In brief
- CEOs are downbeat on the global economic outlook and their own sector but are drawing on pandemic lessons to navigate headwinds and a likely recession.
- Geopolitics is heavily influencing M&A strategies as CEOs focus investments on politically like-minded shores.
- CEOs are embedding ESG into strategy to create brand value and build trusted relationships with customers, employees and other stakeholders.
Moderate vs. severe; temporary vs. persistent: Divergent views on the economic outlook among global CEOs underline the uncertainty that looks set to define the business environment in 2023. An EY study of 1,200 CEOs globally finds that while almost half of respondents foresee a moderate slowdown in the global economy, more than half fear a recession worse than the global financial crisis for the period 2008-10 in terms of its length and severity.
The latest edition of the CEO Imperative Series, which provides critical answers and actions to help CEOs reframe the future of their organizations, finds companies addressing difficult challenges on many fronts. In response, they are combining bold strategic decisions with operational adjustments to weather the coming storm and maintain a course toward long-term value creation.
Chapter 1
Planning for multiple possible futures
Half empty or half full, the economic outlook has a bitter taste.
Findings from the latest quarterly EY CEO Outlook Pulse show CEOs are split on the impact of the global economic slowdown. While the vast majority — 98% — expect a recession, there is little consensus on its length, depth and severity. Interestingly, CEOs are also divided on the outlook for their own addressable market, into which they will have greater insight into anticipated activity levels.
Considering the current global macroeconomic environment, what scenario are you planning for in connection with a potential economic downturn?
A chart showing that the majority of CEOs are planning for either a moderate but persistent downturn or a severe but temporary downturn in both the global economy and the primary market they operate in.
Whether they anticipate a moderate or severe downturn, more than half (55%) of CEOs agree that the recession will differ from previous slowdowns, exacerbated by a unique combination of new factors — from a realignment of geopolitics to a wholesale reassessment of global supply chains and operations.
A similar number (53%) also agree that few members of their senior leadership team have experience in managing a business through any potential downturn marked by uncertainty and volatility.
However, given the unique conditions, experience with downturns might be less important than understanding new geopolitical tensions, supply chain disruption, talent shortages and the ongoing COVID-19 pandemic fallout helping fuel the slowdown. Leaders in this current generation have built a new set of skills during a global pandemic that could serve them well now.
You have indicated you are planning for a severe or persistent downturn in the global economy and/or your primary market. To what extent do you agree or disagree with the following statements?
5 key considerations for CEOs in 2023
- Get ahead of potential developments – CEOs should use scenario planning to understand the possible futures for their business and plan for a number of different outcomes.
- Continually reassess everything – CEOs should analyze every aspect of their current business, operations, portfolio and ecosystem. They should also consider if the aspects are additive or dilutive to their journey and be prepared to make quick decisions on buying, building, partnering – or letting go.
- Look up to see further – Despite the understandable inclination to manage through near-term complexities and challenges, CEOs also need to remain focused on longer-term opportunities for growth.
- Stay close to the customer – Whether it is investing in new technology to foster loyalty or continuing to align with ever-increasing ESG expectations, CEOs should remain laser-focused on their consumers through turbulent times.
- Be bolder by design – Previous recessions have shown that CEOs who invested in future capabilities during the downturn benefited the most during the upturn. Being bold to accelerate your strategy could pay dividends at a later date.
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