PwC's 27th Annual Global CEO Survey - Thriving in an age of continuous reinvention

Thu, Feb 8th 2024, 02:35 PM

The proportion of CEOs who believe global economic growth will improve overthe next 12-months has more than doubled year-on-year. At the same time the proportion of CEOs concerned about their long-term business viability has risen to 45% as tech and climate pressures accelerate, according to PwC’s 27th Annual Global CEO Survey.

The survey, which interviewed 4,702 CEOs across 105 countries and territories, found that 38% ofCEOs are optimistic about global economic growth prospects over the next 12-months, up from18% in 2023.

CEO expectations of economic decline have also tumbled from a record high in last year’s survey(73%) to 45%, as perceived exposure to inflation and macroeconomic volatility fell by 16percentage points (to 24%) and 7 percentage points (to 24%) respectively. Despite ongoingconflicts, the proportion of CEOs who felt their company is highly or extremely exposed togeopolitical conflict risk fell 7 percentage points (to 18%).

CEOs in most regions of the world are also more likely to be optimistic about domestic economicprospects than pessimistic. However, CEOs in North America and Western Europe buck the trend -in Western Europe, 32% expect their domestic economies to improve, 48% decline; North America,31% and 52%, respectively.

CEOs are more likely to plan to increase than decrease their headcount in the next 12-months, with39% reporting that they expect to increase their headcount by 5% or more. Employers in everyregion are more likely to increase than decrease headcount, with the Middle East the most bullishon hiring (65%).

While the trajectory is positive, confidence is fragile as megatrends including technologicaldisruption – exemplified by generative AI – and the climate transition converge. Almost half (45%)of CEOs say they do not believe their current business will be viable in a decade if it continues onits current path – up from 39% in 2023. Reflecting uncertainty about how they will managemegatrends, CEOs are somewhat less confident than last year in their own company’s prospectsfor revenue growth over the next 12 months – down from 42% to 37%.

Prince Rahming, PwC Bahamas Territory Leader said: “Consistent with the viewsexpressed by CEOs who took part in our CEO Survey, despite challenges, optimism in thelocal economy remains at a higher level, driven primarily by the tourism sector. Climatechange, however, remains a significant threat for The Bahamas’ economy as well as othereconomies in the region. It remains a top priority for the country. As it relates to technology,the government continues to make significant strides in the digitisation of the localeconomy, but as the pace of technological advancements grows rapidly and driven byArtificial Intelligence (AI) both the government and local businesses will need to examinetheir technology strategies in order to stay abreast and not fall behind, Greater investmentand reinvention of business models are needed.

The AI opportunity
CEOs overwhelmingly see generative AI as a catalyst for reinvention that will power efficiency,innovation, and transformational change. Nearly three-quarters (70%) believe it willsignificantly change the way their company creates, delivers, and captures value in the nextthree years.

CEOs are also optimistic about the short-term impact. Over the next 12 months, almost three-fifths(58%) expect it to improve the quality of their products or services and almost half (48%) say it willenhance their ability to build trust with stakeholders. They also expect better outcomes for theirbusiness - 41% expect it to positively impact revenue and 46% expect it to positively impactprofitability. The technology, media and communications sector is most positive about the impact onprofit (54%), while energy, utilities and resources are least optimistic (36%).

But while CEOs are increasingly looking to the transformative benefits of generative AI, the greatmajority say it will require workforce upskilling (69%). They have also expressed concern about anassociated rise in cybersecurity risk (64%), misinformation (52%), legal liabilities and reputationrisks (46%), and bias towards specific groups of customers or employees (34%) in theircompanies.

CEOs report progress on climate priorities
As CEOs establish priorities, many are seeing the climate transition as an industry disruptorcontaining distinct opportunities in addition to risks. Nearly one-third expect climate change to shiftthe way they create, deliver, and capture value over the next three years - up from less thanone-quarter who said as much regarding the past 5 years.

CEOs are making progress in turning their commitments into action. 76% have either begun orcompleted steps to improve energy efficiency, while 58% report having made similar strides when itcomes to innovating new, climate-friendly products, services or technologies.

