CEO Confidence Plummets to a New Low
- By Peter Gerendasi Managing Partner PricewaterhouseCoopers Russia B.V.
- Feb. 10 2009 00:00
This was revealed by Pricewaterhouse-Coopers' 12th Annual Global CEO Survey, which debuted at this year's World Economic Forum in Davos. The survey results showed CEO confidence at an all-time low, with the pessimism reaching across regions, industries and levels of economic development.
Thirty-five percent of CEOs worldwide said they were pessimistic about the coming year. Only one in five respondents fully expects a growth in revenue in the next 12 months, down from half in last year's survey. Russian CEOs were surer of themselves: 30 percent were fully confident and 43 percent were partially confident of short-term revenue growth.
The long-term picture is not much better, according to survey respondents. They expect economic recovery to be a slow and drawn-out process lasting years. Only 34 percent said they were completely confident that their companies would experience growth during the next three years. This was down from 42 percent last year, when CEOs were just beginning to recognize the full repercussions of the credit crisis on the global economy. In terms of long-term growth, CEOs in Russia were even more upbeat; 53 percent are fully confident of long-term growth in revenue.
The respondents expect the worldwide banking crisis to continue to have a broad impact on business, affecting companies across all geographic regions and sectors. Companies in the banking, utilities, construction, entertainment and automotive sectors are most likely to be affected, CEOs said. Those CEOs whose companies were anticipating growth said they would fund it primarily through internal cash flow (76 percent of global respondents and 80 percent of Russian respondents), followed by the debt and equity markets.
Russian respondents have greater expectation of being hit by the credit crunch. Some 83 percent in Russia said their companies will be hurt, versus nearly 70 percent globally. Of those, 100 percent in Russia said they faced higher financing costs (versus nearly 80 percent globally), and 84 percent said they would delay planned investments as a result (versus nearly 70 percent worldwide).
But to make up for this, Russian CEOs, to a greater extent than their foreign colleagues, are counting on attracting financial resources from private equity and venture capital funds (30 percent compared to 19 percent globally), divestiture of existing assets (20 percent compared to 11 percent globally) and financial support from the government (17 percent compared to 5 percent globally).
In terms of risk factors, the impact of the recession on the world's major economies, cited by 85 percent of survey respondents worldwide (80 percent in Russia), continued to dominate the concerns of CEOs. Other major risk factors included disruption in the capital markets, cited by 72 percent (63 percent in Russia); over-regulation, 55 percent (43 percent in Russia); and energy costs, 50 percent (33 percent in Russia).
While Russian CEOs are less troubled by risks than their colleagues abroad, they do agree that staffing will be an issue. Availability of key talent was cited by 47 percent of Russian respondents as risk factor, as opposed to 46 percent of global respondents.
Despite their gloomy outlook in the near-term, CEOs are still studying factors for long-term growth. Access to talent remains a top concern for the future. Only 26 percent of CEOs said they planned to reduce headcount in the coming year, and 35 percent planned to maintain staff levels. Thirty-seven percent of Russian CEOs, on the other hand, are preparing to part with staff. Environmental concerns were named as other top factors for long-term success.
Almost three-quarters of CEOs predicted that pressure on natural resources would become an increasingly urgent problem. On the whole, CEOs around the world seemed more troubled by sustainability issues than their Russian peers. These issues included climate change (56 percent compared to 43 percent in Russia), overpopulation (55 percent compared to 43 percent in Russia) and the scarcity of fresh water (50 percent compared to 23 percent in Russia).
Russian CEOs did show more interest in one area: dependence on carbon-based energy. Two-thirds of Russian respondents believed carbon dependence would have an impact on long-term success, versus 61 percent of CEOs worldwide. But the greatest agreement among Russian respondents was seen on a factor that is much less of a concern worldwide: an ageing workforce. Nearly three-quarters of Russian CEOs believe the ageing of the population will play a major role in future success.
For the survey, PricewaterhouseCoopers conducted 1,124 interviews with CEOs in 50 countries during the last quarter of 2008. In Russia, 30 interviews were conducted.