Rising geopolitical threats are eroding the confidence of CEOs worldwide, with revenue prospects declining in most economies.
Despite this, in Ireland, where the economy is growing three times the European average, most CEOs expect to grow revenues 5pc this year.
However, Ireland’s position as a small open economy on the periphery of Europe will not make it immune to global shocks, making the country’s nascent return to growth extremely fragile.
In its briefing at the World Economic Forum in Davos yesterday, a PricewaterhouseCoopers (PwC) report found that two-thirds of CEOs globally see a new spectrum of risks getting in the way of revenue growth, including cybersecurity, societal development, geopolitics and regulation.
China’s economic rebalancing, crude oil price falls, and geopolitical security concerns are all impacting an overall increase in uncertainty about the global economy’s growth prospects.
Globally, only just over a quarter (27pc) of CEOs think global growth will improve over the next 12 months, compared to 37pc last year, while 23pc think it will worsen (the figure in 2015 was 17pc).
‘No matter what the business size, the threats it faces are becoming more complex, crossing the borders of geopolitics, regulation, cybersecurity, societal development, people, and reputation’
– DENNIS NALLY, PwC
Levels of optimism amongst North American CEOs is half that (16pc) of the most optimistic regions (western Europe 33pc and Middle East 34pc). Almost a third of China’s CEOs (33pc) believe global economic growth will slow down in 2016.
“There’s no question that business leaders’ confidence in both the global economy and their own company growth prospects has taken a knock,” said the global chairman of PwC Dennis Nally.
“No matter what the business size, the threats it faces are becoming more complex, crossing the borders of geopolitics, regulation, cybersecurity, societal development, people and reputation. There is a new spectrum of risk for CEOs that represents threats to both national and commercial interests.
“The pessimistic outlook for the year ahead is reinforced by the position of the US, China, Germany and the UK as being the most important for growth again. The fact that CEOs continue to point to these ‘safe havens’ underlines the general uncertainty about where real growth will come from in the long term.”
Confidence in revenue growth is also down compared to last year for nearly every major economy in the world: China 24pc (2015: 36pc), US 33pc (2015: 46pc), UK 33pc (2015: 39pc) and Germany 28pc (2015: 35pc). Italy 20pc (2015: 20pc) and Japan 28pc (2015: 27pc) remained static.
With heightened concerns about geopolitics, two-thirds of CEOs (66pc) now see more threats facing their business today than there were three years ago.
As in most years, the spectre of over-regulation is seen as the top threat to companies’ growth prospects, with 79pc of CEOs citing this – the fourth year in a row that concerns about regulation have risen.
However, geopolitical uncertainty has jumped from fourth in CEO concerns last year to second this year, cited by 74pc of business leaders. As a result, concerns about availability of key skills have dropped from second to fourth, but remain a concern for nearly three-quarters (72pc) of CEOs. Worries about exchange rate volatility are in third place (73pc).
Cybersecurity is also a worry for 61pc of CEOs, representing threats to both national and commercial interests. Concern is highest amongst CEOs in the US, Australia and the UK (74pc+) and in the banking, technology and insurance sectors.
Irish CEOs buck the trend for confidence – but return to growth is very fragile
According to PwC’s recent Global Economic Outlook, Ireland’s economy is now performing over three times the European average in terms of GDP growth. This confidence is also reflected in Irish CEOs’ expectations for business expansion.
For example, a recent PwC survey showed that 88pc of Irish business leaders expect their businesses to grow revenues in the year ahead, of which 62pc said this growth would be more than 5pc. Two-thirds are planning to increase their workforce.
‘Ireland is a small open economy and very dependent on global markets. Any unplanned shocks will create uncertainties’
– FEARGAL O’ROURKE, PwC
“Notwithstanding this confidence, the challenges in Ireland are similar to those facing global CEOs, including political change, over-regulation, cyber threats and availability of key skills,” explained PwC Irish managing partner Feargal O’Rourke.
“Interestingly, nine out of 10 global CEOs say that they are changing how they use technology to deliver on customer and stakeholder expectations.
“In Ireland, our recent Digital IQ survey is telling us that more can be leveraged from digital and, with the right people skills, Irish companies have a huge opportunity to better engage with customers and drive growth.
“However, Ireland is a small open economy and very dependent on global markets. Any unplanned shocks will create uncertainties. With our strong exports and foreign direct investment, our growing employment and consumer demand as well as our friendly business environment, Ireland has a great opportunity to continue to punch above its weight.”
Risk image via Shutterstock
Buy your tickets now!