Even amid an uncertain economy, inflationary conditions and fears of a possible recession, people, talent and culture issues stand out as critical concerns for the board and portfolio company C-suite. Talented people and culture are related – the latter attracts the former and, effectively led, the best and brightest people engender innovative cultures that can compete and win in the digital age. Finding and keeping talent is the top risk globally for all organisations, and the same holds true for PE-owned firms. This is another indication that the future of work continues to be a defining business challenge, both now and for the next decade.
Interestingly, anticipated increases in labor costs do not rank in the top 10 list of risks for PE-owned firms, while this risk issue ranks third on the global list of top risks. However, the rating from the PE group of respondents (6.18) is actually higher than the rating in the overall response (5.92) on our 10-point scale, indicating that even though this particular issue doesn’t rank in the top 10 for PE-owned organisations, it is still of significant concern to their management.
Touching on supply chain issues, uncertainty around the global supply chain remains a critical risk for PE-owned companies, same as is seen in the overall survey results. It’s natural that these companies are concerned about the viability of key suppliers, energy sources, unpredictable shipping and distribution, logistical issues, and price stability in the supply chain ecosystem, as they elevate concerns about the ability to deliver products or services at acceptable margins.
Overview of top risks for PE-owned companies in 2032
With regard to the outlook for the next decade, similar to 2023, PE-owned organisations perceive a riskier outlook compared with global respondents in our survey. Of the 38 risk issues, 21 are rated at the “Significant Impact” level by PE organisations versus three from the global responding group.
The rapid embrace of digital and virtual technologies and other digital platforms for product and service deliveries continues to expand in the global economy, and that trend likely will continue over the next decade. This is creating concerns among many boards and executives in PE-owned companies who believe they may not have the talent and skills needed to develop, support and leverage those technologies to compete effectively.
People, talent and culture remain top of mind. We also see the elevated interest in the rapid speed of disruptive innovations as well as the adoption of digital technologies such as AI, automation in all its forms, and the organisation’s ability to bring in the talent and skills required for these technologies. The rapid embrace of digital and virtual technologies and other digital platforms for product and service deliveries continues to expand in the global economy, and that trend likely will continue over the next decade. This is creating concerns among many boards and executives in PE-owned companies who believe they may not have the talent and skills needed to develop, support and leverage those technologies to compete effectively.
Globally, many industry groups and executives see a riskier environment a decade out versus over the next year, where the opposite holds true for PE-owned companies, which appear to view the next 12 months as fraught with greater risk versus the next decade. This is understandable given that many PE-owned firms have an exit plan that would involve a merger or acquisition in the near term – for example, one to three years versus a decade out – which explains why the outlook for 2032 is less concerning for them.