On the other hand, only 45% note having made progress on or completed incorporating climate riskinto financial planning (with 31% noting no plans to do so). Action on adaptation to physical climaterisks is also lagging at 47% (with 29% noting no plans to act).

The survey suggests significant support for decarbonisation, with only 26% saying that a lack ofboard or management buy-in is at least a moderate barrier to decarbonisation. Instead, CEOs citeregulatory complexity (54%) and lower economic returns for climate friendly investments (51%) asthe biggest barriers to be overcome. CEOs are beginning to take on the economic barrier, with fourin ten reporting that they have accepted lower hurdle rates for climate-friendly investments than forother investments—in the majority of cases between one and four percentage points lower.

The reinvention imperative
As CEOs become more aware of the megatrends facing businesses globally, survey respondentsexpressed increased concern around their long-term business viability. Almost half (45%) note theyare concerned their businesses will not be viable beyond the next decade without reinvention - upfrom 39% in 2023. Notably, the survey shows smaller companies are at greater risk: 56% of CEOsleading businesses generating less than US$100 million in annual revenue believe theirbusinesses will only be viable for 10 years or less if it continues running on its current path. Thisfalls to 27% for those making US$25 billion or more in revenue annually.

Almost all (97%) CEOs note they have taken steps to change how they create, deliver, and capturevalue in the past five years, and over three-quarters (76%) have taken at least one action that hada large or very large impact on their company’s business model.

But while CEOs are taking action, they are faced with a number of challenges. Two thirds (64%)cite the regulatory environment as inhibiting their ability to reinvent their business model to at leasta moderate extent, 55% point to competing operational concerns, and 52% point to a lack of skillsin their company’s workforce.

A further obstacle is inefficiency. CEOs perceive significant inefficiencies across a range of theircompanies’ routine activities—everything from decision-making meetings to emails—viewingroughly 40% of the time spent on these tasks as inefficient. A conservative PwC estimate of thecost of that inefficiency would be tantamount to a self-imposed US$10 trillion tax on productivity.

