The Trump presidency might also impact the Federal Reserve. During his campaign, the president-elect expressed criticism of the monetary-policy choices of Fed Chair Janet Yellen. Trump's appointments to the Fed over the near term bear watching. On the one hand, hawks eager to raise rates rapidly could push the U.S. economy into recession. On the other hand, dove appointments would support faster growth in output and rising inflation.

Tax reform is expected to be a top priority over the next two years for both the administration and Congress. Trump has proposed reducing the corporate tax rate to 15 percent to encourage more startups, expand existing companies, fund improvements in corporate infrastructure, and make the country a much more competitive tax environment for multinationals. In addition, the president-elect may offer a one-time tax rate of 10 percent for global companies repatriating profits from abroad. U.S.-based multinationals are currently estimated to have un-repatriated earnings totaling $2.1 trillion. Bringing these profits back to the U.S. could help fund a wave of economic expansion in the United States if the appropriate strings are attached.

At the same time, any effort to transition away from globalization might lead to lower returns on capital, lower real interest rates, and a weaker dollar. Trade will likely be a contentious issue during the Trump presidency. Sweeping changes in trade policy will likely be complicated by divisions within the Republican establishment in Congress.

However, during the campaign, the president-elect criticized the North American Free Trade Agreement (NAFTA); the Trans-Pacific Partnership (TPP), an agreement between the United States and 11 other countries, including Japan and Vietnam, designed to lower or eliminate tariffs; and U.S. trade with China. One of his primary concerns is with U.S. companies offshoring operations and then selling products back to the U.S. markets, resulting in the elimination of U.S. jobs.

If the United States were to impose tariffs, offshored operations might begin to serve other global markets. This would likely cause shortages in raw materials in the U.S., which might reduce the availability of consumer products and/or increase prices—possibly offsetting any increases in disposable income achieved through tax reform. In addition, of course, if the United States were to unilaterally impose trade restrictions, other countries might respond in kind with punitive restrictions of their own, which would put a damper on global trade and could usher in an era of dangerous protectionism.

Immigration was another contentious campaign issue. According to one estimate, immediately and fully enforcing current immigration law—as Trump has suggested—would cost between $400 billion and $600 billion, and would require many years. Doing so would also shrink the labor force by 11.2 million workers, an impact that would be felt most in the agriculture, construction, retail, and food and beverage services sectors.

Security is also expected to be a priority during the Trump presidency. The administration will likely focus on protecting U.S. borders and expanding the armed forces. Anti-Money Laundering regulation and cyber regulation will remain priorities, given their linkage to national security and fighting terrorism. The administration may also reverse course with countries such as Iran and Cuba, reinstituting some of the curbs that the Obama administration has lifted.

Industries That Will Win Under Trump

Needless to say, many questions remain to be answered as the new administration gets under way. Whatever the answers to these questions, there will be winners and losers in the Trump sweepstakes¹. Likely winners include companies in these sectors:

Airlines. As president, Trump is expected to be more sympathetic to U.S. airlines' claims of unfair competition from state-controlled carriers.

Construction. If Trump follows through on his promise to fix the nation's inner cities and rebuild highways, bridges, tunnels, and other infrastructure, then the construction industry should benefit significantly.

Defense. Increasing defense funding and securing the U.S. borders will probably be top priorities for the administration, which will benefit the defense industry and its suppliers. Increasing the size of the Army, expanding the Navy fleet, adding more combat jets, and preparing for cyber warfare are likely to be on the list of priorities.

1. Some of the information in this section was obtained from the article “Trump Victory: Corporate Winners and Losers,” Richard Milne, Financial Times, November 9, 2016.

Oil and gas. Fossil-fuel companies in the United States clearly have a brighter future with the president-elect than they've had under the Obama administration. Candidate Trump pledged to make the United States “energy independent,” both by opening new areas of the country—including federal land—to oil and gas development, and by changing environmental policies and greenhouse gas standards that have driven closures of U.S. coal-power plants, stymied demand for coal, restricted fracking, blocked the Keystone pipeline, and hamstrung refineries. Nevertheless, reversing the decline of coal will be a formidable challenge, as the industry's demise is largely a result of the abundance of natural gas since the development of fracking.

On the international front, the Trump presidency can be expected to increase geopolitical tensions, given Trump's position regarding the Iranian nuclear deal. A major oil producer, Iran has just returned to global crude markets. New sanctions could curb investment in Iran's energy sector, impacting global supply. However, actions by other members of the Organization of the Petroleum Exporting Countries (OPEC) will have more influence on market supply and prices.

Pharmaceuticals. The new administration is expected to take a more lenient approach to drug pricing than a Democratic administration would. Trump has said that soaring drug prices need to be addressed, and has proposed removing barriers to entry for drug providers, as well as giving Medicare power to negotiate drug prices. However, his proposals were less specific than Hillary Clinton's, and the Trump administration is expected to focus more attention on other priorities.

Likely Losers Under the Trump Administration

Automotive. The auto industry will likely be impacted by the new administration in two ways. First, carmakers that import parts from Mexico, or have factories there, would face serious ramifications from withdrawal from NAFTA or from the proposed border wall. And second, Japanese carmakers will be hard hit if the yen strengthens relative to the U.S. dollar.

