Latvian CEOs are cautious and willing to fight on their own

19/02/15

Every year PwC conducts a global CEO survey to find out their thoughts about future prospects and challenges in business development across their country, region and globally. Thanks to our willing CEOs, this year we have been able to produce a Latvian report. It must be admitted that Latvian CEOs have seen some tough going this year, especially in terms of geopolitical developments. The survey results also sound a note of caution and concern; almost half of the respondents believe that global economic growth will decline this year, yet their own business growth forecasts are cautiously optimistic, with 77% confident of their revenue growth over the next three years. Latvian CEOs are concerned about having a skilled workforce and improving their health and welfare. Latvian CEOs are prepared to work shoulder to shoulder with the government to create an environment that drives innovation and to achieve other goals important to their own business and to the economy as a whole. On behalf of PwC we thank everyone who helped us conduct this survey.

  • A considerable number of CEOs (41%) believe that global economic growth will decline this year.
  • Confidence in revenue growth in their own business remains, with 77% confident of revenue growth over the next few years.
  • 41% of CEOs plan to increase headcount over the coming year.
  • Cost cutting and business process outsourcing are priorities in restructuring.
  • Latvian CEOs are considerably less concerned than Estonian CEOs about the increasing tax burden.
  • CEOs are unwilling to enter into collaborations and strategic alliances with academia, industry clusters and business associations.
  • CEOs believe a skilled and adaptable workforce should be government priority.
  • Key technology areas are cyber security and the use of mobile technologies for customer engagement.

Riga, Latvia: Findings from PwC’s 18th Annual Global CEO Survey conducted in 77 countries, including Latvia, over the fourth quarter of 2014 were presented at the Annual Global Economic Forum at Davos in January 2015.

Just like CEOs in Central and Eastern Europe (CEE), Latvian CEOs are the least optimistic about global economic growth over the coming year. CEOs believe that economic growth over the next 12 months will stay the same (44%) or even decline (41%), yet they retain confidence in their company’s revenue growth prospects, especially in the short term. 77% of respondents are confident of revenue growth over the next few years.

Many CEOs in Latvia (41%) and CEE (42%) are determined to increase headcount. Only 15% of Latvian CEOs are thinking of decreasing headcount over the next 12 months.

CEOs also plan to launch a range of business strategies to strengthen their companies over the next 12 months, with cost cutting (53%) and business process outsourcing (26%) as priorities in restructuring this year.

CEOs were asked to name major commercial, social, economic and political threats to their business growth. Global risk intensity has reached a record high this year. In the eyes of Latvian CEOs, access to key skills ranks third after geopolitical uncertainty and over-regulation, with the increasing tax burden only fourth. Estonian CEOs are considerably more concerned than Latvian CEOs about the increasing tax burden. Also, Estonian CEOs ranked government response to fiscal deficit and debt burden higher than Latvian CEOs did.

Asked about business risks, CEOs globally, in CEE and Latvia all agree that a skilled and adaptable workforce and access to key skills are top concerns. Unlike CEE and Estonian CEOs, Latvian CEOs are concerned about cyber threats and lack of data security, as well as bribery and corruption. Interestingly, unlike Estonian CEOs, Latvian CEOs do not fear the speed of technological change and new market entrants.

For Latvian CEOs the most important market is Russia as its closeness and market size will continue to affect the development of Latvian companies over the next 12 months. The top three strategically important countries globally are the US, China, and Germany. Interestingly, Estonian CEOs see Latvia as their strategically most significant market over the next 12 months, with only 20% of respondents attaching significance to Russia.

Our survey revealed that Latvian CEOs prefer to work with customers, suppliers and NGOs. Considerably fewer Latvian CEOs plan to work with academia, clusters, associations, business networks or competitors. More Latvian CEOs than CEE or global CEOs plan to work with government, start-ups and NGOs. Latvian CEOs’ favourable attitude to working with the government is encouraging. This choice and respondent choice percentages might be due to the small distance between government and people that is typical of small territories.

Asked to define three areas that should be government priorities, global CEOs most often cited creating an internationally competitive and effective tax system, a skilled and adaptable workforce, and providing adequate infrastructure. For Latvian CEOs a skilled and adaptable workforce comes first and is followed by creating an internationally competitive tax system and improving the health and welfare of the workforce.

Asked to name areas where governments are not performing effectively, global CEOs clearly named an internationally competitive and effective tax system, while Latvian CEOs cited a skilled and adaptable workforce (62%). The Latvian government is doing best at providing digital infrastructure and mitigating risks caused by climate change.

CEOs were also asked to name an area they plan to improve in collaboration with government over the next few years. In Latvia this is creating and maintaining an environment that drives innovation (29%). Another 29% will take part in providing a skilled and adaptable workforce, while 26% will help improve the health and welfare of the workforce.

Asked about the significance and use of technology, CEOs globally and in Latvia named digital technology areas that are most strategically important for their organisation. Globally this is using mobile technologies for customer engagement (81%) and data mining and analysis (80%). In CEE this is data mining and analysis (86%) and mobile technologies (74%). Latvian CEOs see cyber security (94%) and the use of mobile technologies for customer engagement (79%) as key. Data mining and analysis is also essential (76%).

Dr.dat. Baiba Apine, a senior manager at PwC Consulting, explains Latvian CEOs’ concerns about cyber security as follows: “Latvian CEOs are considerably more concerned about cyber security (94%) than the global average (78%). Latvian CEOs’ concern has grown since last year mainly as a result of the active debate on cyber security in the media as collaboration with customers and suppliers is increasingly moving into cyber space. The relatively large short-term business impact of data analytics (76% in Latvia and 80% globally) depends on CEOs’ ability to identify areas where data analytics would have added value. At the moment this technology looks more promising to information technology professionals than CEOs themselves.”

Asked to evaluate the advantages of technology and how businesses can benefit, global and Latvian CEOs most often cited improved operational efficiency (88% globally and 100% in Latvia). Data and data analytics ranked second (85%) globally, while customer experience came second (88%) in Latvia. In CEE, operational efficiency and data analytics (90%) tied for first place.

64% of respondents globally and 51% in CEE said they have a talent diversity strategy or intend to launch one in their company. Only 32% of respondents in Latvia said they have such a strategy or intention, and another 32% said they do not.

CEOs in Latvian companies that have adopted a talent diversity strategy (32%) cited talent retention, improved operational efficiency, internal and external collaboration, increased customer satisfaction, and meeting new customer desires (all 91%).

Our approach

As part of PwC’s 18th Annual Global CEO Survey we conducted 1,322 interviews with CEOs in 77 countries over the fourth quarter of 2014. By region 459 interviews were conducted in Asia Pacific, 455 in Europe, 147 in North America, 167 in Latin America, 49 in Africa, and 45 in Middle East. In Latvia we conducted 34 interviews with CEOs in 18 industries. One third of the respondents are from the Top 150 companies by revenue in Latvia.

The Latvian survey covered CEOs at board chairman and director level in a total of 18 industries, including insurance, automotive, construction, banking and finance, pharmaceuticals, information and communications technology, real estate, oil and natural gas, forestry, retail and wholesale, media, transport, and logistics.

PwC firms help organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 195 000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting www.pwc.lv.

Contact us

Zlata Elksnina - Zascirinska

Country Managing Partner, PwC Latvia

Tel: +371 67094400

Follow us