Economic Picture Switzerland

New Roland Berger study surveys business mood in Switzerland. Companies not ready for financial and euro crisis

Zürich, December 15, 2011 - Roland Berger Strategy Consultants have conducted a survey of the business mood in Switzerland and how companies see the economic outlook. Based on 130 top-level decision-makers in Swiss companies, both large-scale corporations and SMEs, the study covers a range of different industries. Almost all of the businesses surveyed now expect significant drops in sales and profits as the financial crisis and euro problems develop during the winter 2011/2012. Although their worries have already led them to take steps to safeguard their position, four out of five companies do not feel adequately prepared.

• 50% of managers are still "neutral to positive" in their view of the current economic situation in Switzerland – But 90% view the economic situation in Europe as (very) critical
• A majority of respondents expect a significant slowdown during the upcoming winter – On the outlook in 2012, they believe economic growth will slow to just 0.5-1%
• More than 60% of companies report negative impacts from the soaring CHF/EUR exchange rate – Most respondents believe the Swiss National Bank will continue its capping interventions, although real improvement is only a medium-term prospect
• Most businesses have initiated actions to safeguard their earnings position, but a majority of managers reckon these steps will prove inadequate
• Too few companies are deploying instruments needed to counter rising volatility and uncertainty, such as trend radars to identify market opportunities and risks, scenario planning or stress tests.

Positive mood now darkening – Strong franc a major problem

Half of the Swiss managers covered by the survey are still neutral to positive in their view of the current economic situation in Switzerland, but they are pessimistic about Europe. Nearly 90% rate the position in Europe as (very) critical. Whereas 30% of respondents say their companies were already affected by the economic downturn in the first six months, "two thirds now anticipate a significant deterioration through the current 2011/12 winter," reports Beatrix Morath, Managing Partner at Roland Berger Switzerland. The prevailing sense of uncertainty is already impacting consumer behavior and corporate investment decisions. "On top of this comes the major risks arising from the present combination of debt crisis, increased equity requirements and rising risk aversion," adds Björn Maul, Partner at Roland Berger Switzerland and co-author of the study.

On the domestic market, Swiss business leaders forecast stagnating and, in part, even shrinking earnings and profits. Almost two thirds of the managers questioned have been hit by the strong franc. Despite the high likelihood of sustained intervention by the Swiss National Bank, real improvement in the franc/euro exchange rate is viewed only as a medium-term prospect (after 6-12 months). But a credit squeeze and high inflation are regarded as likely outcomes by only a small percentage of respondents.

Businesses not adequately prepared

Managers believe that 2012 will bring considerably weakened economic dynamism. Eight out of ten respondents anticipate GDP growth slowing to between 0.5 and 1%. Three out of four managers said they had already taken actions on corporate finance, efficiency and HR in an attempt to counter the currency problem and the effects of a crisis. "Yet the majority of companies feel that these actions won't be adequate and that further steps must follow in order to achieve the targets they have set for cash-flow and EBITDA," explains Björn Maul. The biggest challenge is currently the prevailing uncertainty and the volatility of performance indicators. "Businesses have learned their lessons from the last financial crisis and ensuing slump in the real economy. For the most part, they have built up their liquidity reserves and improved flexibility. Nevertheless, there are clear limits to the effectiveness of traditional strategies to secure corporate results," points out Beatrix Morath.

A large proportion of companies are still falling short when it comes to putting in place the instruments needed to tackle the uncertainties. Although half of Swiss businesses use scenario techniques for anticipating future trends, only a third have robust reporting setups with early indicators or subject their corporate strategy to regular stress tests. The study also identified a failure to interlink risk and performance management on the part of 16%. "The majority of companies are worried about rising volatility going forward. They already have to cope with greater fluctuation in their sales and results. These swings are expected to widen even further and occur at ever shorter intervals. Those businesses that know how to deal with such uncertainties will gain a competitive advantage," Björn Maul explains. "They seem to be the same companies that have already mastered this art and are seeking opportunities in the current economic situation through M&A." Finally, Beatrix Morath notes that, "Companies that can spot developments in good time – not only in their own business but also among their competitors – are in a position to stay calm and prepare strategic acquisitions or additions to their value chain."

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Roland Berger Strategy Consultants, founded in 1967, is one of the world's leading strategy consultancies. With over 2,500 employees working in 45 offices in 33 countries worldwide, we have successful operations in all major international markets. The strategy consultancy is an independent partnership exclusively owned by about 200 Partners. Around 70 people work for Roland Berger in Switzerland.

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Roland Berger Strategy Consultants Switzerland