Businesses require restructuring to thrive in today's environment

From climate change to AI and geopolitics, there are many factors they must consider while framing long-range strategies

- DEVENDRA MEHTA

Restructuring has an exalted status in business schools; the elective course is usually titled 'Mergers, Acquisitions and Restructuring'. In the real world, it is relegated to the netherworld; either clubbed with insolvency or mentioned in conjunction with lay-offs and cost cuts. The constant negative undertone of 'restructuring' saps employee morale and in most cases results in prolonged underperformance.

In today's environment, there are many reasons to give restructuring its rightful eminence, so that it garners trust and delivers sustainable outcomes.

The first is climate change. The pace of action on transition risks arising from decarbonization will ebb and flow based on the political environment. But the physical risks of climate change will also manifest themselves, necessitating relocation and a consequent restructuring. An MIT Technology Review Insights survey of senior executives in the US revealed that 75% of the surveyed organizations had considered relocating.

The second is automation coupled with artificial intelligence (AI) to enhance productivity. According to a PwC report, AI will augment global GDP by 14% in 2030. The manufacturing sector may see the introduction of AI-developed demand-responsive production plans, Internet of Things (IoT)-based predictive maintenance schedules, intelligent energy balancing, among other changes. Similarly, service industries may adopt AI-based data analysis, programming, reports and financial models. This may result in redundancies or a hiring freeze. But some jobs may undergo a metamorphosis. The strategic scenario planning department of yesteryear, for example, may stage a comeback.