CEOs brace for perfect storm as they rewrite investment plans

• Aftermath of the COVID-19 pandemic, geopolitics and inflation compound outlook
• Geopolitics see 95% of respondents reshaping their investment plans
• 52% of respondents will use M&A to weather challenging times ahead

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

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

As a result of increased geopolitical tensions, 95% of respondents are reshaping their investment plans and operations. According to the EY survey, geopolitical risks mean CEOs are delaying planned investments until the situation improves (43%). Many respondents are reconfiguring their company’s supply chains (40%) and relocating operational assets (39%); while a third are exiting businesses in certain markets (30%) or stopping planned investments altogether (29%).

Andrea Guerzoni, EY Global Vice-Chair – Strategy and Transactions, says:  

“CEOs are looking at a global economy unlike anything they’ve seen in many years. The severity of underlying risks may vary by geography or industry, but it is clear that businesses are faced with a perfect economic and geopolitical storm. CEOs will need to pull what levers they can to mitigate these risks, recognizing that some may be out of their control or are secondary effects from other industries.”

Strategic investments to mitigate risks with more than half of CEOs planning M&A

Building sustainability as a core aspect of all products and services to engage customers (39%) and using technology to boost customer loyalty (34%) are the top two actions responding CEOs are planning to pursue to weather a challenging six months ahead.

At the same time, a significant majority (64%) intend to increase capital investment versus just 14% who plan to reduce. More than half (52%) plan to make an acquisition in the next year, while almost 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 that 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 that they will look to acquire a business in an adjacent sector to open new growth avenues.

Guerzoni says: “The landscape has been redrawn in the past 24 months and there are more shifting sands ahead. CEOs are on the lookout for opportunities to unlock growth for the long term and still see M&A as a critical method of boosting those growth strategies by acquiring companies that bolster operational capabilities and innovation.”

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

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About the EY 2022 CEO Outlook Pulse Survey

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

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

In August 2022, Longitude surveyed on behalf of the global EY organization 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 telecoms.

Surveyed companies’ annual global revenues were as follows: less than US$500m (20%), US$500m– US$999.9m (20%), US$1b–US$4.9b (30%) and greater than US$5b (30%).

The CEO Imperative series provides critical answers and actions to help CEOs reframe their organization’s future. For more insights in this series visit ey.com/en_gl/ceo