16th global pwc ceo survey

Contents

1. 16th Annual Global CEO Survey

2. Cyprus

3. Italy

4. Poland

5. Spain

6. United Kingdom

7. United States

8. Asset management in-depthanalysis

9. Asset management key findings

10.Automotive

11.Banking and capital markets

in-depth analysis

12.Banking and capital marketskey findings

13.Chemicals

14.Communications

15.Healthcare key findings

16.Industrial manufacturing

17.Insurance in-depth analysis

18.Insurance key findings

19.Metals

20.Technology

21.Transportation and logistics

www.pwc.com/ceosurvey

Dealing with disruptionAdapting to survive and thrive

16th Annual Global CEO SurveyThe disruptive decade p3/ What worries CEOs most? p5/ A three-pronged approach p10/ It’s a question of trust p22

1,330CEOs in 68 countries

36%of CEOs are very confident about their growth prospectsSee page 3

82% of CEOs plan to change customer strategies in 2013See page 15

Preface

During the past decade, we’ve seen economic volatility and disruption escalate to arguably unprecedented levels. In a globalised world – one where countries, economies and companies are more interconnected and interdependent than ever before – risks that once seemed improbable and even remote have become the norm. For business leaders across the world, ‘expect the unexpected’ has become the mantra.

To navigate through this environment, companies need to develop resilience. This combines an ability to ride out the immediate impact of shocks with a long-term capacity to adapt to constantly changing conditions. We’re helping more and more of our clients achieve this blend of qualities not only to survive through new and emerging challenges, but to thrive in this environment.

In my view, the shift to resilience helps to explain the widening gap between CEOs’ levels of confidence in their organisations’ one-year and three-year outlooks. This year’s survey shows that just 36% of CEOs are ‘very confident’ about their business’s growth prospects over the next 12 months, down from 40% in 2012 and 48% in 2011 (see Figure 1). In contrast, the proportion confident about growth over the coming three years has held up much better. This suggests that leaders believe their organisations can be resilient by rolling with the short-term blows while reshaping for longer-term growth.

What strategies are CEOs adopting to become more resilient? Our findings highlight three common approaches. First, they’re targeting specific pockets of opportunity for organic growth, avoiding spreading their resources too thinly. Second, they’re maintaining a clear focus on the customer, taking active steps to stimulate demand, loyalty and innovation in their customer base – through mechanisms ranging from digital marketing platforms to collaborative R&D. And third, they’re fine-tuning their operational effectiveness by reducing costs without cutting value and collaborating with trusted partners.

The focus on trust also goes much further. In the post-crisis world, trust is at a premium. But it’s also an essential component of the ongoing relationship between an organisation and all its stakeholders – and thereby an important pillar of resilience. With social media giving a voice to evermore diverse groups of stakeholders, CEOs are recognising the need to secure a stronger social mandate by rebuilding public trust. From promoting an ethical culture to increasing workforce diversity and reducing environmental impacts, they’re pursuing a wide array of initiatives to simultaneously support their growth strategies, establish the right mandate and boost resilience.

My sincere thanks go to the more than 1,300 CEOs from 68 countries who shared their thinking with us. Their active and candid participation is the single greatest factor in the success of the PwC Annual Global CEO Survey, now in its 16th year. We greatly appreciate our respondents’ willingness – indeed eagerness – to free up their valuable time to help make this survey as comprehensive as possible. I’m especially grateful to the 33 CEOs who sat down with us in late 2012 to hold deeper and more detailed conversations. You can see their verbatim comments throughout this report.

Dennis M. Nally Chairman, PricewaterhouseCoopers International

PwC 16th Annual Global CEO Survey 1

Contents

The disruptive decade 3

What worries CEOs most? 5

A three-pronged approach 10

Targeting pockets of opportunity 10

Concentrating on the customer 14

Improving operational effectiveness 18

It’s a question of trust 22

CEO survey participants 28

Research methodology and key contacts 30

2 PwC 16th Annual Global CEO Survey

I think the level of external threats has increased with every passing decade. And as the pace of change has increased, organisations like ours have to be a lot more flexible than we might have been in the past.Shikha Sharma, Managing Director and CEO, Axis Bank Limited, India


The disruptive decade

The global economic outlook is certainly enough to test even the strongest enterprises. The eurozone is still mired in recession and the US economy is forecast to expand by just 2.2% this year.1 The situation in some of the growth markets is also getting harder, as the slowdown in the BRIC economies demonstrates.

