Businesses struggling with major skill gaps in tech, rising levels of protectionism
A number of megatrends have been revealed to be top of executives’ agendas moving into FY24, including digitisation, building resilient cities and the net zero transition.
New research has shown that executives across the globe see the biggest business opportunities in the next decade arising from creating resilient cities, with an ageing population named as one of their biggest long-term challenges.
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According to a new report from Ashurst, Future Forces 2023 Report: The megatrends shaping business over the next decade, almost all businesses (97 per cent) are struggling with major skills gaps in technology, holding them back from fully realising opportunities. Additionally, increasingly protectionist investment and trade policies were shown to be executives’ biggest geopolitical worry, with a third enhancing their risk management capabilities and a quarter retooling supply chains in anticipation.
The biggest opportunities for businesses, however, will come from building resilient cities and from digitalisation, with executives noting that barriers to these opportunities are currently coming from skills gaps, the demographics of a rapidly ageing society and rising levels of protectionism.
The research, which surveyed 300 global executives and was produced in partnership with Economist Impact, also identifies six megatrends expected to significantly influence businesses in the coming decade: changing global dynamics, the net zero transition, digitalisation, demographic change, skills for the future, and resilient cities.
Forty-three per cent identified the creation of tech-enabled and climate-resilient cities as offering the biggest opportunities for growth over the coming decade, serving the world’s growing 4 billion-strong urban population with improved transport and civil infrastructure.
In digitalisation, respondents said that investment automation, augmented reality and artificial intelligence are the key technology capabilities likely to make the biggest positive difference to their business.
Etay Katz, co-chair of the bank industry group at the firm and member of the FCA’s Innovation Advisory Group, said this is particularly relevant within the financial sector.
“Digitalisation requires banks to radically reinvent themselves, and we expect them to greatly accelerate the pace of acquisitions of complementary businesses and technologies over the next 10 years as a component of their strategy,” he said.
“However, a more prudent strategy to maintain a competitive edge must also focus on the following building blocks: investing in and deploying emerging technologies such as AI and synthetic data; redefining their business model to focus where banks can realistically expect to have the resource and appetite to compete; and implementing organisational structures to facilitate quicker strategic and technological change. We predict that those banks unable to step up to these challenges will be acquired or, at worst, fail at great costs to shareholders, customers and ultimately states themselves.”
Despite this, two-thirds of respondents admitted that their business has not yet been able to give the six megatrends “sufficient attention”, according to the report.
Ninety-seven per cent of executives said that their technology skills are insufficient to take advantage of opportunities, and 80 per cent were seeing large gaps in their employees’ skills. In addition, more executives (39 per cent) expected their organisations to struggle with shifting population demographics compared with any other megatrend. According to the research, the main concerns of executives revolved around the impacts of an ageing population and the ability of businesses to meet the increasingly diverse needs of customers.
This, head of Ashurst’s UK Risk Advisory Rachel Sexton said, means that more businesses need to invest in risk professionals.
“The survey shows that a large majority of respondents believe that the technical capabilities and employee skills in their businesses fall well short of what is needed to take advantage of future opportunities,” she said.
“On the other side of this is the need to have risk professionals in the business who understand the digitalisation trends and risks that they create and are able to advise on processes and controls that will protect the business. This risk awareness is not meant to slow down business and innovation but to ensure businesses can thrive as they evolve in this new digital world.”
Further, the biggest geopolitical concern for business in the next 10 years is the spectre of protectionism, according to the report, with a majority of respondents fearful of new regulations that favour domestic over foreign investment in their key markets. Leaders working in the financial services, digital economy and infrastructure sectors were most concerned about this issue — and businesses are now reportedly improving risk management and reworking their supply chains in response to these concerns.
The net zero transition is also mentioned throughout the report, with 28 per cent of executives identifying it as both the biggest opportunity and the biggest threat.
“Net zero prioritisation by businesses and investors, along with increased action from governments and regulators, will continue to drive the investment momentum,” the report stated.
“A triad of bills in the US, including the Inflation Reduction Act, the federal sustainability executive order and the historic Bipartisan Infrastructure Law are expected to stimulate investment of more than US$1.25 trillion in climate resilience, conservation and clean infrastructure.”
Overall, the results of the research show the importance of forward-planning for executives, according to Ashurst global chief executive Paul Jenkins.
“The key message from our research is that businesses need to think beyond the immediate issues they face and look out over the horizon when developing their strategic planning,” he said.
“Some of these megatrends are not yet well understood by business — particularly in relation to resilient cities, building skills for the future and managing demographic shifts. It is only by understanding the deeper, underlying currents that are driving change that we can make informed decisions and decide how to meet the needs of our stakeholders.”