CEOs are taking a measured approach in an uncertain market and focusing on strategic investments that can deliver long-term value, writes Graham Reid
According to the EY CEO Outlook Pulse survey, CEOs are determined to act decisively and forge ahead, delivering growth and competitive advantage for their business, despite a uniquely challenging economic environment.
Investment strategies
Ninety-seven percent of CEOs in the Americas, Europe and Asia have altered their planned investment strategies in response to recent global turbulence, with almost a third (32%) halting a planned investment.
The volatile geopolitical environment has curtailed the relatively liberalised global trade era, at least for now. Restrictive regulatory trade and investment policies have overtaken COVID-related issues as the key reason for altering international investment plans.
Indeed, 52 percent of CEOs cited restrictive trade policies and political policy uncertainty as key drivers behind their decisions to alter strategic investment plans. Just 19 percent pointed to pandemic-related issues.
CEOs have reported that they have mapped out specific actions such as:
- delaying a planned investment until the situation improves (44%);
- supply chain reconfiguration (41%);
- relocation of operational assets (36%); and
- exiting businesses in certain markets (34%).
CEOs response
For CEOs, the pandemic continues to loom large regarding risks for future growth. Thirty-two percent of respondents consider a continuation or return of pandemic-related disruptions as a key threat to growth.
Twenty-eight percent consider climate change impacts and pressures to build sustainability among the most significant risks they face.
Other risks include:
- uncertain monetary policy direction;
- increasing cost of capital;
- higher input prices and inflation;
- rising cybersecurity risks;
- a further increase in geopolitical tensions; and
- the regionalisation and fragmentation of the global economy.
The findings of the EY CEO Outlook Pulse survey point to a two-stranded response among CEOs to these challenges.
First, they are tackling immediate issues through increased investment in internal functions such as finance, accounting, supply chain, and logistics, as well as in marketing and customer experience.
Second, CEOs are taking a longer-term view and investing in sustainability, including net zero, other environmental issues, and societal priorities.
That longer horizon is also evidenced by intentions to continue investing in digital transformation, innovation, research and development, cybersecurity measures, and talent development.
These findings demonstrate a calm and measured approach among CEOs as they face a period of uncertainty.
Despite anticipating a global downturn and heightened geopolitical risks, CEOs are still intent on making strategic investments that can deliver long-term value for their business.
Graham Reid is Corporate Finance Partner and Head of Markets at EY Ireland
LOADING...