While market conditions in many countries are still very difficult, CEOs are more positive about the prognosis than they were last year: 52% think the

Figure 1: CEO confidence has gone up and down sharply over the past decade

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months?

Very confident about company’s prospects for revenue growth over the next 12 months

0

10

20

30

40

50

60%

2013201120102009200820072003 2004 2005 2006 2012

40%

48%

52%

26%

31%

41%

50%

21%

36%

31%

Base: All respondents (2013=1,330; 2012=1,258; 2011=1,201; 2010=1,198; 2009=1,124; 2008=1,150; 2007=1,084; 2006 (not asked); 2005=1,324; 2004=1,386; 2003=989)Source: PwC 16th Annual Global CEO Survey

global economy will stay the same for the next 12 months and only 28% believe it will shrink. In 2012, by contrast, 48% were convinced the global economy would contract.

But economic plateaux aren’t exactly grounds for cheer. That’s why short-term confidence about the prospects for revenue growth has continued falling (see Figure 1). CEOs in Western Europe are especially nervous. Only 22% feel very confident they can increase their company’s revenues in the coming 12 months, compared with 53% of CEOs in the Middle East and Latin America.

1 PwC, ‘Global Economy Watch’ (December 2012).


Figure 2: Major disruptions over the last decade

US-led invasion of Iraq

SARS epidemic

Southeast Asian tsunami

Hurricane Katrina (US)

Eurozone sovereign debt crisis and first Greek bailout

New Zealand and Japan earthquake and tsunami

Hurricane Sandy(US)

iPhone launch

Global financial crash

Northern Rock bank run (UK)

Lehman Brothers’ collapse

US, UK and European bank bailouts

Wenchuan earthquake (China)

Indonesia earthquake

WHO declares swine flu pandemic

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: PwC

The prevailing mood is, as usual, somewhat more optimistic when it comes to the longer-term outlook: 46% of CEOs are very confident about expanding over the next three years. That said, CEOs in most parts of the world are much less positive than their peers in the E7 markets (46% versus 58%).2

It’s easy to understand why they’re so cautious. Far-reaching changes are happening – and they’re also happening faster than before. Between 1970 and 2011, the number of man-made disasters nearly tripled, while the number of natural disasters surged sevenfold.3 The past decade alone has seen a number of major disruptions (see Figure 2).

In short, improbable risks aren’t so improbable now; they’re becoming the norm in a more uncertain world. And CEOs everywhere are feeling the heat.

2 E7 markets: China, India, Brazil, Russia, Mexico, Indonesia and Turkey.3 Swiss Re, sigma No 2/2012.

…people always tend to think that a tough economic situation is the sign of a ‘new normal’ and, conversely, that a robust world economy will last forever. But economic conditions always alternate. Yasuchika Hasegawa, President and CEO, Takeda Pharmaceutical Company Ltd., Japan

When people ask me, ‘What’s going to happen in the next five years?’, I throw up my hands and say ‘I have no idea and neither do you.’ How do you cope with that degree of uncertainty? Well, I think, first, by having the right attitude about the process of change and reinvention.Peter Tortorici, CEO, GroupM Entertainment Global, US


Figure 3: Major social unrest tops the list of scenarios that would have the worst impact on CEOs’ organisations

Q: How well would your organisation be able to cope with the following scenarios, if they happened within the next 12 months? (respondents who answered ‘negative impact’)

75

67

63

56

53

53

52

51China’s GDP growth falling below 7.5% per annum

%

Recession in the US

Military or trade tensions affecting access to natural resources

Cyber attack or major disruption of the internet

Major social unrest in the country in which you are based

A breakup of the eurozone

A natural disaster disrupting a major trading/manufacturing hub

Health crisis (e.g. viral pandemic, food/water safety crisis)

Base: All respondents (1,330)Source: PwC 16th Annual Global CEO Survey

What worries CEOs most?

