CEOs brace for perfect storm as they rewrite investment plans | EY

  • Consequences of the COVID-19 Pandemic, Geopolitics and the Composite Inflation Outlook
  • Geopolitics sees 95% of respondents reshaping their investment plans
  • 52% of respondents will use mergers and acquisitions to get through the tough times ahead.

CEOs are actively looking for ways to get ahead of the triple threat of the fallout from the COVID-19 pandemic, heightening geopolitical tensions and inflation, according to the EY CEO Outlook Pulse, October 2022.

The survey, which recorded the views of 760 CEOs around the world on their prospects, challenges and opportunities, found that more than four in 10 (43%) of CEOs identify a continuation or return of disruption related to COVID-19, including new closures and supplies. chain pressures, as the greatest risk to your business. This risk is perceived to be higher in Asia-Pacific (48%) than in the Americas (43%) or Europe (41%). In addition to the perfect storm CEOs are bracing for, 35% of respondents point to geopolitical tensions and 34% inflation as critical risks to growth, with the majority (69%) predicting inflation will negatively affect the performance and growth of your business. A sizeable minority (16%) identified inflation as the biggest threat to their company’s revenue and margins.

As a result of rising geopolitical tensions, 95% of respondents are reshaping their investment plans and operations. According to the EY survey, geopolitical risks cause CEOs to delay planned investments until the situation improves (43%). Many respondents are reconfiguring their company’s supply chains (40%) and relocating operating assets (39%); while a third are going out of business in certain markets (30%) or halting planned investments altogether (29%).

Andrea Guerzoni, EY Global Vice President – ​​Strategy and Transactions, says:

“CEOs are looking at a global economy unlike anything they have seen in many years. The severity of the underlying risks may vary by geography or industry, but it is clear that companies are facing a perfect economic and geopolitical storm. CEOs will need to use whatever levers they can to mitigate these risks, recognizing that some may be outside of their control or spillover effects from other industries.”

Strategic investments to mitigate risks with more than half of CEOs planning mergers and acquisitions

Building sustainability into a core aspect of all products and services to engage customers (39%) and using technology to increase customer loyalty (34%) are the top two actions responding CEOs plan to take out to get through the difficult six months ahead.

At the same time, a vast majority (64%) intend to increase capital investment versus only 14% planning to reduce. More than half (52%) plan to make an acquisition in the next year, while nearly half (40%) of respondents plan to be active on all fronts, looking to acquire, divest, and enter new joint ventures or strategic alliances. When it comes to their next transaction, 21% of respondents said this will be driven by the need to invest in an early stage business to enhance their existing portfolio and access new talent and 15% said they will be looking to acquire a business. . in an adjacent sector to open up new avenues for growth.

Guerzoni says: “The landscape has been reshaped in the last 24 months and there is more quicksand ahead. CEOs look for opportunities to unlock long-term growth and still see mergers and acquisitions as a critical method of driving those growth strategies by acquiring companies that strengthen operational capabilities and innovation.”

To read the full report, visit: ey.com/CEOOutlook

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About the 2022 EY Outlook Pulse Survey for CEOs

The EY 2022 CEO Outlook Pulse Survey aims to provide valuable insights into the major trends and developments affecting the world’s leading companies, as well as business leaders’ expectations for future growth and long-term value creation.

This is a regular pulse survey of CEOs of large companies around the world, conducted by Longitude Research Limited, a Financial Times company.

In August 2022, Longitude surveyed on behalf of the global organization EY a panel of 760 CEOs in 10 countries and across six industries. Respondents represented the following industries: advanced manufacturing and mobility, consumer products and retail, energy and resources, financial services, health sciences and wellness, technology, media, and telecommunications.

The annual global revenues of the companies surveyed were as follows: less than US$500m (20%), US$500m–US$999.9m (20%), US$1b–US$4.9b (30%) and more than US$5b (30%).

The CEO Imperative series provides critical answers and actions to help CEOs reframe the future of their organization. For more information on this series, visit ey.com/en_gl/ceo

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