2021 Highlights – Future of Transaction Management Report

INTRODUCTION

In the past year and a half, Covid has radically altered the way business is conducted and corporate deal makers have had their world turned upside down with mounting transaction management challenges. It is widely expected that 2021will be the year of transition. Barring any unexpected catastrophes-individuals, businesses, and society can start to look forward towards shaping their futures rather than just grinding through the present. The next normal in all probability is going to be different. It will not mean going back to the conditions that prevailed in 2019. Future generations will likely discuss it as the pre-COVID-19 and post-COVID-19 era.

The return of confidence is likely to unleash a consumer rebound. As consumer confidence returns, so will spending, with “revenge shopping” sweeping through sectors as pent-up demand is unleashed. That has been the experience of all previous economic downturns. McKinsey’s most recent consumer survey, published some months back found that countries with older demographics, such as France, Italy, and Japan, are less optimistic of an economic turnaround than are those with younger populations, such as India and Indonesia. How fast and deep confidence will recover is an open question. Spending will only recover as fast as the rate at which people feel confident about becoming mobile again and those attitudes differ markedly depending upon the country.

People who travel for pleasure will want to get back to doing so. Domestic travel was surging, but international travel was still depressed given pandemic-related border restrictions and concerns about health and safety. By definition, leisure travel is discretionary. Business travel is less so. Video calls and collaboration tools that enable remote working, for example, could replace some onsite meetings and conferences and therefore affect the rate at which business travel could pick up.

History shows that, after a recession, business travel takes longer than leisure travel to bounce back. For example, after the 2008–09 financial crisis, international business travel took five years to recover, compared with two years for international leisure travel. A recent survey of business-travel managers found that they expect business-travel spending in 2021 will only be half that of 2019, while most think that although it will grow in scale, it may never recover to the 2019 level. The effective use of technology during the pandemic and the economic constraints that many companies will face for years to come after it could affect the long-term structural change in business travel.

The crisis sparked a wave of innovations and launched a new generation of entrepreneurs. There has seen tremendous growth in digitization across sectors with companies investing heavily in technology. This meant that everything changed drastically. From shopping to bill payments, online customer service, supply-chain reinvention to the use of artificial intelligence (AI) and machine learning. Healthcare, too, has changed substantially, with tele-health and bio-pharma coming into their own.

The great acceleration in the use of technology, digitization, and new forms of working is going to be sustained. Many executives reported that they moved 20 to 25 times faster than they thought possible on things like building supply-chain redundancies, improving data security, and increasing the use of advanced technologies in operations. A McKinsey survey published some months back found that companies are three times likelier than they were before the crisis to conduct at least 80 percent of their customer interactions digitally.

The pandemic has forced companies to reconfigure their operations. For consumer industries, and particularly for retail, it meant improving their digital and omnichannel business models. For healthcare, it was about establishing virtual options as a norm. For insurance, it was about personalizing the customer experience. And for semiconductors, it was about identifying and investing in next-generation products.

These are just a few examples, as every industry will have to transform their way of conducting business to increase productivity. Direct-to-consumer selling requires the development of new skills, capabilities, and business and pricing models. But the trend is clear: many consumers are moving online. To reach them, companies have to go there, too.

With the adoption of automation, digitization, and other technologies, it is estimated that more than half of current workforce would need significant reskilling or upskilling by 2022.

The pandemic has also given a big boost to a bio-pharma revolution. The development of COVID-19 vaccines is just the most compelling example of the potential of the “Bio Revolution”-bio-molecules, bio-systems, bio-machines, and bio-computing.

The dynamics within sectors are likely to change. In previous downturns, the strong came out stronger, and the weak got weaker or went under, or were bought out. Today the defining difference will be resilience-the ability not only to absorb shocks but to use them to build competitive advantage. Only those capable of adapting to the changed world will survive, others howsoever small or giant they may be will perish. Top performers won’t sit on their strengths; instead, as in previous downturns, they will seek out ways to re-build them-for example, through M&A.  In fact, deal making has already began to pick up midyear.

All over the world, the costs of pollution and the benefits of environmental sustainability are being increasingly recognized. Green growth opportunities abound across massive sectors such as energy, mobility, and agriculture. Just as digital-economy companies have powered stock-market returns in the past couple of decades, so green-technology companies could play that role in the coming decades.