Even though the confidence levels of chief executive officers (CEOs) are crumbling globally, experts say that the Middle East is much better placed to weather the storm than many other countries.
PricewaterhouseCoopers has released the finding of its 12th Annual Global CEO Survey during the just-concluded World Economic Forum in Davos that said that globally CEOs' confidence had plummeted to a new low.
Emirates Business contacted PricewaterhouseCoopers to find out a bit more about the survey, its outlook for the Middle East and what CEOs could do to help their firms survive this downturn.
According to the survey battered by recession, CEOs' confidence about future prospects for business has plummeted and executives expect a slow, gradual recovery over the next three years. CEO confidence plunged to its lowest level since 2003, when PwC began tracking CEOs' forecasts. Worldwide, just 21 per cent of CEOs said they were very confident of revenue growth in the next 12 months, down from 50 per cent in last year's survey. And more than a quarter of CEOs said they were pessimistic about prospects for the coming year.
CEOs worldwide were also gloomier about longer term growth as well, predicting a slow recovery. Only 34 per cent said they were very confident of growth over the next three years, down from 42 per cent last year, when CEOs were just beginning to recognise the full impact of the credit crisis on the global economy. Illustrating the changing mood, CEOs confidence worsened over the course of the surveying as negative economic news unfolded.
Pessimism prevailed across all geographic regions, business sectors and levels of economic development, the survey found. Only 15 per cent of CEOs in North America and 15 per cent in Western Europe expressed confidence about growth prospects for the next 12 months. This compared with 21 per cent in the emerging economies of Central and Eastern Europe, 31 per cent in Asia Pacific, and 21 per cent in Latin America.
Tony Poulter, PwC Global Head of Consulting, told Emirates Business: "The pessimism is about short term growth prospects. That appears to be justified. But you can draw some encouragement from this survey. CEOs are concentrating on the long-term as well as the short-term plan; they think that access to talent is a bigger issue for them in the long term than access to capital; they still intend to focus on climate change and other environmental issues, and they see the importance of collaboration rather than isolationism.
"Talent and the war for it are still important to CEOs. In fact, 72 per cent say talent is the most critical driver of long-term success. At the time they were surveyed at the end of last year, only 26 per cent of CEOs globally felt they would reduce their headcount in 2009. However, we cannot know if the position has worsened since the start of this month, and if the outlook for jobs become more negative. Recent headlines might indicate that this is the case."
However, the survey did not include the Middle East as the survey sample in the Middle East was not large enough to be able to extract specific regional data.
Asked specifically about their view of how the Middle East would weather the economic storm, Middle East Senior Partner, Michael J Stevenson said: "We believe that the Middle East is better placed to weather the storm than many other countries – particularly those in the West – because generally countries in the Middle East, especially those in the Gulf and other regional oil- and gas-producing countries, have accumulated fiscal surpluses as a result of the high oil and gas prices The region is going into recession with relatively healthy cash balances. It can, therefore, better afford to continue to invest in infrastructure and other key projects. Also many countries across the region have short lines of government communication which should enable them to make quick decisions that will assist their economies to emerge from the financial crisis more quickly than others around the world."
Asked for advice to CEOs for helping their companies survive the downturn Tony Poulter said: "PwC has 10 main priorities for businesses managing through the downturn. The 10 key points are: Take a closer look at your business; act decisively, remember 'cash is king'; focus on what matters; manage your cost base; reliable management information is key; plan for different scenarios; value your people; take your stakeholders and take advantage of opportunities."
10 Tips for CEOS to survive the storm
Take a closer look
The goal posts are moving; understand the true picture not what you'd like to believe. Get to the bottom of what's driving the business; what you do best and why. Understand how the business is being impacted by the downturn.
Businesses need to ask themselves: What have been and will be the real drivers of performance across my portfolio? For each of my businesses and products clients how much performance is driven by the market and how much by competitiveness? What are my customers telling me that they value and are prepared to pay for? What would they be happy to sacrifice?
