OREANDA-NEWS. February 03, 2009. The results of the 12th Annual Global CEO Survey, which was carried out by PricewaterhouseCoopers, demonstrate that under the influence of the global economic downturn leaders in the business community are losing confidence in business development prospects, reported the press-centre of PricewaterhouseCoopers.

They believe that economic recovery will be a slow and gradual process stretching over the next three years. The results were announced today at the annual meeting of the World Economic Forum in Davos, Switzerland.

CEO confidence has plunged to its lowest level since 2003, when PwC first began tracking the forecasts of the world’s leading CEOs. Worldwide just 21 per cent of CEOs said they were fully confident in a growth in revenue for their companies over the next 12 months, down from 50 per cent in last year's survey. Thirty-five per cent of CEOs said they were pessimistic about the outlook for the coming year.

Pessimism prevailed across all geographic regions, business sectors and levels of economic development the survey found. Only 15 per cent of CEOs in North America and 15 per cent in Western Europe expressed confidence in the growth prospects for the next 12 months. This compared with 21 per cent in the emerging economies of Central and Eastern Europe, 31 per cent in the Asia-Pacific region and 21 per cent in Latin America.

On average Russian CEOs appeared to be more optimistic in their expectations than their global counterparts. In terms of short-term growth in revenue, 30 per cent were fully confident, 43 per cent were partially confident and 27 per cent were not confident.

CEOs worldwide also gave a gloomier forecast for long-term growth, predicting a slow and protracted recovery. Only 34 per cent said they were completely confident that their companies would experience growth during the next three years. This was down from 42 per cent last year, when CEOs were just beginning to recognise the full impact of the credit crisis on the global economy. Illustrating the changing mood, CEOs confidence worsened over the course of the surveying as negative economic news unfolded. In terms of long-term growth, CEOs in Russia were even more confident. Fifty-three per cent are fully confident in long-term growth in revenue.

“The speed and intensity of the recession has rocked the psyches of CEOs and created a global crisis of confidence,” said PricewaterhouseCoopers' Global CEO Samuel A. DiPiazza, Jr. “CEOs are most concerned about the immediate survival of their companies. Even in once rapidly emerging economies, companies are now coping with issues like unavailable credit, sluggish capital markets and collapsing demand.

“The severity and duration of the recession are difficult to predict and CEOs are balancing the challenges of successfully managing through the downturn while also remaining prepared for an economic turnaround. Their prospects for recovery are truly connected with carrying out these two tasks,” he added.

The impact of the recession on the world's major economies, cited by 85 per cent of survey respondents worldwide (80 per cent in Russia), is a risk factor that continued to dominate the concerns of CEOs. Other major risk factors included disruption in the capital markets, cited by 72 per cent (63 per cent in Russia); over-regulation, 55 per cent (43 per cent in Russia); and energy costs, 50 per cent (33 per cent in Russia). As shown above, Russian CEOs are less concerned about risks than their colleagues abroad with the exception of the availability of key talent, which was cited by 47 per cent of Russian respondents as opposed to 46 per cent of global respondents.

Influence of the banking crisis
CEOs expect the worldwide banking crisis to have a broad impact on business, affecting companies across all geographic regions and business sectors. Nearly 70 globally and 83 per cent of CEOs in Russia said their companies will be affected by the credit crisis. Of those, nearly 80 per cent (100 per cent in Russia) said they faced higher financing costs, and nearly 70 per cent (84 in Russia) said they would delay planned investments as a result. Companies in the banking, utilities, construction, entertainment and automotive sectors are most likely to be impacted, CEOs said.

Those CEOs whose companies were anticipating growth said they would fund it primarily through internal cash flow (according to 76 per cent of global respondents and 80 per cent of Russian respondents), followed by the debt and equity markets. It is interesting that Russian CEOs, to a greater extent than their foreign colleagues, are counting on attracting financial resources from private equity and venture capital funds (30 per cent compared to 19 per cent globally), divestiture of existing assets (20 per cent compared to 11 per cent globally) and financial support from the government (17 percent compared to 5 per cent globally).

Long-term growth factors
Despite the severity of the current economic conditions, CEOs continued to be concerned by long-term growth factors. Access to key talent remained a vital concern; only 26 per cent said they planned to reduce headcount in the coming year, while 35 per cent planned to maintain staffing levels. In Russia CEOs’ plans look more drastic — 37 per cent of respondents said they planned to reduce staff.

Moreover, 72% of CEOs predicted that the pressure on natural resources would become more urgent in the future. Other factors that respondents said would have an important impact on long-term success were a dependence on carbon-based energy (cited by 61 per cent compared to 66 per cent of Russian CEOs), climate change (56 per cent compared to 43 per cent in Russia), overpopulation (55 per cent compared to 43 per cent in Russia) and the scarcity of fresh water (50 per cent compared to 23 per cent in Russia). The largest percentage of Russian CEOs (73 per cent) sees the ageing population as an important factor for long-term success.

More than 80 per cent of the survey's respondents (87 per cent of Russian respondents) identified the need to reduce the amount of electricity they use and are looking for ways to increase the efficiency of their business operations. More than half of global respondents (and only 23 per cent of Russian respondents) stated that they are looking for ways to use alternative energy sources. Additionally, companies are investing in technology that will reduce their level of energy dependence.

One priority task for CEOs remains the search for and retention of highly-qualified staff. As part of this effort, 70 per cent of total respondents (90 per cent of Russian respondents) noticed a shortage of knowledgeable and experienced candidates. Other concerns include integrating young specialists into the company's activities (61 per cent; 63 per cent in Russia), providing attractive opportunities for career growth (58 per cent; 30 per cent in Russia) as well as the struggle between companies in the same field to attract qualified professionals (52 per cent; 60 per cent in Russia).

It is interesting that Russian CEOs — more than their global colleagues — are worried by a shortage of graduates in the natural sciences and technical fields (47 per cent in Russia compared to 37 per cent globally), but are much less worried about retaining female staff (10 per cent in Russia compared to 28 per cent globally). In terms of strategies for attracting and retaining qualified staff, survey respondents mentioned introducing flexible working conditions (77 per cent in Russia compared to 78 per cent globally), moving key staff to new jobs, arranging corporate social programmes and more. For the most part, the opinions of global and Russian CEOs were in agreement, however, considerably more Russian CEOs (57 per cent compared to 37 per cent of their global colleagues) are counting on attracting temporary staff to solve any personnel problems.

JVs to overtake cross-border M&A Activity
The percentage of CEOs who believe that Joint Ventures (JVs) will play a greater role than M&A in cross-border growth has surged, particularly in Western Europe and Latin America. This may reflect the lower cost and risk level associated with JVs, as well as the increasing popularity of collaboration to deal with the challenges of cross-border growth.

Merger and acquisition activity has decreased. Only 20 per cent of respondents said they had completed such a transaction last year. The decline in M&A was most pronounced in emerging economies in Asia and Eastern Europe.

Questions on regulation
CEOs said they recognise the need to collaborate with the government to address systemic problems. Yet, while 55 per cent of CEOs (43 per cent in Russia) remain concerned about overregulation as an obstacle to growth, nearly half also said their governments have not done enough to create a skilled workforce, and 38% said governments could do more to improve infrastructure. Likewise, more than 80 per cent of CEOs favoured clear, consistent government policies to address climate change, but only 28 per cent believe that their governments have such policies.