OREANDA-NEWS. February 01, 2010. CEO confidence about future growth has returned, according to PricewaterhouseCoopers’ 13th Annual Global CEO Survey, released at the World Economic Forum meeting in Davos, Switzerland, reported the press-centre of PricewaterhouseCoopers.

According to the survey, more than 90 per cent of CEOs worldwide are very optimistic about the prospects for growth over the next three years. Overall, the survey found that 81 per cent of CEOs worldwide and 76 per cent of Russian CEOs are confident that their companies’ revenues will increase in the next 12 months. A total of 53 per cent of Russian CEOs said they were “very confident” of growth in the next year, up 23 percentage points from last year’s results. Twenty-three per cent of respondents in Russia remain pessimistic and do not expect any increase in revenues in the next 12 months.

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 per cent of CEOs said they were confident of growth in the next year. That compared with 91 per cent in Latin America and in China/Hong Kong, and 97 per cent in India.

A total of 60 per cent of CEOs said they expected recovery in their national economies only in the second half of 2010 or later, while 13 per cent said the recovery was already underway. Nearly two-thirds of CEOs in the US and more than 70 per cent in Western Europe said the turnaround would not begin until the second half of 2010. Russian CEOs are more optimistic, with 50 per cent of respondents expecting growth in 2010 (30 per cent cited the first half of 2010, and 20 per cent — the second).

This rising confidence has translated into a planned boost in recruitment, with nearly 40 per cent of CEOs worldwide and 37 per cent of CEOs in Russia expecting to increase their headcount this year. Twenty-five per cent of CEOs worldwide are planning job cuts over the next year, compared with 17 per cent in Russia and 27 per cent in Central and Eastern Europe (CEE).

“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.”

Other key findings of the 13th Annual PwC Global CEO Survey:
Fears for the future
A protracted global recession remains the biggest overall concern of CEOs around the world, in CEE and in Russia (65, 65 and 60 per cent, respectively), followed closely by fear of over-regulation (60 per cent of all respondents). In CEE and Russia, CEOs are primarily concerned about exchange rate volatility (62 and 53 per cent, respectively) and the impossibility of financial growth (43 and 50 per cent, respectively).

Other high-ranking potential business threats observed by Russian C-level executives included skill shortages (67 per cent) and inadequasy of basic infrastructure (47 per cent), whereas CEOs worldwide cited low-cost competition (54 per cent), energy costs (53 per cent) and terrorism (30 per cent) as potential threats to business growth.

Relations with regulators
CEOs were very clear about the threat of over-regulation. Two-thirds of CEOs disagreed with the notion that governments have reduced the overall regulatory burden. 

Although CEOs generally oppose government ownership in the private sector, nearly half of them agreed that government ownership helps to stabilise an industry during a crisis. CEOs from two sectors that received considerable government support during the crisis — automakers and banks — were among the most appreciative of government ownership in troubled times.

At the same time, CEOs were optimistic about governments’ efforts to address systemic risks: 65 per cent of CEOs worldwide (and 63 percent in Russia and CEE) agreed that regulatory cooperation will help successfully mitigate systemic risks.

Combating the effects of recession
To combat recession, nearly 90 per cent of all CEOs (including in CEE and Russia) said their companies had initiated cost-cutting measures in the past 12 months. Nearly 80 per cent overall and 72 per cent in CEE said they would seek cost cuts over the next three years, and most Russian CEOs (77 per cent) expect to mitigate the effects of the crisis by launching corporate excellence programmes within the same period.

Public trust and consumer behaviour
One in four CEOs believes their industry’s reputation has been tarnished by the downturn. Some 61 per cent 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 has caused a permanent shift in consumer behaviour. Most say that consumers will place greater importance on a company's social reputation (64 per cent), spend less and save more (63 per cent), or be more active in product development (60 per cent).

In Russia, sixty-three per cent of CEOs believe that consumers will trust brands that they already know, while 50 per cent are certain that consumers will cut their spending and save more, or will be more active in product development (53 per cent).

Risk management
Risk management took on greater importance among CEOs as a result of the recession. Eighty-five per cent of all CEOs and 87 per cent of CEOs in Russia plan to make major changes to their company’s approach to managing risk. Most Russian CEOs (93 per cent) have high expectations for investment decisions.

The survey shows that, as a result of the recession, boards of directors are becoming more engaged in key aspects of management, such as assessing strategic risk, monitoring financial health and overseeing company strategy. CEOs in Russia and CEE believe that their boards of directors now focus less on compliance issues and more on issues linked to strategic risks (80 per cent) and financial health (83 per cent).

Climate change
More than 60 per cent 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 per cent of companies with climate change initiatives saw no effect of the recession on their strategies and 17 per cent 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.”