The proportion of CEOs who believe global economic growth will improve over
the next 12-months has more than doubled year-on-year. At the same time the proportion of CEOs
concerned about their long-term business viability has risen to 45% as tech and climate pressures
accelerate, according to PwC’s 27
th Annual Global CEO Survey.
The survey, which interviewed 4,702 CEOs across 105 countries and territories, found that 38% of
CEOs are optimistic about global economic growth prospects over the next 12-months, up from
18% in 2023.
CEO expectations of economic decline have also tumbled from a record high in last year’s survey
(73%) to 45%, as perceived exposure to inflation and macroeconomic volatility fell by 16
percentage points (to 24%) and 7 percentage points (to 24%) respectively. Despite ongoing
conflicts, the proportion of CEOs who felt their company is highly or extremely exposed to
geopolitical conflict risk fell 7 percentage points (to 18%).
CEOs in most regions of the world are also more likely to be optimistic about domestic economic
prospects than pessimistic. However, CEOs in North America and Western Europe buck the trend -
in Western Europe, 32% expect their domestic economies to improve, 48% decline; North America,
31% and 52%, respectively.
CEOs are more likely to plan to increase than decrease their headcount in the next 12-months, with
39% reporting that they expect to increase their headcount by 5% or more. Employers in every
region are more likely to increase than decrease headcount, with the Middle East the most bullish
on hiring (65%).
While the trajectory is positive, confidence is fragile as megatrends including technological
disruption – exemplified by generative AI – and the climate transition converge. Almost half (45%)
of CEOs say they do not believe their current business will be viable in a decade if it continues on
its current path – up from 39% in 2023. Reflecting uncertainty about how they will manage
megatrends, CEOs are somewhat less confident than last year in their own company’s prospects
for revenue growth over the next 12 months – down from 42% to 37%.
Prince Rahming, PwC Bahamas Territory Leader said: “Consistent with the views
expressed by CEOs who took part in our CEO Survey, despite challenges, optimism in the
local economy remains at a higher level, driven primarily by the tourism sector. Climate
change, however, remains a significant threat for The Bahamas’ economy as well as other
economies in the region. It remains a top priority for the country. As it relates to technology,
the government continues to make significant strides in the digitisation of the local
economy, but as the pace of technological advancements grows rapidly and driven by
Artificial Intelligence (AI) both the government and local businesses will need to examine
their technology strategies in order to stay abreast and not fall behind, Greater investment
and reinvention of business models are needed.
The AI opportunity
CEOs overwhelmingly see generative AI as a catalyst for reinvention that will power efficiency,
innovation, and transformational change. Nearly three-quarters (70%) believe it will
significantly change the way their company creates, delivers, and captures value in the next
three years.
CEOs are also optimistic about the short-term impact. Over the next 12 months, almost three-fifths
(58%) expect it to improve the quality of their products or services and almost half (48%) say it will
enhance their ability to build trust with stakeholders. They also expect better outcomes for their
business - 41% expect it to positively impact revenue and 46% expect it to positively impact
profitability. The technology, media and communications sector is most positive about the impact on
profit (54%), while energy, utilities and resources are least optimistic (36%).
But while CEOs are increasingly looking to the transformative benefits of generative AI, the great
majority say it will require workforce upskilling (69%). They have also expressed concern about an
associated rise in cybersecurity risk (64%), misinformation (52%), legal liabilities and reputation
risks (46%), and bias towards specific groups of customers or employees (34%) in their
companies.
CEOs report progress on climate priorities
As CEOs establish priorities, many are seeing the climate transition as an industry disruptor
containing distinct opportunities in addition to risks. Nearly one-third expect climate change to shift
the way they create, deliver, and capture value over the next three years - up from less than
one-quarter who said as much regarding the past 5 years.
CEOs are making progress in turning their commitments into action. 76% have either begun or
completed steps to improve energy efficiency, while 58% report having made similar strides when it
comes to innovating new, climate-friendly products, services or technologies.
On the other hand, only 45% note having made progress on or completed incorporating climate risk
into financial planning (with 31% noting no plans to do so). Action on adaptation to physical climate
risks is also lagging at 47% (with 29% noting no plans to act).
The survey suggests significant support for decarbonisation, with only 26% saying that a lack of
board or management buy-in is at least a moderate barrier to decarbonisation. Instead, CEOs cite
regulatory complexity (54%) and lower economic returns for climate friendly investments (51%) as
the biggest barriers to be overcome. CEOs are beginning to take on the economic barrier, with four
in ten reporting that they have accepted lower hurdle rates for climate-friendly investments than for
other investments—in the majority of cases between one and four percentage points lower.
The reinvention imperative
As CEOs become more aware of the megatrends facing businesses globally, survey respondents
expressed increased concern around their long-term business viability. Almost half (45%) note they
are concerned their businesses will not be viable beyond the next decade without reinvention - up
from 39% in 2023. Notably, the survey shows smaller companies are at greater risk: 56% of CEOs
leading businesses generating less than US$100 million in annual revenue believe their
businesses will only be viable for 10 years or less if it continues running on its current path. This
falls to 27% for those making US$25 billion or more in revenue annually.
Almost all (97%) CEOs note they have taken steps to change how they create, deliver, and capture
value in the past five years, and over three-quarters (76%) have taken at least one action that had
a large or very large impact on their company’s business model.
But while CEOs are taking action, they are faced with a number of challenges. Two thirds (64%)
cite the regulatory environment as inhibiting their ability to reinvent their business model to at least
a moderate extent, 55% point to competing operational concerns, and 52% point to a lack of skills
in their company’s workforce.
A further obstacle is inefficiency. CEOs perceive significant inefficiencies across a range of their
companies’ routine activities—everything from decision-making meetings to emails—viewing
roughly 40% of the time spent on these tasks as inefficient. A conservative PwC estimate of the
cost of that inefficiency would be tantamount to a self-imposed US$10 trillion tax on productivity.
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