Today’s CEOs are concerned about a wide range of potential and ongoing threats to their business growth prospects. These include catastrophic events, economic and policy threats and commercial threats.

Major disruptionsWe asked CEOs about their organisation’s ability to cope with the potential impact of various disruptive scenarios. The majority thought their organisations would be negatively affected, with major social unrest being cause for the greatest concern (see Figure 3). Indeed, CEOs are far more concerned about this than they are about a slowdown in China, possibly because they’ve already factored the latter into their calculations.

The global community of regulators – as well as the political classes – are keen on ensuring the stability of the financial system. And that implies a completely new order, a new set of rules to play by. In these cases, it’s not uncommon to wind up in a situation of regulatory overreach. Piyush Gupta, CEO and Director, DBS Group, Singapore


Red numbers, red tapeOf course, major disruptions aren’t the only cause for concern; CEOs are nervous about a whole clutch of fiscal and political threats. The prospect of continuing economic volatility heads their worry list, as it has for the past two years. But 71% – rising to 89% in North America – are also concerned about how debt-laden governments will try to address growing deficits. And 69% are anxious about the risk of overregulation, now seen as a bigger threat than at any time since 2006 (see Figure 4a).

Has regulation gone too far? The US Dodd-Frank Act of 2010 runs to a massive 884 pages, which makes it 23 times longer than Glass-Steagall, the reform that followed the Wall Street Crash of 1929.4 And the European Commission (EC) has generated so much red tape that business ministers from Germany, the Netherlands, Poland and the UK recently wrote a letter urging Brussels to reduce the burden.5 This is in spite of the EC’s efforts of the past years to consolidate, codify and simplify existing legislation and improve the quality of new legislation.

Figure 4a: Volatile conditions top the list of economic and political threats, but concerns vary by where CEOs are located

Q: How concerned are you about the following potential economic and policy threats to your business growth prospects? (top four threats global CEOs named)

Uncertain or volatile economic growth

Government response to fiscal deficit/debt Overregulation Capital market volatility

Regions most concerned about this threat Regions least concerned about this threat

88%

81%

56%

89%

71%

54%

75%

69%

65%

66%

61%

50%

Africa North America Middle East Africa/Asia Pacific

Global Global Global Global

Middle East Latin America Western Europe Latin America

Base: All respondents (North America=227; Western Europe=312; Asia Pacific=449; Latin America=165; Middle East=32; Africa=50)Source: PwC 16th Annual Global CEO Survey

4 ‘Over-regulated America’, The Economist (18 February 2012), http://www.economist.com/node/215477895 James Kirkup, ‘Lift the weight of red tape, Vince Cable and allies urge Brussels’, The Daily Telegraph (20 November 2012), http://www.telegraph.co.uk/finance/yourbusiness/9689165/

Lift-the-weight-of-red-tape-Vince-Cable-and-allies-urge-Brussels.html


Too much tax, too little talentOn the commercial front, CEOs are particularly anxious about higher taxes and the shortage of key skills (see Figure 4b). These are perennial fears, but current events have brought them to the fore.

In the US, for example, one of the most pressing issues in President Obama’s in-tray is reform of the corporate tax system. In February 2012, he proposed reducing the headline tax rate by eliminating dozens of subsidies, a move that could hit some companies

Figure 4b: Volatile conditions top the list of business threats, but concerns vary by where CEOs are located

Q: How concerned are you about the following potential business threats to your growth prospects? (top four threats global CEOs named)

