The world economy is in a slowdown, that’s pretty clear. In the US, there are fears of a recession in the coming quarter, the interest rate increases due to high inflation make it difficult for companies to earn as they were used to in an era of zero interest (when there is no price for money – you can raise any amount without significant financing costs) and this means that you have to work harder. Many companies are laying off employees to try to keep your head above water (and others take advantage of the situation to fire. Because when everything is blooming – it’s not pleasant and nobody wants to fire, but now there is an opportunity).
Now, a survey of CEOs also shows the negative mood of company managers. You can take the data literally – the managers are very afraid of the near future – and you can also assume that they want to lower expectations (especially the expectations of analysts. Certainly those who manage public companies traded on the stock exchange) Hopefully that way it will be easier for them to pleasantly surprise.
Warren Buffett said that when everyone is greedy you should be a coward, and on the other hand when everyone is a coward it is time to be greedy. Buffett has been sitting on mountains of cash for years and waiting for significant declines in the stock market. Will he start using it soon? That is, is it time to return to the stock market and precisely to assume that after a bad year in the stock market the gains will return?
In any case, here is what the CEOs think: this is “the most negative forecast in 12 years”, according to the survey’s editor, the accounting firm PWC. According to the survey, 73% of the CEOs in the world believe that the growth of the global economy will slow down in the coming year. The main reasons are – inflation (40%), macroeconomic volatility (31%) and geopolitical conflicts (25%). Last year the cyber and health sectors led the way.
By the way, in 2022 they were completely wrong, when 77% thought the situation would be better. In 2021 they were right.
Around the world, their percentages of confidence in economic growth vary widely. The G7 economies, including France (70% vs. 63%), Germany (94% vs. 82%) and the UK (84% vs. 71%) – all burdened by the ongoing energy crisis – these countries are more pessimistic about domestic growth than global growth .
About 40% of CEOs believe that their organizations will not be profitable in 10 years, unless they make changes
According to the survey, about 40% of the CEOs believe that their organizations will not be financially profitable in a decade, if they continue to operate unchanged. The confidence of the CEOs in the growth prospects of their companies has decreased significantly since last year (-26%), the decrease The biggest since the financial crisis of 2008-2009, when there was a 58% drop.
But the truth is that this figure mainly points to the weakness of the CEOs – their job is to make sure that their company succeeds. Maybe not in a year, but in ten years? With such pessimism, how do they even expect to succeed?
The CEOs also testify that they are mainly preoccupied with current operational performance (53%), rather than developing the business and strategy to meet future demands (47%). If they could choose, most CEOs said they would spend more time on the latter (57%).
And here’s another strange figure, the CEOs claim that they don’t fire employees, but more and more companies, large and small, report the firing of hundreds and thousands of employees, so what are they talking about here? In any case, according to the data, CEOs are also looking to cut costs and encourage revenue growth. 52% of CEOs report reducing operating costs, while 51% report raising prices and 48% diversifying the supply of products and services. However, more than half (60%) testified that they do not plan to reduce their workforce in the coming year. 80% indicate that they do not plan to reduce the wages of the employees, in order to preserve talents and reduce the attrition rates of the workforce.
What do CEOs do to improve their companies?
In terms of technology, 76% of the organizations testify that they invest in the automation of processes and systems, 72% in the implementation of systems to increase the skill of the workforce in preferred areas, and 69% in the application of technology such as cloud, artificial intelligence and other advanced technologies.
Inflation, macroeconomic volatility and geopolitical conflicts are the biggest threats to CEOs’ vision
While cyber and health threats were the leading threats in last year’s survey (as a result of the corona), the consequences of the economic crisis are at the top of CEOs’ minds this year, with inflation (40%) and macroeconomic volatility (31%) being the biggest threats according to CEOs In the coming year and over the next five years. In addition, 25% of CEOs feel financially vulnerable to threats posed by geopolitical conflicts around the world, while cyber threats (20%) and climate change (14%) have dropped in rank.
The war in Ukraine and growing concern about other conflicts around the world have caused CEOs to re-evaluate certain aspects of their business models, with nearly half of respondents exposed to geopolitical conflict incorporating a wider range of risks into scenario preparedness and the corporate operating model, for example by increasing investment in cyber security and privacy (48%), supply chain adjustments (46%), re-evaluating market presence or expanding into new markets (46%), or by diversifying their product/service offering (41%).
The survey was conducted for the 26th year, when 4,410 CEOs from 105 countries were asked in the months of October-November 2022.
Bob Moritz, global chairman of PwC: “A volatile economy, inflation for a decade and geopolitical conflicts have contributed to pessimism among CEOs at a level not seen in over a decade. Accordingly, CEOs around the world are reassessing their operating models and cutting costs. To survive the coming years – let alone grow – they must carefully balance short-term threat mitigation and operational requirements with long-term consequences – as businesses that don’t adapt and change simply won’t exist profitable.”
Doron Sadan, the managing partner of PwC Israel: “For me, the bright spot of the survey again lies in human capital, because most of the CEOs stated that the solutions will come from activities of operational efficiency, examination of price strategy and entry into new areas and not necessarily from harming workplaces or the employment conditions of the employees. As far as the CEOs in Israel are concerned, I don’t think the picture is fundamentally different. Global economic trends also affect us in Israel.”