In the Conference Board’s annual C-suite survey, executives express concerns about inflation, talent sourcing, and impediments to pandemic recovery, including possible recession in China and supply chain concerns in the US and Europe.
As the pandemic enters its third year, top executives worldwide are rethinking their operations in the face of new and ongoing threats expected to last at least until 2023.
Inflation has risen to be the No. 2 concern for businesses worldwide this year, up from No. 22 just a year ago, according to C-Suite Outlook 2022, a survey of more than 1,600 top-ranking corporate executives. This annual survey by The Conference Board (TCB) supports and impacts the agenda at global conferences such as Davos and is now in its 23rd year. Global Finance collaborated with TCB this year to enhance participation from CEOs and CFOs outside the United States.
Supply bottlenecks and labor shortages complicated by record infections due to the highly infectious Omicron variant have pushed inflation higher. In December, US consumer prices recorded their fastest rise in 40 years. Globally, 82% of CEOs say they face rising input prices, according to the survey, which was carried out between October and November 2021. Over half say they expect prices to stay elevated until mid-2023 or beyond.
Beyond shared global concerns, the survey reveals differences in priorities across geographies and sectors. While supply chain disruption is a top stress factor for CEOs in the US and Europe, Chinese executives worry more about an economic slowdown. Close to 40% of Chinese CEOs say they fear a recession over the next 12 months, the research shows.
Supply chain disruptions are overwhelmingly felt by executives in the manufacturing sector, who rank them as the top external impact issue in the coming year. However, only 28% of CEOs globally say their organizations are well prepared to address future supply chain shocks (C-suite executives generally are more optimistic at 34%).
Manufacturing executives cite cutting costs and passing higher prices onto consumers as a short-term solution, leaving questions about a more permanent strategy.
“Many of our clients are contending with inflation by increasing prices, and supply chain related challenges by executing supply risk management contingency plans,” says Gina Gutzeit, who leads the Office of the CFO Solutions practice at FTI Consulting.
CFOs polled in FTI’s annual survey say supply chain issues and slowdown are “obliterating our projections and severely draining our cash reserves.”
In health care, companies have faced headwinds from delayed elective procedures and labor shortages, among other problems; and tailwinds from testing, vaccines and telemedicine.
“It remains uncertain when those winds are going to shift and when companies are going to have to deal with those consequences, providing an elevated level of uncertainty and difficulty in thinking about corporate strategies,” says Andreas Dirnagl, global head of health care research with Mitsubishi UFJ Financial Group (MUFG), one of the world’s top lenders to the health care industry.
Favored by strong public capital markets, health care executives refocused their portfolios around their core business, leading to corporate divestitures, spinouts and bolt-on acquisitions.
“I think the pandemic has forced CEOs to further define their strategies and what they do well,” says Beth Everett, managing director of health care banking and head of middle-market health care at MUFG. “As a result of this internal focus, we are seeing a good deal of larger companies sell, spin off or deprioritize parts of their business. I think we will continue to see this on a regular basis in 2022 and 2023.”
Labor shortages have prompted CEOs in the US, Europe and China to consider attracting and retaining talent as their No. 1 priority for 2022. Some are shortening the interview process and offering higher wages and benefits to retain staff. A hybrid model of remote and in-person work is likely to last beyond the pandemic. Such logistics are just one part of the equation, however; and the TCB survey shows an acute awareness of the need to offer a vision of the future that compels attention from both the talent and the markets.
CFOs are themselves facing challenges amid shorter tenure and more responsibilities. Nearly half the corporate finance executives polled by FTI say they expect their CFO to stay in that role less than five years. The pandemic accelerated a trend that started before the health crisis. The CFO’s success or failure is defined in just two to three years, according to the global business advisory firm.
“For some, the increased pressures and the risks associated with the role have diminished [the CFO role] as the pedestal of a career, resulting in pursuing other opportunities,” Gutzeit says.
Overall, the results show a growing acceptance of stakeholder capitalism and strong incentives to reinvent business models to align with social intercourse via digital media and modes of work as transformed under Covid. The challenge is not merely to take advantage of technology to make things faster, but to meet the new and different needs of this rapidly changing world.
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