Increasing tax burden Availability of key skills Energy and raw material costs

Shifting consumer spending/behaviour


65%

62%

50%

82%

58%

45%

68%

52%

31%

57%

49%

35%

Asia Pacific Africa Africa Asia Pacific


Middle East Western Europe Middle East Latin America

Base: All respondents (Western Europe=312; Asia Pacific=449; Latin America=165; Middle East=32; Africa=50)Source: PwC 16th Annual Global CEO Survey

6 Jackie Calmes & John H. Cushman Jr., ‘Obama Unveils Proposal to Cut Corporate Tax Rate’, The New York Times (22 February 2012), http://www.nytimes.com/2012/02/23/business/economy/obama-introduces-plan-to-cut-corporate-tax-rate.html?pagewanted=all

hard.6 Meanwhile, the competition for talent has become more fierce than ever before, with the aging of the global population and the changing nature of work.

Energy and raw material costs are also a significant source of unease – especially in Africa and Asia Pacific, where 68% and 63% of CEOs, respectively, see them as a serious threat.


Silver lining for someIt’s not all doom and gloom, though. Nearly a fifth of all CEOs in the Middle East believe the collapse of the eurozone could provide new business opportunities.

Similarly, 16% of CEOs in the Middle East and 13% of CEOs in Central and Eastern Europe believe China’s slowing growth could open new doors. And 13% of CEOs in North America would welcome a squeeze on natural resources for the same reason.

In fact, Chinese CEOs are already benefiting from the lingering uncertainty in the eurozone. Our research shows that, in 2011, there were 61 deals in which mainland Chinese companies acquired European companies – up from 11 in 2006. And in the three months to March 2012, the number of Chinese firms purchasing European firms surpassed the number of European firms purchasing Chinese firms for the first time in history.7

Some European countries have a high level of productivity while others have a lower level of productivity while they are all wrapped up in a ‘monetary corset’ subject to different tax regulations. If the eurozone fails, an array of opportunities may arise, because some of the current rigidities will disappear. Julio Patricio Supervielle, Grupo Supervielle’s CEO and Banco Supervielle’s Chairman, Argentina

From risk management to resilienceOne thing is clear: the threats facing CEOs are coming from all directions; they’re coming harder and faster; and they’re coming in more subtly varied forms. Confronted with this changing risk landscape, CEOs recognise that traditional risk management techniques aren’t enough. And, in a stagnating global economy, they know they can’t rely on a rising tide to come to the rescue.

The only way forward is to build organisations that can survive and thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption and emerge stronger than before.

“If you don’t evolve and change, you go backwards. It’s pure physics,” says Larry Fink, Chairman and CEO of asset management firm BlackRock Inc. “So we’ve adapted quite considerably. Even this year we changed our entire firm architecture to be more adapted to our clients, to be more adapted to the situation and, importantly, to finalise our evolution from a founders’ culture firm to a global, hopefully entrepreneurial firm. And that has been a big evolution.”

7 PwC, ‘China deals: A fresh perspective’ (October 2012).


To be honest, we wouldn’t dare to predict the future. The fact is the world has been changing a lot more quickly in recent years. And looking back, we find that many forecasts of the global economy turned out to be incorrect. In our company, we just try to do well everything we need to do today. There are so many things out of our control that we feel it’s unnecessary and impractical to make too many predictions about the economy. Instead, we focus on building robust systems that can operate under a variety of conditions.Alex C. Lo, President, Uni-President Enterprises Corporation, Taiwan


A three-pronged approach

So what are CEOs doing to make their organisations more resilient in this era of ‘stable instability’? Our survey shows that they’re taking three specific approaches:

• Targeting pockets of opportunity: CEOs are focusing on a few well-chosen initiatives, primarily in their existing markets, to stimulate organic growth. They’re more wary about entering new markets or engaging in mergers and acquisitions (M&As), and diluting their resources too much.

• Concentrating on the customer: CEOs are looking for new ways to stimulate demand and foster customer loyalty, such as capitalising on digital marketing platforms and involving customers in product/service development. But they’re also aiming to keep their R&D costs down and make the innovation process more efficient.