Consumer products. The Trump administration's approach to reforming cross-border trade, tax policy, and labor laws will be under close scrutiny by retailers and consumer advocates. Retail supply chains have become largely global. Repeal of trade agreements would likely cause shortages in raw materials and/or components for U.S.-based consumer-products manufacturers, with ripple effects throughout the economy.

In addition, many U.S. retailers and manufacturers have worked for decades to tap into foreign consumer markets. Suppose that the U.S. were to bring trade cases against China for allegedly using unfair subsidies to benefit Chinese businesses. This action could negatively impact U.S. companies that rely on Chinese suppliers to make their products, as well as U.S. companies that sell products to Chinese consumers.

Shipping. The shipping industry thrives on global supply chains and low trade barriers. Shipping could be adversely affected by trade policies that spawned a wave of protectionism and unwound the decades-long trend toward globalization.

Technology. Some tech companies would likely benefit from the president-elect's proposed infrastructure investments. However, Silicon Valley has concerns about several of Trump's proposals, including:

• The possibility that tech-friendly trade agreements might get disrupted and tariffs might be imposed on companies moving jobs to low-cost offshore destinations.
• The possibility that a Trump administration might stifle innovation by opposing the H-1B visas that bring many highly skilled workers to the United States. A reduction in the H-1B program could dampen startups and affect projects in both the private sector and the federal government.
• Questions about the balance between security and privacy. As a candidate, Trump criticized Apple's unwillingness to break the encryption on the San Bernardino terrorists' iPhone. These comments have bred uncertainty in the area of security vs. privacy.
• The likelihood that the U.S. will enact more cyber legislation, as well as initiatives to enforce stronger protections from, and retaliation against, cyber attacks.

Telecommunications. The president-elect has said he would block the proposed AT&T/Time Warner merger. He has also been critical of Federal Communications Commission (FCC) regulations, and the new administration may enact changes in that agency. For example, Trump's appointment to head the FCC might change federal policy around Net neutrality. Republicans previously pushed legislation that would curtail the FCC's ability to enforce Net neutrality, but the effort failed under threat of a veto by President Obama. That obstacle will likely no longer exist under President Trump.

Industries with Mixed Results Under Trump

Banking. We expect to see lighter-touch regulation on the banking sector, effected through President-elect Trump's picks to head the various agencies and his likely implementation of a moratorium on new regulations. Smaller community and regional banks are most likely to get regulatory relief.

During the campaign, Trump said he would repeal the Dodd-Frank Act and reinstitute Glass-Steagall, so it is not clear what his real position on banking regulations is. In reality, it's more likely that the new administration will tweak or roll back parts of Dodd-Frank, but not repeal the law.

In the end, the financial services industry needs a strong economy, so the banking sector needs to monitor the expected impact of Trump policies on the economy overall.

Healthcare. During the campaign, much was said about repealing the Affordable Care Act. If it were repealed without being replaced, the pool of insureds would be reduced. However, since 20 million people have health coverage because of the law, repeal without replacement is unlikely. Since the election, discussion has turned to alternative approaches. Options include:

• Modifying the Affordable Care Act (ACA) through rule-making and smaller legislative changes.
• Undermining the ACA by dropping the present administration's appeal of a court ruling against an executive order that allows for federal “cost-sharing” payments to insurers, which results in deep discounts for many health-insurance customers.
• Suspending and altering ACA regulations—for example, to allow for benefit plans that don't meet ACA minimum requirements.
• Altering the dynamics of how the ACA exchanges work.
• Neglecting the ACA by failing to fund it in the budget process.

One possible alternative to the ACA is tax-free health savings accounts, which Trump proposed during the campaign to enable individuals to save money to pay for healthcare costs while deducting the cost of their premiums for tax purposes. He also advocated requiring price transparency from all providers (e.g., doctors, clinics, hospitals, and other healthcare organizations) and increasing competition among insurers by allowing them to market and sell policies across state boundaries (i.e., they would be allowed to offer insurance in any state so long as their plans comply with state requirements).

The president-elect is also committed to reforming the veterans healthcare delivery system. How that initiative would impact the broader healthcare industry bears close scrutiny.

On the plus side, the Trump administration may view industry mergers more kindly than his predecessors.

Manufacturing. As with construction contractors, materials and heavy equipment manufacturers will benefit from renovation of the nation's inner cities and the rebuilding of highways, bridges, tunnels, and other infrastructure. However, fair trade is expected to be a priority for the Trump administration. Industrials offshoring their operations to other countries and selling products back to U.S. markets are likely to be targeted. Global supply chains of U.S. manufacturers may also be affected.

Insurance. The story here is similar to that of the banking industry: Optimism that there will be a lighter regulatory hand (e.g., rollback or at least delay of the fiduciary standard, less concern about non-bank SIFIs) must be weighed against possible changes in the state of the economy overall. A retreat from globalization would certainly not help this industry.

