5th January 2017 – We have been privileged to work with many successful organisations in 2016 on their planning, investment decisions and business organisation.  With advances in information technology, we know vast amounts about the past and the present but are still making judgements about an uncertain future.  Our sense of the mood prevailing entering 2017 is one of commercial optimism, tempered with a cautious and wise focus on the risks and uncertainties ahead.   In this note we summarise some 2017 themes on which clients, potential clients and our friends may wish to reflect.  If we can help your organisation with any of these areas, please contact us.

  1. The key driver of uncertainty for business and investment decisions continues to be international political risk. This is new territory and needs to be navigated carefully. The landscape should become clearer as we move through 2017 on the back of elections in key European countries and the first year of the Trump presidency. The need for businesses to understand the impact of political trends and risks is now acute and we are increasingly active in this area. Mark Zuckerberg’s new year’s resolution, as Facebook Founder and CEO, to visit, talk and listen to people in every US state is some indication that a penny is dropping with some business leaders that the way our economies and societies are organised isn’t working for lots of people. Practically all measures of wealth concentration since 2008 point towards increasing concentration in the wealthiest people and global corporations. ‘Finance is King’, more so that it ever was. If social and political cohesion is desired, this (or at least the electoral perception of this) will need to change. The wealth paradox at the heart of the new Trump administration will be intriguing.  My guess is the new regime will focus on borrowing tax receipts from the future (by bringing overseas cash back to US) to invest in infrastructure today to provide economic stimulus, rather than wealth redistribution per se. Trump’s nominee to the Supreme Courts will have huge influence beyond Trump’s tenure in controversial areas such as immigration, pollution regulations, intellectual property law and labour law. From the lowly J-1 student to the biggest businesses there is a short chain involved to impact on the Irish economy.
  2. Brexit will have some structural impact down the line on most Irish businesses, unless there is an opportunity for an electoral backlash (a possibility, but a remote one) in 2017.  Short term currency risk management and diversification of markets and supply chain are key short term concerns and identifying opportunities to buy assets in the right sectors are the typical responses we see.  2017 will reveal whether voter support for the EU in key European countries is as solid as opinion poll numbers. If it is not, then we are in for a turbulent time. Closer to home, the ‘new politics’ in Dublin is a political experiment that may yield some durable ideas, but ultimately it is a political experiment whose main uncertainty is around the timing of its demise.
  3. Paradoxically, in times of greatest disruption it pays to have a multi-year plan. So much now points to ‘reflation’ and interest rates creeping back up.  Oil prices are rising.  Businesses need plans that are clearly thought through, articulated crisply and supported by a flexible financial model. This is key to providing sensible direction to the team and also to making sound decisions about acquisition opportunities (which are increasingly on the business agenda).
  4. We have seen a pleasant upswing in the extent to which this planning cycle has brought a recognition of the need to invest in “People” again. A structured approach to succession, at every level, is an area where we have been active with a number of clients recently.  In parallel, 2017 will be another year of growth in the ‘gig’ economy and this will bring with it opportunities and challenges for the business models of such ’employers’.
  5. In difficult times, invest in your Board. It is the key arena where strategy and acceptable risks are decided.  The Board needs to be an incredibly effective team, while spending a very limited amount of time together as a unit. Navigo has expertise shaping Boards into effective teams; keeping Board skills up to date; and monitoring and evaluating key areas of performance and improvement through regular Board Evaluation. Reach out to have your annual Board evaluation externally facilitated by us this year.
  6. Risk management is a vital area with which many businesses struggle, particularly in the current environment. The best businesses practice it really well and intuitively.  More widespread adoption in Irish organisations of this way of thinking and the related techniques is an important business area for Navigo.  In all of the tumult, we see a risk of losing sight of the continuing technological innovation and disruption that is underway.  We have seen live examples of impressive machine learning in 2016 that when fully refined will radically reshape customer experiences, whole industries/professions and many careers.  Management teams can often prefer to foresee these changes in the 5-7 year timeframe rather than in the nearer term.  Smarter businesses are investing now and using strategic thinking and insight to redefine their model.
  7. There will continue to be a focus in Ireland on improving governance. Well flagged attention is needed in the area of charities and sport bodies.  In business, improving the composition of the Board is high on the agenda and whistleblowing will continue to be a very active area of improvement.  In the current circumstances and political environment, we continue to alert clients to the importance of proactively reviewing their tax strategies (see our September release – http://www.navigo.ie/apple-tax-five-practical-important-reminders-irish-company-directors/ ) and broaden this to public affairs generally. Pay particular attention to the risks of schemes that reward equity and finance for ‘skipping the queue’ in obtaining returns from business.  Remember recent public concern about solvent employers dealing with pension schemes and some prepack insolvency approaches that have raised troublesome legal and ethical issues.

If we can assist with these, or other issues, please don’t hesitate to contact us directly.

Brendan Lenihan is Managing Director of Navigo Consulting which specialises in business planning, strategy, governance and change. (www.navigo.ie) He is a Chartered Accountant and a former President of the Institute of Chartered Accountants in Ireland.  During the course of his career, he has worked in the US, Europe and Ireland, including as a Director of a number of significant businesses that operated across multiple jurisdictions.  

Navigo Consulting specialises in business planning, strategy, governance and change. Our consultants are experienced professionals and have seen business from a number of perspectives including both as executive and non-executive Directors of very significant international businesses as well as many years as professional consultants.  If we can help your organisation to succeed with a business objective that is important to you, contact our Managing Director, Brendan Lenihan on (01) 477 3404 or contact us through www.navigo.ie