Expectations from the stakeholders during downturn

1. Expectations from the stakeholders during downturn G Venkatraghavan March 24,2009 NASSCOM, Chennai

2. To understand the impact of the financial crisis, it is important to remember the drivers of economic growth AD = C + I + G + X - M Investment Exports Aggregate Demand Imports Government Expenditure Consumption 2 Succeeding in the New Economic Environment | November 2008 | 9/28/2014 Economic Impact of the Financial Crisis | 23rd October 2008

3. In this financial crisis, the negative impact on all drivers of growth will be more extensive and severe Investment • Business confidence • Interest rates • Availability of finance • Level of economic activity • Economic growth • Level and changes in consumer demand • Cost and efficiency of capital equipment • Rate of depreciation • Government policy Exports • Disposable income and firm income • Consumer and business confidence • Interest rates • Availability of credit • Exchange rates • Attitudes to saving • Attitudes to spending • Economic activity in export markets Aggregate Demand • AD = C + I + G + X - M Consumption • Disposable income • Consumer confidence • Interest rates • Availability of credit • Attitudes to spending • Attitudes to saving Government Expenditure • Income (revenue) • Borrowing • Necessity for economic stimulus Imports • Disposable income and firm income • Consumer and business confidence • Interest rates • Availability of credit • Exchange rates • Attitudes to saving • Attitudes to spending • Economic activity in import markets 3 Succeeding in the New Economic Environment | November 2008 | 9/28/2014 Economic Impact of the Financial Crisis | 23rd October 2008

4. A different kind of downturn – Traditional responses will not suffice Long and Difficult • Unprecedented constraints on access to credit and capital; Unwinding of over-leverage • Falling demand, increased price sensitivity as consumers and enterprises cut back • Disruptions in supply chains, partner and customer arrangements Typical cost management will NOT be enough Firms must examine working capital & investment: identifying opportunities to restructure, reduce, and preserve capital as well as streamline operations Transformative • Restructuring of industries: Firms fail, sold off overnight • New regulatory regimes • Stress on global inter-dependencies Succeeding in the New Economic Environment | November 2008 | 9/28/2014

5. Credit Credit is hard to get Cash Cash is King (doesn’t mean that customer is not ) Confidence Perceptible ‘lack of confidence’ even among seasoned CEOs The 3 C pointers Succeeding in the New Economic Environment | November 2008 | 9/28/2014

6. What are our stakeholder expectations in this scenario? Customers Organization Management Suppliers Employee Succeeding in the New Economic Environment | November 2008 | 9/28/2014

7. What the employees want • Job security • Facilitate up-skill/cross-skill • Increased communication • Keep me engaged • Focus on ‘trust’ Succeeding in the New Economic Environment | November 2008 | 9/28/2014

8. What the suppliers want • Honour contracts • No knee jerk reactions • Work together towards the long term • No unreasonable ‘squeezing’ • Transparency on company performance Succeeding in the New Economic Environment | November 2008 | 9/28/2014

9. What the customers want • Clarity on situation - Serve with same quality at potentially lower costs • Share burden • Flexible arrangements • ‘Partnering’ and ‘Risk-Sharing’ arrangements • Help in leveraging existing assets to ‘do more’ Succeeding in the New Economic Environment | November 2008 | 9/28/2014

10. What the Management wants • Sustained business (even if growth is lower than usual) • Sweating of existing assets • Conservation of cash • Voluntary efforts to deal with current situation Succeeding in the New Economic Environment | November 2008 | 9/28/2014

11. Along with these demands, broader forces are at work Our world has become… Smaller & Flatter • Pervasive connections and communications • Emerging markets • Open trade • Systems-level complexity • Viral spread of information • Widening gap between information available, and information effectively managed. Riskier • Instrumented • Interconnected • Intelligent Smarter … And tomorrow's leaders will capitalize on the new opportunities created Succeeding in the New Economic Environment | November 2008 | 9/28/2014

12. Companies need to do three things: Focus on Value ExploitOpportunities Act with Speed • Do more with less • Focus on the core • Re-align relationships • Capture share • Build future capabilities • Change industry dynamics • Manage change • Leadership • Risk & Transparency Succeeding in the New Economic Environment | November 2008 | 9/28/2014

13. Credit Credit is hard to get Cash Cash is King (doesn’t mean that customer is not ) Confidence Perceptible ‘lack of confidence’ even among seasoned CEOs The 3 C pointers Succeeding in the New Economic Environment | November 2008 | 9/28/2014

14. Adaptability improve productivity and conserve capital, cut spending and redeploy to products and markets that generate growth, margins, and true differentiation Agility Create agility to incrementally expand or contract, build key capabilities by spending on a vision to leverage investment and reshape the industry Alignment Creates an environment to anticipate changes before they occur and the ability to use fast, sustainable decision-making In summary .. Answers to the 3 C lies in 3 A Succeeding in the New Economic Environment | November 2008 | 9/28/2014