By Zelmira Silva, Partner, ESG Advisory and Strategic Narratives, InspIR Group
Volatility is no longer just an emerging markets phenomenon—it’s a defining characteristic of global capital markets. From Wall Street to Riyadh, companies are navigating a landscape shaped by political instability, technological disruption, and economic uncertainty. The investment community’s response has been to demand unprecedented transparency, increased scenario planning and strategic clarity to understand how resilient and adaptative businesses are.
Universal Uncertainty and Volatility?
Remember when volatility was just a “developing world” headache? Not anymore. Since 2020, market volatility indices like the VIX have consistently surpassed historical averages due to events ranging from rapidly escalating trade conflicts to abrupt shifts in monetary policy. According to JPMorgan, these spikes in volatility are now structural rather than exceptional.
Alejandra Naughton, board director at Banco Supervielle and Holcim Argentina, emphasizes: “Boards must now accept volatility as a permanent reality. Strategic clarity and agile communication are essential, not optional.”
Emerging Markets: From Survivors to Trendsetters
Emerging markets demonstrated superior macro management post-pandemic, tightening monetary policy ahead of the curve and delivering faster disinflation than many advanced economies. Several emerging market central banks, from Brazil to Indonesia, managed to stabilize exchange rates and sustain growth—despite tighter global financial conditions—through prudent planning and adaptive policymaking.
Brazilian companies, historically adept at managing economic volatility, offer valuable insights into resilience and sustainable growth. As highlighted in a recent InspIR webinar with global fund managers, they achieved an average return on equity (ROE) of 18% over the past five years, surpassing the S&P 500’s 16%. Their strategic advantages include adaptability to different macro scenarios, rigorous financial discipline, efficient asset management, and precise capital allocation.
In the Middle East, the Saudi Telecom Company (STC) is a great example of resilience. Amid COVID-19, STC set revenue records; achieving nearly 16% year-on-year growth in Q4 2020 by prioritizing digital transformation and operational resilience. Another great example is Nubank in Brazil. Founded in 2013, Nubank revolutionized regional banking with a fully digital, customer-centric approach, amassing over 100 million customers to become one of the world’s largest digital banking platforms, underscoring the power of innovation and customer-focused strategies.
A New Playbook
The volatility genie isn’t going back in the bottle. But for companies willing to embrace disciplined scenario planning and bold communication with a global mindset, uncertain times are an opportunity to stand out and win.
How to Surf the Volatility Wave
- Stress-Test Your Story: Audit your investor communications regularly. Can your narrative weather a market storm?
- Scenario Planning is Not Optional: it’s a strategic imperative in times of heightened uncertainty.
- Highlight your Expertise: Demonstrate your ability to navigate volatile scenarios and aptitude to surf this wave that has now become a constant.
- Senior-Led IR: Senior leaders should be front and center, driving the conversation. Boards should be more involved than ever, leading with clarity during uncertain times.
