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(Feb 1, 2013 – Jan 31, 2016)
www.genpact.com/home/volatility-adaptation-index
VOLATILITY AND ADAPTATION INDEX (VAI)
Monitor signals in large companies, anticipate structural changes – and provide leaders the intelligence to drive agility
2 © 2016 Copyright Genpact. All Rights Reserved.
Introduction: Genpact Volatility and Adaptation Index (VAI) 03
Why Volatility and Adaptation Index (VAI)? 03
Methodology 04
Section 1: Overall insights 06
Recurring themes for volatility and adaptation 07
Main drivers of VAI 09
Section 2: Industry specific analysis 12
Comparison across industries 13
3 years historical trend across industries 13
VAI across industries (last 3 months) 14
Comparisons of 2015 (Feb’15-Jan’16) vs. 2014 (Feb’14-Jan’15) 15
Retail banking 20
Commercial banking 21
Capital markets 22
Insurance 23
Healthcare 24
Life sciences 25
Consumer goods 26
Manufacturing 27
High tech 28
Contents
3 © 2016 Copyright Genpact. All Rights Reserved.
• Unprecedented economic volatility leads
global companies to adapt, often through
transformed business operations
• Events like profit warnings, cost-cutting
initiatives, M&A, change of senior leadership
signal volatility, and adaptation measures
• Genpact Volatility and Adaptation Index (VAI)
is a directional measure based on monitoring
of large data sets across a sample of over
800 companies
• It provides senior leaders with the
intelligence to inform structural decisions and
facilitate organizational alignment
Objective
WHY VOLATILITY AND ADAPTATION INDEX (VAI)? INSIGHT INTO GLOBAL ENTERPRISES’ ENVIRONMENT AND STRUCTURAL MOVES
4 © 2016 Copyright Genpact. All Rights Reserved.
VOLATILITY AND ADAPTATION INDEX - SAMPLE
Methodology
Heathcare
Others
High tech
Manufacturing
Life sciences
Insurance
Consumer goods
Capital markets
Retail banking
Commercial banking
9%
5% 7%
10%
11%
21%
9%
12%
7%
9%
Europe Asia-Pacific and Japan
North America
63%
16% 21%
By Industry By Geography
5 © 2016 Copyright Genpact. All Rights Reserved.
Methodology
VOLATILITY AND ADAPTATION INDEX (VAI) - METHODOLOGY
800 global
companies
with sizeable
operations
63% North
America
21% Europe
16% Asia
Pacific and
Japan
Identified
“events” that
signal current
or future
volatility
correlated to
changes in
operating
strategy-
restructuring,
change in
leadership,
regulatory etc.
Monitoring of
online media,
newswires,
publications,
financial
statements,
databases and
social media to
screen content
Analytics to
filter the news,
attribute
relevance and
salience
Volatility and
Adaptation
Index =
[% of companies
displaying
events]
X
[average number
of volatility
events per
company]
• This release covers 36 months with data updated till Jan 31, 2016
• Events include both macro industry-wide events such as regulations and company
level events like financial underperformance or cost cutting
• Industries - banking, insurance, capital markets, healthcare, life sciences,
manufacturing, consumer goods, etc.
Quarterly Index Analytics Definition
OVERALL INSIGHTS
SECTION 1
7 © 2016 Copyright Genpact. All Rights Reserved.
ENTERPRISE VOLATILITY CONTINUES TO MODERATE
Executive summary
TIME FOR CEOS’ ACTION
Insights Implications for C-suite
• Total index for 2015* lower than
2014#average levels
• Financial pressures and mergers and
acquisitions increase; fewer companies
engaged in restructuring activities
• Retail banking and consumer goods
report the highest VAI in 2015 driven by
leadership change and financial pressures
• Largest reduction in VAI for high tech
and manufacturing
• Results corroborated by Genpact’s own
operational measurements e.g.
mortgage operations in banks; consumer
goods companies’ keen interest in
operations transformation services
• Future still uncertain, and temporary
stability is a good time to prepare
• Heed agility imperative: comparative speed of
adaptation might determine success against
competitors and has implications for
shareholders as performance is scrutinized
• Enhance ability to change enterprise-wide
direction fast: speed of strategy formation and
organizational alignment can be shortened by
• Observing practices adopted by early
movers-some monitored by VAI
• Creating a burning platform internally
by communicating those competitors’
moves
• Utilizing lean-management principles
to: align strategy with execution; sustain
the pace of change by discovering better
ways of working and enabling people to
contribute fully; generate material impact
by delivering value efficiently to
customers
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
8 © 2016 Copyright Genpact. All Rights Reserved.
