US executives forced to rethink corporate strategies with post-election policy changes

47% of companies believe it will be difficult for their organisations to respond to increased regulation on environmental and sustainability practices

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Post-US Election, executives in America are expecting to have to re-evaluate their supply chain approaches due to changes in legislation, regulations and policy, according to the Ernst & Young LLB Election Pulse Strategy Survey.

The survey polled 500 US C-level and executive decision -makers at companies with $1b+ in annual revenue between October 19th 2020 and October 26th 2020 and explored the potential implications of each presidential administration's policies on business strategy and execution.

The survey showed that nearly every corporate strategy is expected to be impacted by sustainability regulation under the incoming Biden administration, with 96% of respondents indicating their current portfolio strategy will be affected. This comes at a time when ESG (environmental, social and governance) has gained prominence among investors and dealmakers as a key consideration in the due diligence process.

The survey found that 44% of companies are looking to form coalitions with corporate customers, suppliers and competitors, and an equal amount are making changes internally through new investments in clean, sustainable assets.

When assessing the relative ease or difficulty of making these changes, there is a substantial gap between companies of higher and lower revenue. The great majority (86%) of leaders at companies between $1b and $5b in revenue indicate it would be easy to respond, while 70% of leaders at companies with $10b+ in revenue indicate it would be difficult.

US business leaders are also considering the impact of potential economic stimulus and investment in infrastructure by the federal government. They see these actions as critical for success, as 44% indicate large-scale infrastructure investments to offset the economic impact of COVID-19 will create opportunities for their company. A nearly equal percentage (43%) indicate large-scale infrastructure investments will stimulate the US economy, and 42% indicate they will create opportunities for customers.

Federal policies and regulations aimed at increasing domestic onshoring of production and operations are also expected to have a significant impact on corporate strategy, with more than 64% of US business leaders indicating they would acquire or build more domestic production in response. Business leaders at companies between $1b and $5b in revenue (58%) responded they are more likely than businesses surveyed overall (35%) to say that federal policies designed to increase domestic onshoring will have a positive impact on their company's profitability. This cohort is also more likely than companies with $10b+ in revenue to expand manufacturing suppliers and back-office employees in the US next year. The gap is significant, with 86% of these companies indicating they are likely to expand, compared with 53% of business leaders overall.

As executives wait for potential regulative changes expected with the new presidential administration, integrating considerations early on and embracing opportunities for capital allocation will be key to surviving in this environment.

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