Global fears undermine CEO confidence
Mounting concerns about China's deceleration have hit financial markets like a pile-driver, sending U.S. benchmark indexes to their worst start ever for a new year and rekindling fears about a global downturn.
The turmoil is also weighing on the minds of business leaders. China's slowdown, falling oil prices and geopolitical risks are top considerations for corporate executives as they make strategy, according to a new survey by management consulting firm PwC. The upshot? Over two-thirds of CEOs around the world are worried about their companies' business prospects.
The survey, which polled nearly 1,400 chief executives, also revealed that 25 percent of executives believe global growth will improve over the next 12 months -- that's a 10 percent drop from a year ago. Only one-third of CEOs say they are very confident of their own company's growth this year.
"There's no question that business leaders' confidence in both the global economy and their own company growth prospects has taken a knock," said Dennis Nally, global chairman of PwC.
Notably, given the relative strength of the U.S. economy compared with other parts of the world, CEOs in America are far less optimistic compared to their counterparts in Western Europe and the Middle East. About a third of CEOs from China believe global economic growth will slow in 2016, according to PwC.
JPMorgan Chase (JPM) CEO Jamie Dimon is one corporate chieftain watching China closely.
"China has slowly been moving -- it's not there yet -- to a market economy. They can't micromanage forever," said Dimon, citing the ongoing push by the world's most populous country to transition from an economy based on manufacturing and investment to one driven more by consumer spending, as in the U.S. "Those changes are causing a little bit of turbulence but hopefully this turbulence is not an arbiter of bad things to come."
Geopolitical risks now represents the second-most important concern on CEO minds. The top concern, according to the survey? Eight in 10 chief executives see government over-regulation as the biggest threat to corporate growth, a standard complaint among business leaders. That hasn't changed much from previous years, the PwC report shows.
Another major issue keeping execs awake at night is cybersecurity, both because of its potential impact on a company's reputation and its bottom line, and for its implications for national security.
Nally said that "no matter what the business size, the threats it faces are becoming more complex, crossing the borders of geopolitics, regulation, cyber security, societal development, people, and reputation."
If senior execs share many of the same concerns about security, they also see opportunities for tech to boost their financial results. Nine of 10 CEO say they are changing how they use technology in an effort to grow their businesses, the survey shows. The most significant change will be in sectors such as banking, insurance, hospitality, travel and health care.
"Reshaping companies built on profit alone into ones where profit and purpose combine is not going to happen quickly or easily, but it's a transformation that is already starting and that businesses need to keep pace with," Nally said.