Private companies worldwide generally express high confidence about their future success, even as they acknowledge risks related to cybersecurity, trade, and other factors.
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Even with the current economic backdrop clouded by signs of slowing across many parts of the world, most private companies worldwide are confident about their organizations’ prospects for success over the next two years (figure 1), according to the 2019 Deloitte Private global survey of private company leaders.
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The study, Global perspectives for private companies: Agility in changing markets, also found that most private companies surveyed expect their revenues, profits, productivity, and capital investment to go up in the coming year—and that 49 percent anticipate growing their full-time workforce, a slightly greater proportion than in 2017.
One explanation for this broad sense of confidence in the current business environment is that private companies have the freedom to maintain a longer-term perspective, since they face fewer short-term pressures from shareholders, analysts, and other key stakeholders than publicly held companies. Private companies also tend to be more agile as organizations, able to adapt quickly to changing market conditions.
Respondents’ general sense of confidence comes even as they identified a number of risks to their organizations. As a group, the risks respondents were most concerned about were trade barriers, potential cyberattacks, and the cost of raw materials (figure 2). Respondents in Asia-Pacific stood out for showing more concern about these key risks to the outlook and several others, including foreign exchange rate fluctuations and weaker domestic and foreign market demand.
Trade barriers, in particular, are viewed as one of the highest risks to growth by Asia-Pacific respondents (30 percent). For most companies, trade disputes have upset commerce only at the margins, at least to date. Any escalation or the enactment of actual trade barriers could pull more trading partners into the fray, causing disruptions that could have ripple effects across global supply chains. The uncertainty trading barriers cause can also ultimately hurt business investment, as companies become more wary of the potential for lost revenue.
Cyberattacks are tied with trade disputes as the top risk on respondents’ worry lists. Not surprisingly, respondents identify cybersecurity as their top technology investment priority for the coming year (figure 3). Again, respondents in Asia-Pacific express the most concern about growing cyberthreats and are the most committed to boosting their defenses. Forty-three percent of private company executives in the region point to cyber intelligence as their most likely technology investment over the next 12 months, compared to 34 percent in the Americas and 30 percent in Europe, Middle East, and Africa.
Competitive threats are clearly on the minds of private company executives, as half of our respondents see disruption by either a traditional or nontraditional competitor as at least a medium risk, and nearly one in five characterize it as a high risk. Across all three regions, our surveyed executives say their company is taking action to prepare for anticipated competitive disruption. The most popular move in this regard involves changing business models.
But many private companies aim to disrupt the market themselves. Nearly four in 10 respondents say they are exploring opportunities to take advantage of disruption. And a third have organized dedicated teams focused on disruption. On the other hand, more than a fifth of the respondents say there is little focus on disruption at their company or they aren’t taking any action at all to get ahead of it.
Asked to identify their sources of competitive advantage, respondents pointed to the development of new products and services, high productivity, business model innovation, and growing existing markets (figure 4).
Private leaders also view a strong corporate culture as integral to their business’s performance. More than three-quarters of our respondents (77 percent) characterized culture as strategically important to the success of their company, with more than a third (35 percent) strongly agreeing with that sentiment.
It will be interesting to see whether the coming year tests private companies’ ability to preserve their culture, not just because of generally high expectations around corporate combinations, but also due to the preponderance of respondents who believe their company will at least consider an initial public offering in the coming year. More than one-half of our respondents believed that their company was on a path to going public within the next 12 months, a figure that stayed consistent across all three regions.
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