Chief executives want to reduce costs but not wages or staff size

The majority of chief executive officers believe that global economic growth will decline over the coming year, with 73 per cent of participants contributing to the most pessimistic outlook in more than a decade, according to the findings of a global CEO survey circulated by PwC Cyprus on Tuesday.

Despite the gloomy outlook for the next 12 months, a sizeable amount of participants said that while they are looking to cut costs, they are neither looking to reduce salaries nor decrease their number of employees.

The latest iteration of global consulting firm PwC’s annual Global CEO Survey polled 4,410 CEOs in 105 countries and territories in October and November 2022.

“The bleak CEO outlook is the most pessimistic CEOs have been regarding global economic growth since we began asking this question 12 years ago and is a significant departure from the optimistic outlooks of 2021 and 2022, when more than three-quarters (76 per cent and 77 per cent, respectively) thought economic growth would improve,” the company said in its report.

“In addition to a challenging environment, nearly 40 per cent of CEOs think their organisations will not be economically viable in a decade if they continue on their current path,” the company added.

What is more, according to the survey, the confidence of chief executive officers in their own company’s growth prospects also declined dramatically since last year, dropping by 26 per cent, the biggest decline since the 2008-2009 financial crisis, when a 58 per cent decline was recorded.

On a global level, the survey noted that business confidence around economic growth varies sharply, not excluding G7 economies.

The report also said that among the most severe concerns for chief executives are soaring inflation, macroeconomic volatility, as well as geopolitical conflicts.

“While cyber and health risks were the top concerns a year ago, the impact of the economic downturn is top-of-mind for CEOs this year, with inflation (40 per cent) and macroeconomic volatility (31 per cent) leading the risks weighing on CEOs in the short-term – the next 12 months – and over the next five years,” the report said, while noting that 25 per cent of CEOs also feel financially exposed to geopolitical conflict risks, whereas cyber risks and climate change have fallen, dropping to 20 and 14 per cent respectively.

“The war in Ukraine and growing concern about geopolitical flashpoints in other parts of the world have caused CEOs to rethink aspects of their business models, with almost half of respondents that are exposed to geopolitical conflict integrating a wider range of disruptions into scenario planning and corporate operating models either by increasing investments in cybersecurity or data privacy (48 per cent),” the report added.

Moreover, the survey reflected the fact that chief executives are cutting costs but not headcount or compensation.

According to the results, 52 per cent of CEOs said that they are reducing operating costs, 51 per cent reported raising prices, and 48 per cent are diversifying their companies’ product and service offerings.

However, 60 per cent of CEOs said they do not plan to decrease the size of their workforce in the coming year, while 80 per cent have indicated that they do not plan to reduce staff remuneration in order to retain talent and mitigate workforce attrition rates.

CEOs noted the need to collaborate with a wide range of stakeholders to build trust and deliver sustained outcomes if they are to generate long-term societal value. The survey found that when organisations partner with non-business entities, it is to address sustainable development (54 per cent), diversity, equity, and inclusion (49 per cent), and education (49 per cent).

In terms of technology, 76 per cent of organisations said that they are investing in automating processes and systems, 72 per cent said that they implementing systems to upskill workforces in priority areas, while 69 per cent stated that they deploying technology such as the cloud, AI and other advanced technology.

“However, many CEOs question whether critical preconditions for organisational empowerment and entrepreneurship are present in their companies to tackle the increasingly complex risks organisations face,” the report said.

As an example, it noted that only 23 per cent of CEOs said that leaders in their company often or usually make strategic decisions for their function without consulting the CEO.

Further to the above, only 46 per cent of CEOs said that the leaders in their company tolerate small-scale failures often or usually.

However, more optimistically, nearly 9 in 10 (85 per cent) respondents said that the behaviours of employees are often or usually aligned with their companies’ values and direction.

“The risks facing organisations and society today cannot be addressed alone and in isolation. CEOs must therefore continue to collaborate with a wide range of public and private sector stakeholders to effectively mitigate those risks, build trust and generate long-term value – for their businesses, society and the planet.” Global Chairman of PwC Bob Moritz said.

Finally, as part of its global survey, PwC Cyprus said that it will present its 12th local survey in a special event in March 2023.

According to the company, 159 CEOs from Cyprus participated in the study, reflecting the business community’s growing interest in taking part in the survey.