A study has found that after the recent downturn,domestic companies are innovating in an unprecedented manner, to beatcompetition and remain relevant to theirtarget customer base in a fast changingmarketplace.

As business volatility continues to go up, companies see innovations in products, services and operations as the most potent tools to beat competition in the next three years, as also to meet the growing demand from emerging markets, says an Ernst & Young survey titled 'Turn risks and opportunities into results'.

"In many sectors, we are seeing a return to growth. While the past couple of years have been marked by intense cost-cutting, we are now seeing companies responding to competition by innovating, improving execution strategies and investing to improve operational agility and competitiveness," says Ernst & Young India leader for risk advisory services Ram Sarvepalli in the survey.

This is markedly different from how firms responded in the past to recessions, he says, adding, "The study confirms that, today, businesses look before they leap. They don't just seek opportunities, but focus on making sure they have the capabilities and innovative strengths to make a real impact in their chosen markets."

The survey was conducted between December'10 and February'11 among 733 companies spanning 15 countries--France, Germany, Italy, the Netherlands, Sweden, Britain, Poland, Russia, the Middle East, Africa, India, Brazil, the US, China, Australia, among the first and second level non-executive directors, and operational heads.

Apart frominnovation and growth from EMs, the other top opportunities for the domestic companies are improving execution of strategy across businesses and investment in processes, tools, training, IT, and also in clean technologies, says the survey, which was made available exclusively to PTI today.

The survey lists the top 10 business opportunities for the domestic companies as the following: innovation, emerging market demand growth, improving execution strategy across businesses, investing in processes, tools and training for greater productivity, investing in IT and clean technologies, emergence of new marketing channels, excellence in investor relations, mergers and acquisitions, and public-private partnerships.

It further says the above findings from the domestic companies are very close to the global ranking, where the same opportunities have received the highest scores, however, with variations in the ranking order.

Globally, improving execution of strategy across businesses is ranked No 1, with companies seeking to improve the way, in which, they communicate the business vision, goals and strategy, involving all business functions in the strategic planning process.

The survey also speaks of the risks. "Regulation and compliance continues to pose the biggest overall risk in the domestic market as well as globally," it says. However, companies in most rapid growth markets, including India, China, Russia and the Middle East/North Africa region, report that the impact of regulation and compliance risks is expected to diminish by 2013, it says.

Risks associated with the war for talent continue to rise, says the report, adding managing talent is the second risk seen by domestic companies and the third risk globally.

Interestingly, the survey ranks among the top four challenges for almost all sectors and is also expected to escalate them by 2013.

The EMs (emerging markets) are particularly more concerned about this and are evenly divided in citing both internal problems like weakness HR processes and external pressures like rising competition for talent, as responsible for pushing this risk up the ladder.

The top 10 risks for domestic companies are regulation and compliance, talent management, emerging technologies, cost-cutting, expanding government role, pricing pressure, market risks, social acceptance/CSR, access to credit and a double dip recession.