Remembering cash is king
Ensure your finances and working capital are in good order; protect your liquidity; re-examine your treasury, financing, funding and pension exposures. Monitor your performance against financial and non-financial covenants. Adopt an hands-on approach to cash management.
Businesses need to ask themselves: To what extent am I familiar with our obligations on our existing facilities? How regularly am I updating my financial stakeholders? How aware are they of our current situation?
How effective have I been at implementing cash generation/ cash preservation initiatives? What more can be done?
Manage your cost base
Focus on enhancing operational performance; go for targeted rather than across the board cuts, extract better value; reduce unnecessary complexity; look at whether your business model needs to change.
Businesses need to ask themselves: Is this business making and buying the right things?
Am I putting its skills and competitive advantages in the right place?
Is the company eliminating waste? Are the operations completely aligned to the end consumer?
Can we employ smarter procurement techniques?
Does management understand where value is being created or destroyed?
Plan for different scenarios
Winners demonstrate agility and flexibility; model a range of financial, operational and workforce scenarios that reflect the impact of the downturn on your business; adapt quickly; explore your strategic options.
Businesses need to ask themselves: How will my business be impacted by an extended downturn? What industry sectors and geographies does the company operate in? What are the likely repercussions for those sectors and geographies? To what extent have we stress-tested our forecasts to account for changes in performance and outlook? Have we stress-tested forecasts over different time periods to reflect a potentially extended downturn?
Take your stakeholders with you
Evaluate the likely impact of the downturn on your stakeholders; make sure you understand their agendas. Perception is often reality so maintaining regular and open dialogue on a timely basis is essential.
Businesses need to ask themselves: Do I know who my key stakeholders are?
Am I aware of recent changes in my stakeholder base? Am I aware of their agenda? How am I meeting their expectations?
Have I seen attitudes change recently? Am I keeping up-to-date with developments concerning my key stakeholders which may impact my business?
With increased uncertainty and volatility it is important to take tough decisions early. Focus relentlessly on the key drivers of value and the key risks across the business.
Don't sit back and wait. The winners will be those who position themselves to take advantage of the upturn. Strong leadership is required with different skills necessary.
Businesses need to ask themselves: Do you have the right people in the right roles?
Are you ignoring ingrained biases and tackling sacred cows? Have you re-assessed the key risks facing your business and are you completely focused on those risks?
Focus on what really matters
Evaluate which products, customers and channels create or destroy value. Revisit your existing investment programmes? What initiatives could you stop or defer?
Businesses need to ask themselves: Which customers have declining orders and how can I mitigate against this?
Which products and new product development really matter to my profitability?
How can I build more volume through my profitable channels to market?
Which investment programmes are critical to surviving the downturn and which can wait? Am I focusing on what really matters?
Reliable management info is key
Now more than ever you need the right management information; clearly defined KPIs are essential to ensure improvement initiatives effectively add to customer and business value. Decision making needs to be based upon facts; speed of decision making needs to improve.
Businesses need to ask themselves: Which areas need to be monitored carefully? How often do I receive information on those critical areas? When do I receive it?
What is my degree of confidence in the information I receive?
What are the key risk areas surrounding our business? How should we monitor our performance against these risk factors?
Value your people
Regular and clear communication with employees is key to their engagement. Identify key talent and develop appropriate incentives for them; free up limited resources by outsourcing or partnering functional activities; secure strategic new talents that are suddenly available.
Businesses need to ask themselves: How is the current economic environment affecting my people needs?
How am I using my workforce differently to reflect my changing revenue streams? How am I motivating and rewarding my workforce? What reward strategies are my employees telling me they value?
Take advantage of opportunities
Don't stop innovation or investing in those areas of growth you will need for the future. Identify the growth opportunities that may suddenly exist; surface opportunities to acquire strategic targets; negotiate more favourable relationships. Have an eye for the future.
Businesses need to ask themselves: Which parts of the business generate the highest return on capital and which the lowest? Would they benefit from additional growth capital or productivity investments? Do I have a clear view of the portfolio of investment opportunities that I have in the pipeline and an accurate assessment of their risk profile?