Energy, inflation, cyber risk, and recession are immediate CEO concerns. For long-term growth, the emphasis is on technology, automation, and upskilling existing workforces.
While the war has certainly forced many businesses to put part of their strategic plans on hold, our latest global survey of 750 CEOs and other C-suite executives shows it is also acting as an accelerator, speeding up strategy refinement and innovation, especially around cyber risk, supply chains, renewable energy, and crisis and contingency planning. The war’s impact appears far-reaching. Just 9 percent of companies in our global survey say the war will have no material impact on their business operations in the coming year, though all companies will be dealing with energy and food inflation.
This special C-Suite Outlook midyear survey, conducted between May 10 and 24, is a follow-up to our annual survey released in January 2022, C-Suite Outlook 2022: Reset and Reimagine. The latest survey focuses on the impacts of the Russia-Ukraine conflict on the global business environment and firm-level operations. We asked about the actions they are taking to mitigate the amplified risks caused by the conflict and their concerns about what may come next as the conflict continues. A separate section looks at longer-term growth strategies following back-to-back global shocks (i.e., the global pandemic and the war) and how CEOs and C-suite executives plan to attract and retain valuable talent in a time of acute labor shortages.
Insights for What’s Ahead
Our midyear global survey of CEOs and other C-suite executives about the impact of the war in Ukraine finds:
- The war is helping fuel inflation CEOs and other C-suite executives see the war fueling inflation through energy price volatility and higher costs for scarce inputs. This is leading to concerns over margin compression.
- Recession expectations are high More than 60 percent of CEOs globally say they expect a recession in their primary region of operations before the end of 2023 or earlier, a sentiment shared by other C-suite executives. Fifteen percent of CEOs say their region is already in recession.
- Cyber risk grows There are high levels of concern about an escalation of the war, especially around cyberattacks. This means board members and senior management must recognize the present danger and ensure their organizations adopt a heightened security posture.
- Danger that competing economic blocs will emerge CEOs say rising US-China tensions are likely to have a major impact on business operations in the coming 12 months. They have serious concerns about the emergence of competing economic blocs—a division that would have significant negative impacts on global trade and economic growth for years to come.
- A yes to secondary sanctions but concerns about the consequences of sanctions already in place Even though a decision to introduce secondary sanctions would sharply escalate the economic battleground and set the stage for a fractured global economy and world order, the majority of CEOs globally favor them even though they do have concerns about the negative consequence of sanctions already in place.
- Renewable energy is part of longer-term growth strategy Energy price volatility related to the conflict is driving many firms to take a closer look at renewable energy as part of a longer-term growth strategy. Depending on how it is sourced, it can provide a hedge against the price volatility of fossil fuels, but initial investment costs can be hefty.
- Supply chain resilience is a priority Expect the emphasis on resilient and more environmentally and socially responsible supply chains—cited by CEOs as critical responses to the conflict—to gain momentum since investors will be focusing on those issues.
- Stakeholder priorities shift in wartime The stakeholder views most important in determining organizational response to the war include those of customers, the board, and regulators. Employees have played a less important role in shaping the corporate business response to Ukraine than in dealing with domestic social and political issues not related to the war. Companies are not involving the employee populace in the economic impacts of the war since most are not in the areas of accountability most heavily affected.
- Time to revisit corporate citizenship responses to the war CEOs say their corporate citizenship responses to the conflict are primarily focused on supporting employee volunteer efforts and providing cash to international relief organizations. As we’ve seen before with natural disasters, a relatively small percentage of companies are prepared to deal with the long-term, direct effects of the war. Given the conflict’s duration, it may be time to revise your overall Ukraine relief plan— support now needs to be viewed as a long-term proposition.
Long-term growth in a volatile global environment
- Technology and talent are the focus of longer-term growth strategies To ensure growth for their business over the next two to three years, CEOs say they are investing in digital transformation, developing new lines of business, upskilling and retraining existing employees, strengthening the corporate culture, and increasing productivity in their hybrid work models.
- Government policies that can drive growth More investment in infrastructure and R&D, an effective energy transition plan, along with lower taxes and less regulation, are favored government policies to spur growth. When asked which government policy actions would most help their business to thrive, CEOs say they can best benefit from lower taxes, public investment, fewer regulations, and an effective government energy transition plan.
- Addressing the impact of labor shortages requires a three-pronged approach CEOs say they plan to attract more candidates by improving their recruitment process and workplace flexibility, accelerating automation, and shifting the workforce profile to more contractual workers versus full-time employees.
- To tackle labor force challenges, firms are doubling down on the hybrid work model and automation as well as improving their recruiting processes and communication around business strategy To improve retention in a time of tight labor markets, CEOs are focusing on more meaningful internal communication, greater workplace flexibility, employee wellness, providing opportunities for individual growth, and better incentives from higher pay to paid to time off for current employees.
- The biggest challenge for external communications is the issue of rising prices Trust in corporations has been built up throughout the pandemic, but that trust can be eroded if there is any sense of profiteering. Communicating the story to your customers should be handled carefully with honesty and transparency.
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