CEOs have become increasingly concerned that their companies will fail over the next decade, despite signs of an improving economic outlook for this year.
The pandemic, energy crises, war in Europe and heightened geopolitical tensions have sapped the confidence of business leaders, with a large proportion of those surveyed by global accounting firm PwC saying they need to become more resilient.
About 40 percent of the 4,410 CEOs the firm surveyed late last year said they did not see their own companies as sustainable in 10 years if they stayed on their current path. Pessimism among business leaders toward the end of 2022 contrasts with better-than-expected data on the global economy in recent weeks.
Instead of the widely predicted global recession, growth figures from major economies such as the UK and Germany were stronger than expected, while inflation fell from the multi-decade highs seen in many economies last year.
Economic conditions continued to improve on Monday as CEOs and world leaders gathered in the Swiss mountain resort of Davos for the World Economic Forum, and European wholesale gas prices fell below €60 per megawatt hour for the first time since September 2021. Jean Marc Ollagnier, European CEO of consultancy Accenture, said: “Most European CEOs are optimistic about the year ahead.”
Bob Moritz, global chairman of PwC, said that while the mood of “excessive optimism” before Russia’s invasion of Ukraine had turned to “excessive pessimism” before the turn of the year, business leaders were increasingly focusing on the changes needed to become more resilient in the longer term. .
“CEOs are thinking, ‘Can they move at the speed they need?'” Moritz said. “He’s worried: ‘I kind of know what the problems are, but can I survive in the next five years and thrive in the next 10’.”
Nearly six in 10 said they did not personally devote enough time to strategic issues such as improving their company’s technology capabilities, raising employee skill levels, building resilience in their supply chains and decarbonizing their business.
Ollagnier said there was a need for European companies in particular to improve technology and “reinvent their business”.
So far in 2023, there has been unexpected resilience in economic data. China’s decision to end its zero-epidemic Covid policy and falling European gas prices have prompted some economists to upgrade their projections for 2023. Wholesale food prices have also fallen sharply since peaking last spring.
A World Economic Forum survey of chief economists confirmed the improvement in sentiment, with two-thirds expecting economic conditions to improve during 2023.
Although the business environment continued to be challenging, the mitigation of disruptions in the supply chain, resilient labor markets and easing of inflationary pressures were highlighted as reasons for greater optimism.
Most still thought the world would slide into recession due to challenging conditions at the start of the year, that any downturn would be short-lived and growth would pick up later in the year.