The global economy and geopolitical tensions are two of the key factors weighing on the minds of chief executives, according to a global CEO survey launched at Davos last week.
Despite the fact that we are now eight years on from the financial crisis, business leaders are proving to be increasingly concerned about the global economy.
Less than a third (27%) of the CEOs in the survey, which was carried out by PricewaterhouseCoopers, believed that global economic growth will improve in 2016. This is down 17 points from two years ago, when almost half (44%) believed growth would come.
But this isn’t the only pessimistic trend in the report. Almost a quarter (23%) believe that economic growth in 2016 will actually decline. In 2014, this figure was 17%.
In addition, findings from the survey show only slightly more than a third (35%) are very confident about their own company growth in the coming year, down 4 points on last year (39%), and even 1 point below 2013.
“I think globally I’m a bit more worried because there’s a slowdown in China and the debt crisis in Europe is still lingering,” said Don Lam, CEO of VinaCapital, who was one of a number of business leaders interviewed by PwC for the report.
“If our purpose is to help our customers be successful, if the economy around them doesn’t provide growth and avenues for success, then our prospects dim,” said Brian Moynihan, CEO of Bank of America.
“Bottom line, the trends aren’t good,” said PwC Chairman Dennis McNally. “There’s no question that business leaders’ confidence in both the global economy and their own company growth prospects have taken a knock.
“CEOs see real challenges ahead. They are keeping a very close eye on China given the continued importance they place on its economy for their own growth prospects.”
Tough times for business
CEOs cite various reasons for their gloominess. Two-thirds of CEOs (66%) see more threats facing their businesses today than they did three years ago.
“The global marketplace is getting more and more global, and things are changing more and more rapidly,” said Susanna Campbell, CEO of Ratos AB. “It’s a very exciting time to do business. It’s a very difficult time to do business. The past is no longer a good predictor of the future.”
Perhaps the most noteworthy – three or four years ago they didn’t even appear on CEOs’ radar – are concerns over geopolitical tensions, cited by 74% of business leaders and in at number two on their list of worries this year.
It’s hardly surprising that geopolitics weighs heavily on CEO minds, given the frequency with which terrorist attacks make the headlines. Exchange-rate volatility and social instability, which are interconnected with geopolitical tension, also feature high on the list of concerns.
“Given most recent events, geopolitical concerns are likely to become even more pronounced in the year ahead,” said McNally.
When there's a lack of control
Still in the number one spot, and a higher concern than ever before at 80%, are concerns about regulation.
But regulation, along with geopolitical issues and the economy, is something that CEOs have little control over. In areas where they can exert some influence, the picture was brighter.
Although technology was cited as a major concern to the way businesses operate, 90% of CEOs are changing how they use technology to better converse with and understand their customers. In addition, 68% are changing how they use their data and analytics to help grow their business.
Taking into account their place in a globalized world, 86% are making changes to how they measure success. In other words, success will not be measured by profit alone. “A measure of success is how you give back to society,” said Don Lam.
The outlook for jobs is good. With 72% worried about availability of key skills, almost half plan to increase headcount this year.
“CEO’s are clearly dealing with a lot of moving parts, an economic picture that is increasingly unpredictable, a world that is becoming more complex … a series of risks that are growing wider,” said McNally.
“Given these challenges, it’s easy for all of us to assume a doom-and-gloom scenario, but we see much more than that. To me it’s actually encouraging to see how CEOs are confronting today’s realities but also thinking about the longer term; looking at the long-term viability and sustainability of their business.”
The Annual Meeting took place in Davos from 20 to 23 January, under the theme Mastering the Fourth Industrial Revolution.