BCG - The Boston Consulting Group

Collateral Damage

The global financial crisis is no longer just a financial crisis—it is engulfing the wider economy. In our Collateral Damage series, we explain the background to the current troubles, analyze the impact of government actions around the world, explore likely economic scenarios, and examine the challenges facing companies outside the financial sector. We also set out a rapid but comprehensive action plan for senior executives that should take around three to six weeks to formulate and start implementing.

BCG has a long history of helping companies survive and thrive during global economic downturns. This expertise is encapsulated in the Collateral Damage series, which addresses the main issues senior executives should be thinking about and acting upon in a time of crisis.

Two key features underpin the Collateral Damage series:

• A comprehensive, big-picture analysis of the global economic downturn as it evolves in different regions, countries, and sectors
• Practical guidance for senior executives on tried and tested steps that should be taken to protect companies from the worst of the crisis and to prepare them for when the economy recovers

The Collateral Damage series draws on experts from across BCG, reflecting the global nature of the economic downturn. The six parts of the series published so far are:

"Collateral Damage Part 1: What the Crisis in the Credit Markets Means for Everyone Else"

This paper presents BCG's initial prediction that the financial crisis will have a damaging impact on the wider economy. It investigates the roots of the crisis and enumerates the various ways that nonfinancial companies will be affected, including limited access to funds, a higher cost of capital, tougher stock markets, government protectionism, more regulation, and weaker consumer demand. It also outlines a series of practical steps that senior executives can take to counter the worst effects of the downturn.

"Collateral Damage Part 2: Taking Robust Action in the Face of the Growing Crisis"

This paper examines the developing economic crisis as it spreads beyond the financial sector and assesses the likely impact of the interventions on companies around the world. It warns of a deep and prolonged recession in the United States and Europe and provides a holistic three-part executive action plan.

"Collateral Damage Part 3: Asia, Advantage, and Action"

This paper considers the likelihood of a deflationary outcome to the economic crisis, reviews the impact of the crisis on some Asian markets, explores what effect this might have on global sourcing strategies, and describes in more detail what companies should do in three specific areas: leadership and people, the financial fundamentals, and pricing. There is also an appendix for readers interested in examining where the culpability for the crisis might lie.

"Collateral Damage Part 4: Preparing for a Tough Year Ahead—The Outlook, the Crisis in Perspective, and Lessons from the Early Movers"

In this fourth part of our Collateral Damage series, we consider the outlook for 2009 (including the likely effect of the crisis on consumers around the world), revisit the history of the crisis in order to understand why the economic story has developed as it has, describe the very varied assumptions that some major companies are making for 2009, and detail how four major companies responded early to the crisis. We also include three appendixes. The first contains an analysis of the parallels between the current recession and the Great Depression; the second provides a portrait of the recession through a series of statistical graphics; and the third describes some of the seminal events in the crisis.

"Collateral Damage Part 5: Confronting the New Realities of a World in Crisis"

The financial crisis has inflicted widespread collateral damage on businesses and economies around the world. But it is also giving rise to a new corporate environment shaped by a new global economic order. We identify some of the “new realities” of the world in crisis and explore how the world might avoid sinking into even bigger economic trouble. In a search for more radical measures, we also propose some alternative policy solutions to this economic crisis.

"Collateral Damage Part 6: Underestimating the Crisis"

The sixth paper in the Collateral Damage series considers actions taken by companies around the world in light of the unfolding economic crisis, as reported in a new BCG survey of more than 400 major companies based in seven developed countries. Our key finding is that too many companies appear to be doing too little, too late. We offer some thoughts about how to instill a sense of urgency into an organization—including treating a company like a turnaround.
 

• e-mail page
• print page