Navigating an uncertain world

BUSINESS leaders across the globe are regularly asking themselves some form of the following four questions:

• How do I navigate today’s environment of extraordinary uncertainty?
• How likely are inflation and recession in major markets?
• What scenarios should I therefore be planning for?
• Amid all this uncertainty, what are long-term themes and opportunities I should invest in?

As the pre-pandemic world fades, executives are left to navigate what some are calling a “polycrisis” – a set of smaller crises, both geopolitical and macroeconomic, that together add up to more than the sum of their parts. Covid. Supply chain insecurity. War in Europe. Energy transition. Low consumer and business confidence. Trying to isolate the impact of any one of them is like attempting to pull ingredients out of a baked cake.

Karen Harris, managing director of Bain & Company’s Macro Trends Group, argues that in an era of such extreme uncertainty, planning for a single high-probability scenario is a mistake. Optionality is key, and that calls for considering a wide range of scenarios, including outcomes that are extreme but plausible. Prediction, adaptation, and resilience are all required.