Volatility and Adaptation Index (VAI)

Monitor signals in large companies, anticipate structural changes

– and provide leaders the intelligence to drive agility

(Feb 1, 2013 - Oct 31, 2014)

www.genpact.com/home/volatility-adaptation-index

Volatility and Adaptation Index (VAI)

http://www.genpact.com/home/volatility-adaptation-index





PROCESS • ANALYTICS • TECHNOLOGY 2 © 2014 Copyright Genpact. All Rights Reserved. 2

CONTENTS

Introduction: Genpact Volatility and Adaptation Index (VAI) 03

Why Volatility and Adaptation Index (VAI)?.......................................... 03

04 Methodology……………………………………………………................ .

………

……

.

.

.

.

Comparison across industries………………………………………….... 13

18 month historical trend across industries

Comparison of VAI across industries in the last 3 months

Retail banking…………………………………………………………

Commercial banking………………………………………………………

Capital markets………………………………………………………........

Insurance……………………………………………………….................

Life sciences………………………………………………………............

Healthcare………………………………………………………...............

20

21

22

23

24

25

26

27

28

Consumer goods………………………………………………………......

Manufacturing………………………………………………………..........

High tech………………………………………………………..................

Section 1: Overall insights

Recurring themes for volatility and adaptation………………………….

Main drivers of VAI…………………………………………………

Analysis of 3 months covering May-Jul’14

18 month historical trend from Feb’13 to Jul’14

Section 2: Industry specific analysis

06

09

10

12

PROCESS • ANALYTICS • TECHNOLOGY 3 © 2014 Copyright Genpact. All Rights Reserved.

Insight into global enterprises’ environment and structural moves facilitates strategy and organizational alignment

Why volatility and adaptation index (VAI)?

• 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 800 companies

• It provides senior leaders with the intelligence to

inform structural decisions and facilitate

organizational alignment


Volatility and Adaptation Index - sample

Methodology

Heathcare

Others

High Tech

Manufacturing

Life Sciences

Insurance

CPG

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


Volatility and Adaptation Index (VAI) - methodology

780 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 a full trailing year with data updated till October 31, 2014

• 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, CPG, etc.

Quarterly Index Analytics Definition

Methodology

Section 1

Overall insights


Dip in long term trend indicates that operating changes gain momentum as volatility stabilizes. Good time for CEO’s action

Executive Summary

• Total index down in the last 3 months,

compared to trailing 12 months*; less than 40%

companies manifest some volatility and change

• Leadership changes, M&A and financial

conditions accounted for much of VAI; fewer

companies reported industry, regulatory

changes

• Patterns confirmed: adaptation systematically

follows volatility with a 3-6 months time lag

• CPG (leadership changes, restructuring most

widespread), followed by retail banking have

highest VAI in last 3 months

• Largest reduction in VAI for insurance

followed by high tech

• Results corroborated by Genpact’s own

operational measurements e.g. Mortgage

operations in banks; CPG’s 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

* Nov 2013-Oct 2014

Insights Implications for C-suite



Recurring themes for volatility and adaptation*

*Data from Aug’1, 2014 to Oct’ 31, 2014

WORD CLOUD ANALYSIS

Overview ► Main themes ► Aug’14–Oct‘14

ALL INDUSTRIES

Aug’14-Oct‘14


Leadership changes, M&A and financial pressures account for much of VAI

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x

M&A activity has

reduced substantially in

last 3 months compared

to the trailing 12 months

Volatility due to

financial conditions

increased marginally in


to trailing 12 months

Industry, regulatory

changes dipped in the


to trailing 12 months

Overview ► Main drivers ► Aug’14–Oct‘14

ALL INDUSTRIES

Aug’13– Oct‘14

Ove

rall

Ind

us

try,

reg

ula

tory

or

geo

gra

ph

ic

ch

an

ge

Fin

an

cia

l

co

nd

itio

n

Re

str

uc

turi

ng

Lea

ders

hip

ch

an

ge

Ac

qu

isit

ion

or

ge

og

rap

hic

ex

pan

sio

n

Volatility events

Adaptation responses

-57%

Aug’14-

Oct’14

Trailing

12

Months

+13%

Aug’14-

Oct’14

Trailing

12

Months

-55%

Aug’14-

Oct’14

Trailing

12

Months


VAI down compared to trailing 12 months average; volatility inches up from low levels

Overview ► Main drivers ► Historical trend (Feb’13–Oct’14)

V

ola

tility

an

d a

dap

tati

on

in

dex

ALL INDUSTRIES

Feb’13–Oct‘14 Adaptation responses Volatility events

Feb’13–Apr‘13 May’13–Jul'13 Aug’13–Oct‘13 Nov’13–Jan‘14 Feb’14–Apr‘14 May’14–Jul’14 Trailing

12 months

average

30 34 22 43 19 21 39 100%

22

Industry, Regulatory or Geography Changes

Financial Condition

Acquisition or Geographical Expansion

Leadership Change

Restructuring

Aug’14–Oct’14

Section 2

Industry specific analysis


Sharp differences in trend across industries; volatility and adaptation spikes up in CPG and life sciences