9 © 2016 Copyright Genpact. All Rights Reserved.
RESTRUCTURING UP, FINANCIAL PRESSURES DOWN IN THE LAST THREE MONTHS COMPARED TO 2015 TREND
Overview ► Main drivers ► Last 3 months (Nov’15–Jan’16) vs. 2015 (Feb’15-Jan’16) V
ola
tili
ty a
nd
Ad
ap
tati
on
In
de
x
Financial pressures
reduced in the last 3
months compared to the
2015 average trend
Restructuring activity
increased in last 3
months compared to the
2015 average trend
M&A activity reduced in
the last 3 months
compared to the 2015
average trend
ALL INDUSTRIES
Nov’15– Jan‘16
Ove
rall
Ind
us
try,
reg
ula
tory
or
ge
og
rap
hic
ch
an
ge
Fin
an
cia
l
co
nd
itio
n
Res
tru
ctu
rin
g
Ac
qu
isit
ion
or
geo
gra
ph
ic
ex
pan
sio
n
Lea
ders
hip
ch
an
ge
Volatility events
Adaptation responses
-59%
Nov’15-
Jan’16
2015
+46%
Nov’15-
Jan’16
2015
-71%
Nov’15-
Jan’16
2015
10 © 2016 Copyright Genpact. All Rights Reserved.
LEADERSHIP CHANGES, FINANCIAL PRESSURES AND M&AS ACCOUNT FOR MUCH OF VAI IN 2015
Overview ► Main drivers ► 2015 (Feb’15-Jan’16) vs. 2014 (Feb’14–Jan’15) V
ola
tili
ty a
nd
Ad
ap
tati
on
In
de
x
Financial pressures
increased in 2015
compared to 2014
Restructuring reduced
in 2015 compared to
2014
M&A activity increased
further in 2015
compared to 2014
ALL INDUSTRIES
Feb’15– Jan‘16
Ove
rall
Ind
us
try,
reg
ula
tory
or
ge
og
rap
hic
ch
an
ge
Fin
an
cia
l
co
nd
itio
n
Res
tru
ctu
rin
g
Ac
qu
isit
ion
or
geo
gra
ph
ic
ex
pan
sio
n
Lea
ders
hip
ch
an
ge
Volatility events
Adaptation responses
2014#
-80%
2015*
2014#
2015*
+15%
2014#
+113%
2015*
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
11 © 2016 Copyright Genpact. All Rights Reserved.
HIGHER ADAPTATION AMIDST FALLING VOLATILTY IN 2015
Overview ► Main drivers ► 3 year trend (Feb’13–Jan’16) V
ola
tility
an
d A
dap
tati
on
In
dex
ALL INDUSTRIES
Feb’13–Jan‘16 Adaptation responses Volatility events
34
22
43
39
19 21 21
25 25 27
31
25
13
24
30
Financial condition
Industry, regulatory or geography changes
Acquisition or geographical expansion
Leadership change
Restructuring
INDUSTRY SPECIFIC ANALYSIS
SECTION 2
13 © 2016 Copyright Genpact. All Rights Reserved.
COMMERCIAL BANKING AND CAPITAL MARKETS RECORD THE MAXIMUM INCREASE IN VOLATILITY AND ADAPTATION
Industry comparison ► 3 year trend (Feb’13–Jan’16)
80
60
40
20
ALL INDUSTRIES
Feb’13–Jan’16
Vo
lati
lity
an
d A
dap
tati
on
In
dex
Capital markets
Retail banking
Commercial banking
Healthcare
Consumer goods
Manufacturing
Life sciences
Insurance
High tech
Feb’14– Jan’15 Feb’13–Jan’14 Feb’15–Jan’16
14 © 2016 Copyright Genpact. All Rights Reserved.
HIGHEST LEVELS OF VOLATILITY AND ADAPTATION IN RETAIL BANKING, FOLLOWED BY CONSUMER GOODS IN 2015
Industry comparison ► 2015 (Feb’15–Jan’16)
24
2
1316
19
39
4851
5456
All
Ind
ustr
ies
Fe
b’1
5-
Ja
n’1
6
Hig
h te
ch
Insu
rance
Ma
nu
factu
rin
g
He
alth
ca
re
Co
mm
erc
ial b
an
kin
g
Ca
pita
l m
ark
ets
Life
scie
nce
s
Co
nsu
me
r g
oo
ds
Re
tail
ba
nkin
g
Feb’15–Jan‘16 Retail banking showed highest volatility and adaptation
index between Feb’15-Jan’16 (explained by financial
conditions, regulatory and leadership changes)
15 © 2016 Copyright Genpact. All Rights Reserved.
