Thursday, January 28, 2010
Business confidence is returning after the sharpest drop in economic activity since World War II, according to PricewaterhouseCoopers (PwC) 13th Annual Global CEO Survey.
This rising confidence has translated into hiring plans, with nearly 40 per cent of CEOs expecting to increase their workforce this year. That contrasts with 25 per cent of CEOs planning job cuts over the next year, down from nearly half who decreased their workforce in the past 12 months.
"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. The emerging economies are clearly recovering at a faster pace than those that are more developed. Companies with the best prospects for early recovery are those who managed through the recession while keeping an eye to the recovery ahead.”
"The timing of the recovery will vary depending on geography and industry," Mr. Nally said. “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."
In Asia Pacific and Canada about half of CEOs are looking to increase employment in 2010, and this figure is over 60 percent in Brazil. Meanwhile, nearly a fifth of UK CEOs say they expect their workforce to rise by more than 8 percent in 2010.
Overall, the survey found that 81 percent of CEOs worldwide are confident of their prospects for the next 12 months, while only 18 percent said they remained pessimistic. The results compare with 64 percent who said they were confident a year ago and 35 percent who were pessimistic. Thirty-one percent 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.
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 percent of CEOs said they were confident of growth in the next year. That compared with 91 percent in Latin America and in China/Hong Kong, and 97 percent in India.
Looking at the longer term, the results were more even. Overall, more than 90 percent of CEOs expressed confidence in growth over the next three years. Those results, coming at the start of a new decade, were about on par with confidence levels of CEOs in PwC’s 2000 survey. But 10 years ago the economic split was very different, with 42 percent of North American CEOs extremely optimistic -- twice as many as in Asia.
For the future, a total of 60 percent of CEOs said they expect recovery in their national economies only in second half of 2010 or later, while 13 percent said recovery was already underway, and 21 percent said it would set in during the first half of this year. Return to growth was fastest in China, where 67 percent of CEOs said recovery had begun in 2009. However, nearly two-thirds of CEOs in the US and more than 70 percent in Western Europe said the turnaround would not begin mid-2010.
Other key findings of the 13th Annual PwC Global CEO Survey:
Protracted global recession remains the biggest overall concern of CEOs around the world (65 percent), followed closely by fear of over-regulation (60 percent). More CEOs are "extremely concerned" about over-regulation (27 percent) than any other threat to business growth. 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
To combat recession, nearly 90 percent 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 percent overall said they would seek cost cuts over the next three years
Over one in four CEOs believe their industry’s reputation has been tarnished by the downturn. However, 61 percent 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 behavior. Most say that consumers will place greater importance on a company's social reputation (64 percent), spend less and save more (63 percent), or be more active in product development (60 percent)
Risk management took on greater importance among CEOs as a result of the recession. Forty-one percent of CEOs plan to make major changes to their company’s approach to managing risk, and another 43 percent report plans to make some change to their processes.
More than 60 percent 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 percent of companies with climate change initiatives saw no effect of the recession on their strategies and 17 percent 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."
Download the full survey report plus supporting graphics.
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