Industry comparison ► Historical trends (Feb’13–Oct’14)

120

20

40

80

60

100

High Tech

Capital Markets

Manufacturing

Healthcare

CPG

Life Sciences

Insurance

Commercial banking

Retail banking

ALL INDUSTRIES

Feb’13–Oct‘14

Vo

lati

lity

an

d a

dap

tati

on

in

dex

Feb’13–Apr‘13 May’13–Jul'13 Aug’13–Oct‘13 Nov’13–Jan‘14 Feb’14–Apr‘14 May’14–Jul’14 Aug’14–Oct’14


Industry comparison ► Aug’14– Oct‘14

30

22

02

11

17

24

4243

5455

Ca

pita

l Ma

rke

ts

Co

mm

erc

ial B

an

kin

g

Life

scie

nces

Reta

il Bankin

g

CP

G

Vo

latilit

y a

nd

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ap

tatio

n In

de

x

All In

du

strie

s

No

v’1

3- O

ct’1

4

All In

du

strie

s

Aug’1

4- O

ct’1

4

Insu

rance

Hig

h T

ech

Ma

nu

factu

ring

He

alth

ca

re

Highest levels of volatility and adaptation in CPG followed by retail banking and life sciences

Aug'14-Oct'14

CPG showed highest volatility and adaptation index

between Aug’14-Oct’14 (explained by leadership

change, restructuring and acquisitions)


CPG

CPG and retail banking show most volatility and adaptation; leadership change main trigger across industries

Life Sciences

Retail Banking

Overall

Index

Number of

events

% of

companies

impacted Main volatility themes

1. Leadership change

2. Restructuring

3. Acquisition or geographic

expansion

1. Leadership change

2. Financial conditions

3. Restructuring

1. Acquisition or geographic

expansion

2. Financial conditions

3. Restructuring

Industry comparison ► Aug’14–Oct‘14

Aug'14-Oct'14


Fewer events observed in insurance and high tech in the last quarter; more in CPG and life sciences

% of

companies

impacted

Average

number of

volatility events

per company

CPG, Life sciences

High tech, Insurance

CPG, Life sciences

High tech, Insurance

Sharp increase in volatility events in CPG and life sciences in last 3 months

Acquisition or expansion

Leadership changes, cost cutting/restructuring

Financial conditions

Vo

lati

lity

an

d A

dap

tati

on

In

de

x

% delta from last 12 months average


0

5

10

15

20

25

30

35

40

45

50

55

-150 -600 0 -50 -100 100 50 200 150

Commercial Banking

Retail Banking

Manufacturing

Healthcare

CPG

Lifesciences

Capital Markets

High Tech

Aug'14-Oct'14

Insurance


Two out of every five companies reported one or more volatility or adaptation events in the last quarter

0 5 10 15 20 25 30 35 40 45 50 55 60 65

3.0

2.5

1.0

2.0

1.5

0.5

Avera

ge n

um

ber

of vola

tilit

y e

vents

per

com

pany

% of companies impacted

Trailing 12 Months

Overall- Last 3 Months

Capital Markets

Manufacturing

Healthcare

CPG

High Tech

Life Sciences

Insurance

Commercial Banking

Retail Banking

Aug’14-Oct’14



Determinants of volatility and adaptation vary widely by industry

H L

H

# o

f ev

en

ts p

er

co

mp

an

y

% companies impacted

Retail banking Commercial banking Insurance CPG Capital markets

Life sciences Manufacturing Hi 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

Nov'13-Oct'14

Industry analysis summary ► Trailing 12 months (Nov’13–Oct’14)

Healthcare


Volatility seems to be followed by adaptation “waves” in most industries. Cutting the lag can provide strategic agility

Total VAI Feb-Apr May-Jul Aug-Oct Nov-Jan Feb-Apr May-Jul Aug-Oct

OVERALL 22 V

A

Retail banking 54 V

A

Life sciences 43 V

A

Manufacturing 11 V

A

CPG 55 V

A

Capital markets 24 V

A

Insurance 1 V

A

High tech 2 V

A

V Volatility* events

A Adaptation** responses

Intensity of events

* F

ina

ncia

l dis

tre

ss, e

xte

rna

l re

gu

lato

ry o

r o

the

r sh

ocks

** le

ad

ers

hip

ch

an

ge

s, e

xp

an

sio

n, M

&A

, re

str

uctu

rin

g

Industry analysis summary ► Volatility-to-adaptation lag

2013 2014


Volatility and adaptation index - Retail banking Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

Decrease in leadership churn

Last 3

months#

32%

Trailing 12

months*

.

