the environment, this document
has been printed on paper with a high recycled content.
Information in this publication is intended to provide only a general outline of the subjects covered.
It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be
used in place of professional advice. Ernst & Young LLP accepts no responsibility for any loss arising from any action taken or not taken by anyone using this material.
ey.com/uk
Andrew Wollaston
+44 20 7951 9944
[email protected]
Tom Jack
+44 161 333 2635
[email protected]
For related enquiries contact:
[email protected]
Business Resilience
Actively adapting
to preserve value
5
Economic uncertainty
Regulatory
scrutiny
Technological
innovation
Aggressive capital
Market
uncertainty
► Impact of increasing
regulation and
intervention from
regulators and
governments
► Rapidly changing
landscape of winners
and losers driven by
disruptive technology,
changing consumer
behaviours and habits
and globalisation
► Shareholder activism is on the rise in Europe,
with over $100bn of
capital to invest
► Innovation and new
market entrants
impacting existing
business models
► Traditional and
alternative capital
providers have huge
amounts of capital
ready to invest in high
yield opportunities
► Customer trends and
behaviours continue
to drive rapid market
transformations
► Economic uncertainty
and geopolitical risk in a
number of markets
► Political uncertainty and fiscal austerity constraining growth
across Europe
► Volatile commodity
prices and exchange
rates creating a
challenging business
environment
► Revised 2014 Corporate Governance Code requiring companies
to form a robust
assessment of the
risks threatening their
business model over
an extended period
► A connected economy
with multiple
information channels
means business
situations spread
quickly and information
is difficult to contain
► Capital is targeting
undervalued businesses
and capital inefficiency, including excess
fixed assets and working capital
► A clear vision for the business,
supported by market trends and
organisational capabilities
► Operational risks, e.g., key supplier,
input prices, IT and disruptive
innovation are understood
and managed
► Absence of clear strategy or significant changes in existing strategy
► Profit warnings and earnings underperformance versus peers
► Market concerns on credibility of corporate strategy
► Operating cash flow negative or poor cash conversion
► Credible management
r
lde
ho nce
e
► Active engagement and alignment with
equity, financial and other stakeholders
Market resilience
► Revenue risks, e.g., customer, product,
market, competition and pricing are
understood and managed
► Market and trading data regularly used to align customer facing activity
► Clear strategy regarding disruptive
technologies
Op
e
res ra
ili
Business
resilience
en
ke
t
ce
it
en al
ce
4
Operations
tify
en
Id
3
Stakeholders
l
na
tio ce
en
2
Operational resilience
r
Ma li
i
res
1
What are the warning signs?
Stakeholder resilience
Sta
k
res e
ili
The 5 big issues
Active management is critical to adapt in
a changing environment
Adapt
There has never been a greater need for a
company to assess its own business resilience
p
Ca ili
e
r s
g
M iti
a te
► Stakeholders disunited
► Commodity or other input price risk
► Sudden or unexplained departure of CEO or CFO
► Over-dependence on key supplier or technology
► Operational capabilities built
to deliver business vision, with
safeguards against challenges to the
operational footprint
► Threat or emergence of shareholder activism
► IT is not effectively integrated and fails to support
the business
Capital resilience
Markets
Capital
► Flexible long term financing and achievable debt covenants supported
by robust cash forecasts
► Loss of market share, revenue deteriorating or growth rate behind peers
► Risk of, or actual, covenant breach or missed
interest payment
► Over-dependence on major market or customer
► Refinancing required within 24 months
► Flexibility in the cost base to be able to
react rapidly to change
► Strong working capital performance — building cash balances and
capital efficiency
► Robust management of legacy
liabilities
► Failed IPO or exit
► Market price pressure
► Excess or deficient working capital
► Inability to pass on input price changes
► Core lenders selling debt or debt trading at discount
► Disruptive technologies, new market entrants or
competitor behaviour
► Lack of forward visibility re cash or cash targets
► Regulatory change
Business resilience
► Cumbersome organisational structure
► Return on capital employed indicates excess capital