• Improving operational effectiveness: CEOs are balancing efficiency with agility. They’re trying to cut costs without cutting value or leaving their organisations exposed to external upheavals. They’re also delegating power more widely and collaborating with organisations to share resources and develop new offerings.

Targeting pockets of opportunity Two-thirds of all CEOs are focusing on a few carefully selected initiatives rather than nurturing numerous different ideas and then weeding out the weakest. That’s easier said than done because every business unit naturally thinks its plans should take precedence. But there’s considerable

evidence to suggest that concentrating your firepower works much better than adopting a scattergun approach.

One analysis of how 4,700 companies weathered three previous downturns shows that the star performers – those that emerged stronger than ever – weren’t the obvious ones. They weren’t the companies that cut fast and furiously or went on the offensive with ambitious restructuring programmes, acquisitions and the like. The former saw customer satisfaction drop as the quality of their offerings deteriorated, while the latter were stretched much too thin.8

The companies that fared best in terms of both sales growth and profits growth were those that mastered the delicate balance between cutting costs to survive in the short term and investing to expand in the longer term. They took advantage of depressed prices to buy property, plants and equipment that would help them compete more effectively in the future. And they invested judiciously in R&D and marketing to boost their sales and profits when demand rose again.9

The CEOs in our survey are responding in the same fashion. They’re weighing up all their options, making a few smart investments and consolidating their resources to maximise the odds of success. And they’re doing so not because they think it’s the best way of surviving a downturn but because they think it will make their organisations more robust.

Steve Holliday, CEO of international energy distributor National Grid Group Plc., sums up this approach. “It’s very easy to just go off and think you can do things that you do well in many countries around the world which arguably need some of your skills,” he warns. But if a company doesn’t have a clear idea of where it can deliver value and isn’t disciplined in its focus, it risks extending itself too far. “We’re very, very conscious of making sure we don’t overreach ourselves.”

8 Ranjay Gulati, Nitin Nohria & Franz Wohlgezogen, ‘Roaring Out of Recession’, Harvard Business Review 88, no. 3 (March 2010): 62–69.9 Ibid.

Growth is not necessarily about revenue growth. In this uncertain environment there is more and more emphasis on bottom line growth. Peter Terium, CEO, RWE AG, Germany


Figure 5: CEOs are pursuing the opportunities for organic growth in existing markets

Q: Of these potential opportunities for business growth, which one is the main opportunity in the next 12 months?

New operation(s) in foreign markets

New M&A/joint ventures/strategic

alliances

Organic growth in existing

foreign market

New product or service

development

Organic growth in existing

domestic market

32%

17%17%

8%

25%

Base: All respondents (1,330)Note: 1% of CEOs responded ‘Don’t know/Refused’Source: PwC 16th Annual Global CEO Survey

Figure 6: Two faster and two slower economic lanes are developing

Growing but susceptible to disruption

Aggregates

Growing but decelerating

Growing and accelerating

Struggling to grow

France

Japan

United Kingdom

Netherlands

Ireland

1.2%

0.9%

2.1%

1.1%

2.2%

Poland

Australia

Canada

United States

Germany

3.4%

3.1%

2.3%

2.4%

1.3%

Indonesia

Brazil

South Africa

Italy

Spain

Portugal

Greece

0.3%

0.9%

0.5%

0.6%

6.2%

4.0%

3.6%

South Korea

Mexico

Russia

3.6%

3.7%

3.8%

China

India

Saudi Arabia

Turkey

7.3%

6.6%

4.2%

5.1%

Eurozone Global (market rates)1.0% 3.0%

The global growth leaderboard is changing

All percentages are projected 2013-15 average growth rates

Sources and methodology: PwC analysis, national statistical authorities, Thomson Datastream and IMF. The tables above form our main scenario projections and are therefore subject to considerable uncertainties.

Homing in on organic growth

So exactly which pockets of opportunity are CEOs targeting? Nearly half are pinning their hopes on organic growth in their existing markets (see Figure 5). Only 17% plan to complete M&As or form new strategic alliances. And only 25% are turning to new product and service development.

