Building strategic and annual plans is one of the greatest challenges CEOs face right now. With the trajectory of tariffs, interest rates, and geopolitics far from clear, delaying long-term bets for a quarter—or two at a stretch—may feel like the safer wager. But CEOs who don’t find the wherewithal to move forward with big investment decisions soon will likely sacrifice growth and resilience down the road.
Gaining that level of conviction starts with perspective. Yes, tariff announcements and subsequent pauses have whipsawed markets. The only thing that feels certain is that wherever tariffs land, supply chains will look different than they did 12 months ago. Considering that the global economy has already endured the severe demand and supply side shock delivered by the pandemic, finding a way forward through tariff-induced supply disruptions is comparatively more manageable.
CEOs also have vastly superior tools at their disposal now than they did half a decade ago. AI-enabled planning capabilities, such as a tariff command center, can test assumptions about trade variables across a variety of scenarios to help CEOs rapidly land on a robust market and financial base case for decisive action.
Companies that make smart, strategic investments during times of economic stress outperform their industry peers.
Conversely, CEOs who adhere to tactical reactive moves in the hope that stability will soon return are likely to hand their bolder competitors an easy victory. Our research shows that companies that make smart, strategic investments during times of economic stress outperform their industry peers. Deals made in down markets, for example, generate 9 percentage points greater relative shareholder returns in two years’ time, compared with deals made in up markets. And 43% of transformation programs launched during the pandemic achieved value-accretive growth, compared with only 28% launched in years of comparative global financial stability.
Five Actions for Finding Conviction During Volatile Times
Whether CEOs are embarking on strategic planning, an annual planning exercise, or a mid-cycle check, five actions can help them commit capital, expand or redeploy their talent pool, and make growth bets now with confidence:
- Create a “living” driver-tree of your revenue and identify leading indicators. You cannot accurately forecast what you don’t understand. While many CEOs have a strong intuitive grasp of the variables that drive their revenue, far fewer have a deep analytical understanding of them. A digital driver-tree of your business can capture the inputs that influence revenue, sales volume, margins, and costs. It can also help pinpoint forward-looking indicators that can signal when change is afoot. For example, a company that expects to sell a certain volume of a fixed asset that requires inspections could detect a pending slump in sales if inspections suddenly fall.
- Use scenarios to find your base case. Conviction stems from a rock-solid market and financial base case for greenlighting actions that “win in all weathers.” Scenario planning can stress-test assumptions under different market and financial conditions to help CEOs home in on a strong base case for how much cash, EBITDA, and debt capacity they can deploy to support their business strategy—regardless of what the world serves up next.
- Foster agility with a rolling, “always on” forecast. A rolling forecast keeps strategic and budget plans nimble by continuously tracking forward-looking indicators and other variables. If a forward indicator reveals a move to the lower bound of the base case forecast, CEOs can rein in variable costs to stay on target, rather than shrink operating margins or strand assets. Conversely, if a leading indicator shows the company will exceed the base case forecast, CEOs can capture more operating leverage and expand their margins. A rolling forecast can also signal in advance when an alternative scenario is poised to displace the base case, allowing CEOs to pivot quickly.
- Don’t shortchange forward-looking portfolio assets. Capital allocation decisions should aim to generate revenue and create competitive advantage. In volatile conditions, it can feel safer to over-index on today’s proven revenue generators. But companies need to actively invest in tomorrow’s as well. Here, the CEO’s direct involvement is crucial. Leaders must take an active stand on the role different assets play in their portfolio strategy to ensure that long-term investments aren’t overlooked (specifically that they are included in the set of “no brainer” investments that the company pursues under any of the scenarios mentioned above). In addition to focusing on major transformations and M&A that drives growth, CEOs should prioritize moves that give them greater flexibility in uncertain times, such as joint ventures.
- Keep your AI momentum going. AI is a juggernaut that the upheavals of this year will not derail. AI-powered scenarios enable companies to land on a robust base case more efficiently and continuously monitor signals of pending financial and market changes. CEOs should avoid any temptation to pause AI investments, to ensure that their organizations don’t fall permanently behind peers that are forging ahead. Companies that have tested, learned, and created or identified advantage for their business model with generative AI (GenAI) need to scale those pilots in earnest. And if they haven’t already, they should invest in building and implementing AI agents —a far more powerful innovation that can reshape entire business processes, integrate siloed workflows, and drive cost-saving efficiencies.
Moving Forward with Conviction
CEOs who wait for perfect clarity to initiate strategic and budget plans and deploy capital will lag their peers in today’s business environment. By understanding the drivers of their revenue, recognizing the leading indicators that signal a pending change, and running scenarios, they can land on a strong base case for action. They can also use rolling always-on forecasts to continuously test assumptions and pivot quickly as conditions change, ensuring that they keep moving forward with eyes wide open.
