Confronting Complexity | KPMG | RU

Confronting Complexity

Confronting Complexity

How business is taking on the challenges and opportunities.

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Are businesses globally becoming more complex? Are the causes and effects of complexity the same everywhere? To find out, KPMG interviewed 1,400 business leaders in 22 countries. The results show that complexity has risen to the top of the management agenda as both a challenge and an opportunity.

As part of the BRIC group of countries, Russians often find themselves being compared to the emerging markets of Brazil, India and China. But when it comes to the issues of business complexity, Russians are decidedly more like their regional neighbours in Europe than they are like the BRIC economies.

Complexity rising over past two years

Only one in five Russian businesspeople indicated that business complexity had increased 'very significantly' over the past two years, about the same proportion as in France, Denmark and the Netherlands. Brazil, China and India, however, topped the leader-board in this regard, with anywhere from a third to a half of local respondents saying they had seen very significant increases.

Looking ahead, only 6 percent of Russians expected to see a very significant increase in complexity going forward, versus about a quarter of Chinese and Brazilian respondents, and a third of Indian ones. Again, these results are more in line with European nations such as Italy (2 percent) or Sweden (4 percent).

Causes of complexity

Whereas Russians most commonly agreed with other European nations when identifying non-tax regulation as one of the most prevalent causes of complexity in their current business environment, Chinese, Indian and Brazilian respondents were more likely to point to information management or the increased speed of innovation instead.

However, Russian respondents stand out in this particular area as being significantly less concerned than their global peers: Russians were the least likely nation to anticipate complexity coming from information management (40 percent versus a global norm of 63) or from the increased speed of innovation (34 percent as opposed to 59 percent). They were also half as likely as their global counterparts to cite complexities stemming from operations in foreign countries.

Looking to future causes, however, the pattern begins to change. While 80 percent of Russian respondents thought that non-tax regulation would continue to be one of the root causes of complexity over the next two years, two thirds expected to be concerned about complexities stemming from tax policy, government oversight and information management. Only slightly less of a concern was the increased speed of innovation, at 60 percent.

Almost unanimously (92 percent), Russian businesspeople felt that increased complexity had resulted in more risks for their company to manage, whereas Indian and Chinese respondents tended to cite increased cost, and Brazilians overwhelmingly focused on the need for new skills. Only one third of respondents (34 percent) from Russia felt that they were seeing difficulties in implementing change, and just slightly more (36 percent) admitted having difficulties in making managing decisions as a direct result of complexity. In both cases, the Russian result was much lower than the global average.

Optimistic about new opportunities arising from complexity

Businesspeople in Russia tended to be more optimistic than most other Europeans about the potential for complexity to create opportunities for their business. Almost 85 percent of Russians suggested opportunities might be on the horizon, versus Italy and Netherlands at 70 percent or Germany at a pessimistic 53 percent. Almost three quarters of Russian respondents suggested said that complexity would primarily help them do the following four things: create new products (79 percent), expand into new markets (76 percent), make their company more efficient (also 76 percent), and create new and better strategies (74 percent).

To manage complexity, Russian businesspeople favoured two distinct strategies that have driven their responses in the past: improved information management (74 percent) and business reorganization (72 percent).

Far less common were actions related to the outsourcing of functions, changes to HR approaches or investments in foreign markets, with just over half of Russians surveyed indicating that they had used these strategies in the past.

Most important future actions

Looking to the next two years, while information management continued to be the top choice with 72 percent of Russians, the desire to conduct further business reorganization had clearly dissipated and was selected by less than half of Russians as a possible future action.

Our findings suggest that – while the growth trajectory and economic potential of Russia may be more like those of the BRIC countries – the complexities that Russian businesspeople face (and the opportunities and solutions that they expect to take advantage of) tend to place them with the more mature economies of Europe. Nevertheless, Russian businesspeople do not seem to see complexity as a major bar to reorganization, and they welcome the opportunities it presents.

Confronting Complexity

Confronting Complexity

How business is taking on the challenges and opportunities.

© 2017 KPMG Audit LLC, the Mongolian member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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