Utilities. Large investments in plants, pipelines, and other infrastructure have the power to shape power generation in the United States for many years to come. Under the Clean Power Plan (CPP)—a policy aimed at combating global warming in accordance with standards set by the Paris climate accord—and with the current incentives to invest in renewables, U.S. utilities are retiring coal plants and replacing them with wind and solar facilities. If President Trump strikes down the CPP, that would impact those strategic decisions. While Trump has also stated that he favors nuclear energy, many in the nuclear industry support the CPP because it reduces the use of coal.

How much effect the Trump administration will have on utilities overall is unclear, but it will certainly alter competition among the various power-generation methods: coal, natural gas, nuclear, wind, and solar.

How Should Companies Be Preparing for President Trump?

Now that the uncertainty around who will occupy the White House and control Congress is cleared up, companies need to address the risks associated with changing political realities. Following are six suggestions companies should consider undertaking now:

Closely watch developments on trade. The new administration appears to be committed to a reset of NAFTA and the TPP. President Trump will likely also focus on addressing trade issues with China—e.g., currency manipulation, exclusion of U.S. products from government purchases, subsidies to Chinese companies. How these policy initiatives play out might significantly affect companies' operations in, or exports to, these foreign markets, as well as companies that use suppliers based in these markets.

Re-evaluate the assumptions underlying your corporate strategy. Every organization's strategy is built on both implicit and explicit assumptions about the future. As most observers handicapped the election's odds in favor of a Clinton presidency, many companies probably factored that assumption into their strategic thinking. Now that the election is history, it makes sense to reassess the company's underlying strategic assumptions in light of the incoming Trump administration and Republican Congress. If it's possible that one or more assumptions might be rendered invalid, senior management should assess the ramifications for corporate strategy and the organization's business model. Scenario analysis may be useful.

Consider the implications of plausible scenarios germane to your sector, and begin preparing for the possible. Define appropriate scenarios, taking into account your expectations about how the incoming administration's various trade, regulatory, tax reform, immigration, and other policy plans will impact the company's markets, channels, customers, employees, supply chains, and cost structure. Use these scenarios to understand the potential impact on the business and to formulate strategic alternatives that enable the company to capitalize on market opportunities and address emerging risks. Update the analysis as more members of the president's team are identified and policies are clarified through inauguration and the first 100 days.

Prepare for more discretionary spending capacity. The new administration is expected to try to reduce corporate tax rates to as low as 15 percent, make it easier for U.S. firms to repatriate profits earned abroad, eliminate the corporate alternative minimum tax, and provide special tax deductions for firms engaged in manufacturing in the United States. What would happen to your company's cash flow if these proposals came to fruition? How would the company deploy the additional cash flow and/or repatriated funds; would it undertake new investments, pursue merger and acquisition (M&A) targets, pull deferred projects off the back burner, enhance compensation structures to retain talented employees, expand facilities, upgrade systems, and/or increase dividend rates?

Update M&A plans. The combination of a more favorable tax environment, access to foreign earnings, and deregulation would likely encourage more M&A transactions. Companies should take these changing dynamics under consideration in assessing their M&A appetite in view of their overall corporate strategy and the economic climate.

Diversify if your company's revenue mix is dependent on government funding. Defense contractors can capitalize on defense spending, and materials companies, heavy equipment manufacturers, and construction contractors may benefit from increased infrastructure spending. However, other companies with a high dependency on government contracts and funding, or with close ties to federal agencies that may be placed under tight budgetary constraints, should evaluate opportunities to deploy their core competencies in markets outside of the public sector. The new administration's priorities will likely strain budgets that in the past called for subsidies, discretionary spending, and myriad projects. The president-elect campaigned on eliminating waste as a way of reducing deficits, and that means reining in spending. It is not unreasonable to surmise that the new administration and the Republican Congress will at least restrain growth in budgets for areas that are not deemed a priority.

As business leaders seek to better understand the president-elect and what he might do once he is in office, they will want to know how the Trump administration will respond when policy positions are opposed, market responses are negative, and unintended consequences are better understood. Will proposals be all-or-nothing, or will the administration compromise on something in the middle?

Trump's desire to increase economic growth is unmistakable. But will the new administration be flexible in its positions, willing to rethink priorities and reach out for compromise to get something accomplished?

In these exciting times, only time will tell. Nevertheless, even in this fluid environment, it is not too early to start considering alternatives to current strategies. Then, as the new administration's priorities and policy direction become clearer over time, companies can firm up their responses to expected changes in their operating environment. Keeping in mind these six points will help companies in every sector confidently face a challenging future.

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Jim DeLoach is a managing director at Protiviti. He has over 35 years of experience and is a member of Protiviti's Solutions Leadership Team. With a focus on helping organizations respond to government mandates, shareholder demands, and a changing business environment in a cost-effective and sustainable manner, DeLoach assists companies in integrating risk and risk management with strategy setting and performance management. He has been named to the NACD Directorship 100 list from 2012 to 2016.

Carol Beaumier is an executive vice president, strategic planning, with Protiviti and a member of the firm's executive management team. She has more than 30 years of experience in consulting and as a former regulator with the U.S. Office of the Comptroller of the Currency. Beaumier is a frequent author and speaker on a wide range of financial industry risk and regulatory issues.