DAVOS, Switzerland 27 January 2010 – With their worst fears of prolonged recession behind them, CEOs' confidence for future growth has bounced back from the gloomy prospects of a year ago, according to PricewaterhouseCoopers 13th Annual Global CEO Survey. The survey results were released at the World Economic Forum annual meeting in Davos.
Boris Krasnyansky, Managing Partner of PricewaterhouseCoopers in Ukraine, said:
“The consolidated opinions of business leaders around the globe continues to be the most reliable barometer of ‘economic weather’ in the world. Last year, CEOs were compelled to introduce dramatic changes in their companies: reduce headcount, hold on to cash, and sell off assets. Nevertheless, this year Survey results impress with a high level of CEO confidence in short-term prospects – there’s a sense that the worst is over. As the Ukrainian economy highly depends on the global one, this assessment will also create positive expectations of business community in Ukraine”.
According to the survey, more than 90% of CEOs worldwide are very optimistic about the prospects for growth over the next three years. Overall, the survey found that 81% of CEOs worldwide are confident of their prospects for the next 12 months, while only 18% said they remained pessimistic. The results compare with 64% who said they were confident a year ago and 35% who were pessimistic. Thirty-one per cent of CEOs said they were now "very confident" of their short term prospects, up 10 percentage points from last year, a low point in CEO confidence since PwC began its tracking.
This rising confidence has translated into a planned boost in recruitment, with nearly 40% of CEOs worldwide expecting to increase their headcount this year. Contrasting with 25% of CEOs in the world and 27% in Central and Eastern Europe (CEE).
The survey revealed striking differences in confidence levels - and by extension the impact of the global recession -- among CEOs in emerging economies and those in developed nations. In North America and Western Europe, for example, about 80% of CEOs said they were confident of growth in the next year. That compared with 91% in Latin America and in China/Hong Kong, and 97% in India.
For the future, a total of 60% of CEOs said they expect recovery in their national economies only in second half of 2010 or later, while 13% said recovery was already underway, and 21% said it would set in during the first half of this year. Nearly two-thirds of CEOs in the US and more than 70% in Western Europe said the turnaround would not begin until the half of 2010.
"The fears of a global economic meltdown have receded and CEOs are more upbeat about their prospects," said Dennis M. Nally, Global Chairman of PricewaterhouseCoopers. "CEO confidence is tempered, however, by the slow pace of recovery and the impact of often drastic cost-cutting and other steps taken to survive the downturn”.
“In some fast-growing economies the turnaround is well under way; but CEOs in the countries hardest hit by the crisis see its effects remaining through 2010 and beyond. CEOs must now shift their mindset to making strategic decisions about investing in growth in order to gain competitive advantage." - Mr. Nally added.
Other key findings of the 13th Annual PwC Global CEO Survey:
Fears for the future
Protracted global recession remains the biggest overall concern of CEOs around the world (65%), followed closely by fear of over-regulation (60%). More CEOs are "extremely concerned" about over-regulation (27%) than any other threat to business growth.
“Clearly, the findings of this Survey on regulation, or rather introduction of over regulation, are felt to be an important issue by many CEOs in our country,” Boris Krasnyansky said. “Ukrainian lawmaker and regulatory authorities should be aware that excessive regulation is a clear obstacle to further investment and growth. This also holds true for inconsistent interpretation and arbitrary enforcement of legislation”.
Other high-ranking potential business threats included instability in capital markets, and exchange rate volatility. At the other end of the spectrum, concerns over terrorism and infrastructure were cited by less than a third of CEOs globally as threats to growth.
Love-hate relationship with regulators
CEOs were very clear about the threat of over-regulation. Over Two-thirds of CEOs disagreed with the notion that governments have reduced the overall regulatory burden. They also opposed government ownership in the private sector even in the worst of times – nearly half agreed that government ownership helps to stabilise an industry during a crisis. CEOs from two sectors that received considerable government support during the crisis – automakers and banks – were amongst the most appreciative of government ownership in troubled times.
At the same time, CEOs were optimistic about governments’ efforts to address systemic risks such as another economic crisis – 65% of CEOs agreed that regulatory cooperation will help successfully mitigate systemic risks.
Combating the effects of recession
To combat recession, nearly 90% of all CEOs said their companies had initiated cost-cutting measures in the past 12 months, led by those in the US, Western Europe and the UK. And nearly 80% overall said they would seek cost cuts over the next three years.
Public trust and consumer behaviour
Over one in four CEOs believe their industry’s reputation has been tarnished by the downturn. However, 61% of CEOs in the banking and capital markets sector said there has been a fall in trust in their industry.
Nearly half of CEOs are concerned that the recession caused a permanent shift in consumer behaviour. Most say that consumers will place greater importance on a company's social reputation (64%), spend less and save more (63%), or be more active in product development (60%).
Risk management took on greater importance among CEOs as a result of the recession. Forty-one per cent of CEOs plan to make major changes to their company’s approach to managing risk, and another 43% report plans to make some change to their processes
Boards of Directors are becoming more engaged in key aspects of management; such as assessing strategic risk, monitoring financial health, and overseeing company strategy.
More than 60% of CEOs said their companies are preparing for the impact of climate change initiatives and believe those efforts will improve their company's reputation. The recession had little impact on the green momentum; 61% of companies with climate change initiatives saw no effect of the recession on their strategies and 17% raised such investments last year.
"CEOs will be in a post-survival mode in the coming months. Their most common regret about how they dealt with the recession was not fully understanding the risks, and failing to respond more quickly," said Mr. Nally. "The importance of managing risk was the most often cited lesson to emerge from the financial crisis. CEOs are learning to balance risk management with decisiveness and flexibility as they seek to return to prosperity."
For more details, go to www.pwc.com/ceosurvey
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For the PricewaterhouseCoopers 13th Annual Global CEO Survey, 1,198 interviews with CEOs were conducted in 52 countries during the last quarter of 2009. The majority of interviews were conducted by telephone. The research was coordinated by the PricewaterhouseCoopers International Survey Unit, Belfast, Northern Ireland, in cooperation with project managers and a global advisory board of PwC partners. By region, 535 interviews were conducted in Europe (Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Netherlands, Norway, Poland, Portugal, Romania, Russia, Spain, Sweden, Switzerland, Turkey, UK, Ukraine), 289 in Asia Pacific (Australia, China/Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Singapore, Taiwan, Thailand, Vietnam), 167 in Latin America (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela), 139 in North America (US, Canada), and 68 in the Middle East and Africa.
The full survey report plus supporting graphics which can be downloaded are available at www.pwc.com/ceosurvey.
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