HIGHEST LEVELS OF VOLATILITY AND ADAPTATION IN CONSUMER GOODS IN THE LAST 3 MONTHS
Industry comparison ► Last 3 months (Nov’15–Jan’16)
24
13
225
10
1416
23
30
47
Re
tail
ba
nkin
g
Ca
pita
l m
ark
ets
All
Ind
ustr
ies
Fe
b’1
5-
Ja
n’1
6
Ma
nu
factu
rin
g
Insu
rance
Life
scie
nce
s
Co
nsu
me
r g
oo
ds
Hig
h t
ech
All
Ind
ustr
ies
No
v’1
5-
Ja
n’1
6
He
alth
ca
re
Co
mm
erc
ial b
an
kin
g
Nov’15–Jan‘16
Consumer goods showed highest volatility and adaptation
between Nov’15-Jan’16 (explained by financial conditions,
regulatory and leadership changes)
16 © 2016 Copyright Genpact. All Rights Reserved.
Retail
banking
LEADERSHIP CHANGE FOREMOST ADAPTATION RESPONSE; FINANCIAL PRESSURE KEY VOLATILITY TRIGGER
Industry comparison ► 2015 (Feb’15–Jan’16)
Life
sciences
Consumer
goods
Overall
Index
Number of
events
% of
companies
impacted Main volatility themes
1. Leadership change
2. Financial condition
3. Restructuring
1. Financial condition
2. Leadership change
3. M&A
1. Financial condition
2. Leadership change
3. Restructuring
Feb'15-Jan'16
17 © 2016 Copyright Genpact. All Rights Reserved.
SHARPEST RISE IN VOLATILITY AND ADAPTATION EVENTS IN LIFE SCIENCES AND CONSUMER GOODS
Industry comparison ► 2015 (Feb’15-Jan’16) vs. 2014 (Feb’14–Jan’15)
% of
companies
impacted
Avg.
number of
volatility events
per company
Retail banking, Consumer goods
High tech
Retail banking, Consumer goods
High tech
Acquisition or expansion
Leadership changes, cost cutting/restructuring
Financial conditions
Vo
lati
lity
an
d A
dap
tati
on
In
de
x
% delta from 2014
0
15
30
45
60
-300 -200 -100 0 100 200 300
Retail banking
Manufacturing
Life sciences
Insurance
High tech
Healthcare
Consumer goods
Commercial banking
Capital markets
Feb'15-Jan'16
18 © 2016 Copyright Genpact. All Rights Reserved.
42% OF COMPANIES REPORTED ATLEAST ONE VOLATILITY OR ADAPTATION EVENT IN 2015
Industry comparison ► 2015 (Feb’15–Jan’16)
10 20 30 40 50 60 70
1.8
1.5
1.2
0.9
0.6
0.3
Avera
ge n
um
ber
of vola
tilit
y e
vents
per
com
pany
% of companies impacted
Healthcare
Q4 2015
Consumer goods
Commercial banking
Retail banking
Capital markets
High tech
2015
Manufacturing
2014
Insurance
Life sciences
Feb’15-Jan’16
19 © 2016 Copyright Genpact. All Rights Reserved.
H L
H
# o
f ev
en
ts p
er
co
mp
an
y
% companies impacted
DETERMINANTS OF VOLATILITY AND ADAPTATION VARY WIDELY BY INDUSTRY
Industry analysis summary ► 2015 (Feb’15–Jan’16)
Retail banking Commercial banking Insurance Consumer goods Capital markets
Life sciences Manufacturing High tech
Adaptation responses
A R L Restructuring/
Cost cutting
Acquisitions or
geo expansion
Leadership
changes
Volatility events
F I Financial
pressures
Industry, regulatory or
geography changes
A
L R
I
F
A
L
R
I F A
L
R I
F
A
L
R
I F
A L
R I
F
A L
R I
F
A L
R I
F A L
R I
F
A L
R
I F
Feb’15-Jan'16
Healthcare
20 © 2016 Copyright Genpact. All Rights Reserved.
19%27%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – RETAIL BANKING
VAI ► Retail banking ► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.30.4
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Financial pressure reduces
Leadership churn reduces
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
77.1
2015
56.3
2014 * #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
25%38%
2015 2014
0.51.0
2015 2014
21 © 2016 Copyright Genpact. All Rights Reserved.
