Strategy - The prolonged Great Recession has signaled a new period of sustained market volatility. A recent Chemical Customer Connectivity Index (C3X) survey of 150 chemical industry executives conducted in fall of last year highlights concerns over this period of high volatility and the manner in which volatility has historically been managed. 50% of survey respondents stressed and increased focus on improved strategic planning and volatility monitoring initiatives.

Volatility and volatility management have become buzz phrases increasingly heard around the executive suites of the chemical industry's largest players. The latest C3X survey, published by A.T. Kearney, CHEManager Europe and Westfälische Wilhelms-Universität Münster, Germany has revealed that concerns over market volatility and the failings of historical volatility management are very clearly on the minds of chemical industry executives. The results of this empirical survey of 150 executives in the chemical and its customer industries unearthed the following three key findings.

47% of chemical manufacturers see a balance of opportunities and risks arising from increased volatility. For more than one third of the companies interviewed the risks outweigh the opportunities. For less than one fifth of the respondents the opportunities outweigh the risks.
Half of the respondents are already working on strategic levers to improve volatility management. These levers include improved strategic planning, scenario development, and the use of effective monitoring instruments.

Two thirds (66%) of respondents felt that both the most difficult and most necessary improvements to volatility management need to be made in the realm of strategy. Procurement in turn is considered to need the least attention.

Dr. Joachim von Hoyningen-Huene, Principal in the Chemicals and Oil Practice at A.T. Kearney stresses: "Chemical companies around the world have increasingly realized that volatility is here to stay and work on both capitalizing on upturns and managing risks of downturns."

Success Factor Monitoring

Recent economic turbulence has shown that customer and competitive structures in the increasingly interconnected regional markets are in constant motion and demand an appropriate degree of monitoring vigilance and agility. "Market ripples" are now happening with greater frequency and often with greater effect, leading to increased volatility amplified to often seismic levels in previously insulated markets and industries. As global phenomena, these "market ripples" must be monitored in a systematic and centralized fashion to achieve continued competitiveness and agility.

Tobias Fehre, Principal in the Chemicals and Oil Practice at A.T. Kearney emphasizes that, "for the last five years the entire world has ridden a roller coaster of volatility that has sparred no industry, the least of which the chemical industry. Successful riders looked ahead on the track for signs of upcoming dips, twists, turns and rises. The C3X survey emphasizes that the chemical industry has woken up to the importance of being an alert and informed ‘rider'".

One important factor to be more proficient in anticipating market swings is systematic monitoring. Leaders are deploying advanced analytics to identify indicators that had a proven impact on their business in the past and are projected to continue to be leading indicators in the future. Most agile and prepared chemical companies integrate monitoring these indicators with processes on board and operational levels and have their action plan ready to act ahead of downturns and upswings.

Chemical Customer Connectivity Index

The objective of C3X is to analyze the chemical industry from the vantage points of chemical companies and their customers. The survey captures the views of senior executives from leading European chemical companies and of decision-makers in customer industries working at the interface to their suppliers. Participants in this sixth C3X survey included executives from more than 15 European countries representing chemicals firms and client companies - a total of more than 150 executives in all. The customer industries cover a variety of different sectors, ranging from the automotive and food industries to the cosmetics sector.