Threats in 2018 that keep CEOs around the world up at night

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PwC, the leading professional services firm, recently conducted around 1300 interviews with CEOs in 85 countries. 57% of CEOs around the world believe that global economic and business growth will improve, at least over the next 12 months.

Read on to know other interesting revelations from PwC’s 21st CEO Survey.

1. Carpe Diem: The CEOs are the new optimists

2018 saw the maximum jump in highest-ever level of CEO optimism in terms of global growth over next 12 months. Last year, only 29% CEOs believed in the improvement in their business growth, which has doubled in 2018.

This shows the optimism and faith among the chief executives in the business environment worldwide, despite high concerns over corporate misbehavior, geopolitical uncertainty, and impact of artificial intelligence on employment.

This surprising optimism might be the result of belief in Carpe Diem. When asked about this optimism, some thought leaders and leading economists said that the burst of optimism was itself reason for continued optimism, and was grounded in a sound rationale. While some considered it a short-term blip.

“We are in a cyclical recovery that has been going on for many years since the financial crisis. People have gotten more optimistic. I think in most parts of the world, CEOs believe that changes in policy are going to continue to improve growth,” observed Glenn Hubbard, economist and dean of Columbia Business School.

2. Optimism and anxiety going hand in hand

However, the record increase in faith regarding global economic growth didn’t translate into an equal faith in the growth of their own organizations.

CEOs from North America (53%) seemed confident about their own organization’s revenue growth in 2018, followed by Latin America (45%), Asia-Pacific (44%), and Western Europe (38%) region. While rest of the world moved in opposite direction, from “very confident” to “somewhat confident”.

CEOs seemed more cautious when asked about their organizational revenue growth over next three years. More CEOs were ‘somewhat confident’ (46%), rather than ‘very confident’ (45%). This too was surprising, because, typically, CEOs show confidence in longer term rather than immediate future.

When asked about the factors that will drive growth, CEOs from North America pointed to organic growth (94%), followed by merger & acquisitions (61%), and then cost reduction (59%).

3. India enters top 5 for global investment

When being asked to look at the countries (except their own) to which CEOs turn for growth, North America topped (46%) the list, followed by China (33%), Germany (20%), UK (15%), and India (9%). While the positions of North America, China, Germany and the UK were the same as 2017, India left Japan behind to grab the 5th position in the list. Canada also has gained a place in top 10, which was at the 15th position last year.

“Three factors make the United States favorable to business now,” noted CEO advisor and author Ram Charan. “First, no country has better mechanisms for funding risks or for raising capital. Second, robotic technology is advancing rapidly, and thus labor cost arbitrage – less expensive labor in other countries – is no longer a restricting factor. Third is growth. At 3%, it is a huge factor. And despite a labor shortage, high-level skills in the US are still the best in the world. Foreigners who want to succeed in the US market want to build plants there. The corporate tax cut will likely accelerate foreign direct investment in America, especially from Europe and Japan.”

4. Terrorism and cyber threats are most concerning factors for business growth

 ‘Over regulation’, which was the most concerning factor among CEOs in 2017, stayed flat at 42% in 2018 as well. The ‘uncertain economic growth’, which was among the top 5 most threats for CEOs last year, moved out of top 10. Unfortunately, other threats such as terrorism and cyber threats vaulted from #12 and #10 to now #2 and #4, respectively.

This shows that CEOs are more anxious about social threats, rather than the direct business risks like new market entrants or changing business behavior.

The anxieties of CEOs vary by the region, but ‘geopolitical uncertainty’, ‘over-regulation’, and ‘increasing tax burden’, were the three threats which appeared on the radar in every region.

5. Globalization failing to close gap between rich and poor

Globalization, the process by which the world becomes more integrated, had a significant impact in some areas. 63% CEOs indicated that globalization has helped to a large extent in ‘enabling universal connectivity’, and ‘easing the movement of capital, goods, and information’ (58%).

However, 39% CEOs said that it failed to close the gap between the rich and the poor, while 30% said that it had bleak impact on averting climate change and resource scarcity.

“If you look at the history of the world over the past 100 years, you see it going back and forth between the opening of economies and the closing of economies. Episodes of anti-globalization come and go as political points of view change. But today we operate in a connected world. Even the most inward-looking governments cannot block how people talk on their cellphones,” said Bernardo Vargas Gibsone, President & CEO of ISA.

CEOs were of divided opinion when asked about whether we are headed towards widespread growth that will benefit many or concentrated growth that will benefit only the few.

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Images source: PwC

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