19%29%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – COMMERCIAL BANKING
VAI ► Commercial banking ► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.20.4
2014 2015
20%13%
2014 2015
0.20.1
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Financial stress reduces
M&A activity increases
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
*
48.1
2015
38.9
2014 #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
22 © 2016 Copyright Genpact. All Rights Reserved.
26%23%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – CAPITAL MARKETS
VAI ► Capital markets ► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.40.4
2015 2014
19%32%
2015 2014
0.4
0.8
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Financial pressure increases
Leadership churn decreases
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
61.2
2015
48.1
2014 * #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
23 © 2016 Copyright Genpact. All Rights Reserved.
11%
3%
2014 2015
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – INSURANCE
VAI ► Insurance► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.1
0.0
2015 2014
19%
7%
2015 2014
0.3
0.1
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Financial pressures increases
Leadership churn increases
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
2015
13.2 4.2
2014 * #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
24 © 2016 Copyright Genpact. All Rights Reserved.
2015
18.7
2014
18.1
9%4%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – HEALTHCARE
VAI ► Healthcare ► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.1
0.0
2015 2014
8%13%
Last 3
months
Trailing 12
months avg.
0.10.2
Last 3
months
Trailing 12
months avg.
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
M&A activity increases
Financial pressure reduces
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
* #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
25 © 2016 Copyright Genpact. All Rights Reserved.
2015
51.0
2014
21.5
28%
10%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – LIFE SCIENCES
VAI ► Life sciences► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.5
0.1
2015 2014
15%13%
2015 2014
0.20.2
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Leadership churn increases
Financial pressures increase
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
* #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
26 © 2016 Copyright Genpact. All Rights Reserved.
2015
54.1
2014
32.2
33%
17%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – CONSUMER GOODS
VAI ► Consumer goods► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.4
0.2
2015 2014
20%26%
2015 2014
0.30.3
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Financial pressures increase
Leadership churn increases
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
* #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
27 © 2016 Copyright Genpact. All Rights Reserved.
2015
16.0
2014
21.2
13%8%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – MANUFACTURING
VAI ► Manufacturing ► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.20.1
2015 2014
5%
12%
2015 2014
0.1
0.2
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Financial pressure increases
Restructuring activity reduces
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
* #
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
28 © 2016 Copyright Genpact. All Rights Reserved.
2015
2.3
2014
3.8
5%
1%
2015 2014
Industry, regulatory or geography changes
Financial condition
Acquisition or geographical expansion
Leadership change
Restructuring
VOLATILITY AND ADAPTATION INDEX – HIGH TECH
VAI ► High tech► 2015 (Feb’15-Jan’16) vs. 2014 (Nov’14–Jan’15)
2015* (FEB’15-JAN’16) VS. 2014# (FEB’14-JAN’15)
Ad
ap
tation
Vo
latilit
y
0.1
0.0
2015 2014
2%
10%
2015 2014
0.0
0.1
2015 2014
Vo
lati
lity
an
d A
da
pta
tio
n I
nd
ex
Financial pressures increases
Restructuring activity decreases
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
% companies impacted Avg. no. of volatility
events reported per
quarter per company
#Data covering Feb 1, 2014 to Jan 31, 2015
*Data covering Feb 1, 2015 to Jan 31, 2016
* #
29 © 2016 Copyright Genpact. All Rights Reserved.
About Genpact
Genpact (NYSE: G) stands for “generating business impact.” We are a global leader in digitally-powered business process management and
services. We architect the Lean DigitalSM enterprise through our patented Smart Enterprise Processes (SEPSM) framework that reimagines our
clients’ operating model end-to-end, including the middle and back offices. This creates Intelligent OperationsSM that we help design, transform,
and run. The impact on our clients is a high return on transformation investments through growth, efficiency, and business agility. For two
decades, first as a General Electric division and later as an independent company, we have been passionately serving a few hundred strategic
clients including one-fourth of the Fortune Global 500, and have grown to over 70,000 people in 25 countries, with key offices in New York City.
The resulting business process and industry domain expertise, and experience running complex operations, are a unique heritage and focus
that help us drive the best choices across technology, analytics, and organizational design.
For more information, visit www.genpact.com.
Follow Genpact on Twitter, Facebook, LinkedIn, and YouTube.
© 2016 Copyright Genpact. All Rights Reserved.
Genpact Research Institute
The Genpact Research Institute is a
specialized think tank harnessing the
collective intelligence of Genpact –
as the leading business process
service provider worldwide - its
ecosystem of clients and partners,
and thousands of process operations
experts. Its mission is to advance the
“art of the possible” in our clients’
journey of business transformation
and adoption of advanced operating
models.
www.genpact.com/research-institute
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