37%

Drop in regulatory changes

0.70.8

Last 3

months#

Trailing 12

months*

% companies

impacted

Avg. no. of volatility

events reported per

quarter per company

13%

Trailing 12

months*

Last 3

months#

24% 0.2

0.4

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Retail banking ► Aug’14–Oct‘14

Trailing 12

months*

Last 3 Months#

53.8 68.9

Financial Condition

Leadership Change


Restructuring


Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x

*Data covering Nov 1, 2013 to October 31, 2014 #Data covering Aug 1, 2014 to October 31, 2014


Volatility and adaptation index - Commercial banking Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

Leadership churn increases

Last 3

months#

32%

Trailing 12

months*

27%

Financial stress decreases

0.50.5

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Trailing 12

months*

29%

Last 3

months#

22% 0.30.3

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Commercial banking ► Aug’14–Oct‘14

Last 3 Months#

42.0

Trailing 12

months*

36.8


Financial Condition


Leadership Change

Restructuring

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x



Volatility and adaptation index - Capital markets Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

Increase in leadership churn

Last 3

months#

28%

Trailing 12

months*

22%

Restructuring/cost cutting down

0.80.7

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Last 3

months#

6%

Trailing 12

months*

16%

0.10.3

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Capital markets ► Aug’14–Oct‘14

Last 3 Months#

24.1

Trailing 12

months*

47.3


Leadership Change

Restructuring


Financial Condition

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x



Volatility and adaptation index – Insurance Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

Decrease in leadership churn

Last 3

months#

3%

Trailing 12

months*

10%

M&A activity down

0.0

0.2

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Last 3

months#

0%

Trailing 12

months*

14%

0.0

0.2

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Insurance ► Aug’14–Oct‘14

Last 3 Months#

0.1

Trailing 12

months*

17.1


Financial Condition


Leadership Change

Restructuring

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x



Volatility and adaptation index - Life sciences Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

Leadership churn decreases

Last 3

months#

0%

Trailing 12

months*

14%

Financial stress on the rise

0.0

0.2

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Last 3

months#

29%

Trailing 12

months*

16% 0.3

0.2

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Life sciences ► Aug’14–Oct‘14

Last 3 Months#

43.4

Trailing 12

months*

46.6


Financial Condition


Leadership Change

Restructuring

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x



Volatility and adaptation index - Healthcare Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

M&A activity slows down

Last 3

months#

12%

Trailing 12

months*

13%

Increase in leadership churn

0.10.1

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Last 3

months#

29%

Trailing 12

months*

13% 0.7

0.3

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Healthcare ► Aug’14–Oct‘14

Last 3 Months#

16.7

Trailing 12

months*

14.9


Financial Condition


Leadership Change

Restructuring

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x



Volatility and adaptation index - CPG Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)


Last 3

months#

24%

Trailing 12

months*

27%

Financial stress increases

0.30.4

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Last 3

months#

22%

Trailing 12

months*

18% 0.20.2

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Consumer Goods ► Aug’14–Oct‘14

Last 3 Months#

54.7

Trailing 12

months*

46.2


Financial Condition


Leadership Change

Restructuring

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x



Volatility and adaptation index - Manufacturing Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

Financial stress decreases

Last 3

months#

6%

Trailing 12

months*

10%


0.1

0.0

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Last 3

months#

7%

Trailing 12

months*

20%

0.0

0.1

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► Manufacturing ► Aug’14–Oct‘14

Last 3 Months# Trailing 12

months*

29.1 11.2


Financial Condition


Leadership Change

Restructuring

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x



Volatility and adaptation index - High tech Last 3 months (Aug’14-Oct’14) vs. trailing 12 months (Nov’13-Oct’14)

Leadership churn decreases

Last 3

months#

3%

Trailing 12

months*

11%


0.0

0.2

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Last 3

months#

4%

Trailing 12

months*

9% 0.0

0.1

Last 3

months#

Trailing 12

months*

% companies

impacted


events reported per

quarter per company

Ad

ap

tatio

n

Vo

latilit

y

Industry analysis ► High tech ► Aug’14–Oct‘14

Vo

latilit

y a

nd

Ad

ap

tatio

n In

de

x

Last 3 Months#

1.5

Trailing 12

months*

9.8


Financial Condition


Leadership Change

Restructuring



About Genpact

Genpact (NYSE: G) stands for “generating business impact.” We design, transform, and run business operations including those that are complex and

industry-specific. We believe that our approach, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, is more focused, unbiased

and agile than that of our competitors. Our solutions integrate technology, data and processes into advanced and adaptable operating models that foster

growth and facilitate better management of cost and regulations in uncertain times. The result is intelligent operations of a range of functions such as

finance, supply chain, origination and client servicing, compliance, and risk. We have hundreds of long-term clients including more than one-fourth of the

Fortune Global 500. We have rapidly grown to over 66,000 people in 25 countries with key management and corporate offices in New York City. Our global

critical mass doesn’t dilute our flexible and collaborative approach, and our management team drives client partnerships personally. We attribute much of

our success to our unique history – behind our passion for process and operational excellence is the Lean and Six Sigma heritage of a former General

Electric division that has served GE businesses for more than 16 years.

For more information, visit www.genpact.com.

Follow Genpact on Twitter, Facebook, LinkedIn, and YouTube.

© 2014 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.

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Data & Analytics

Volatility and Adaptation Index (VAI)