At first glance, then, it might look as if CEOs are hunkering down and waiting for better times. But CEOs also know that, if they want to grow their business, they’ll have to go where the growth is – and four distinct economic clusters are emerging (see Figure 6).

The troubled states of Southern Europe are contracting. Meanwhile, Australia, Japan, North America and the more robust members of the European Union are showing signs of recovery, albeit rather shaky.

The growth countries are also diverging. China and India are still expanding rapidly, but the pace is slowing down. Conversely, some parts of Southeast Asia and Latin America are picking up speed. This pattern is expected to continue for the rest of the decade.


With growth rates among both mature and growth economies diverging, and with highly unique opportunities and threats in each market, CEOs are looking for specific opportunities in all clusters.

It’s not surprising that five of CEOs’ top ten overseas destinations are growth markets, nor that four of these are the BRIC economies (see Figure 7). But the fact that Indonesia is now in the top ten – for the first time – shows that CEOs have been quick to spot more subtle shifts in the distribution of economic power.

Indonesia is the fastest of the accelerating markets, with real GDP growth forecast to increase by 6.2% a year for the next three years.10 By 2050, Indonesia’s economy in purchasing power parity (PPP) terms could be bigger than that of Germany, France or the UK.11 Its stock market has soared 12.6% in the past 12 months alone.12 And the government has launched a major programme to improve the country’s overburdened infrastructure.13

Other emerging markets are also being prioritised, like Mexico and Thailand, which are close on the heels of CEOs’ top ten markets. Mexico is particularly notable – it could become the world’s 7th largest economy by 2050 in PPP terms.14

And a growing number of CEOs are looking to Africa. For example, Nestlé sees Africa as one of the biggest opportunities for the food industry in the next 10-20 years.15 Dr. João Bento, CEO of Portugal-based international technology provider Efacec Capital SGSP SA says, “…we also have a presence in growth economies, such as Latin America, Southern Africa, Magreb and also in India.”

The US, meanwhile, remains second on CEOs’ list of top ten overseas destinations, as it did last year. All five of the mature economies on the list are growing, albeit susceptible to disruption. These markets, which comprise five of the G7 countries, are quite simply too big to ignore: the US, Japan and Germany are projected to remain among the world’s ten biggest economies, in PPP terms, in 2050, while Canada and the UK are expected to remain in the top 20.16

Furthermore, although the E7 countries are set to overtake the G7 countries in terms of GDP size and growth by 2050, they are still expected to lag far behind the G7 countries in terms of GDP per capita.17 So large, mature markets will still remain attractive for higher valued products and services, given their more affluent consumers.

10 PwC projections. 11 PwC, ‘World in 2050’ (January 2013). 12 Daniel Inman, ‘Southeast Asia’s Growing Appeal’, The Wall Street Journal (3 December 2012), http://online.wsj.com/article/SB10001424127887324020804578151761632189982.

html#mod=djemITPE_t 13 Eric Bellman, ‘Indonesia Boosts Infrastructure Investment’, The Wall Street Journal (7 December 2012), http://online.wsj.com/article/SB10001424127887323501404578165794187322794.html 14 PwC, ‘World in 2050’ (January 2013).15 Caroline Scott-Thomas, ‘Nestlé eyes big food industry opportunities in Africa’, Food Navigator (26 November 2012), http://www.foodnavigator.com/Financial-Industry/Nestle-eyes-big-food-

industry-opportunities-in-Africa16 PwC, ‘World in 2050’ (January 2013).17 Ibid.

Figure 7: Half of CEOs’ top ten countries are growth markets

Q: Which three countries, excluding the country in which you are based, do you consider most important for your overall growth prospects over the next 12 months? (maximum of 3 responses)

China

31%US

23%

Brazil

15%

Germany

12%

India10%

Russia8%

Indonesia7%

UK6%Canada

5%

Japan5%


CEO opinion is divided on Europe, though some CEOs see promise, including those countries that are struggling to grow. “People there [in Western Europe] have decided that they should work less and retire earlier. And that may not be affordable. So I think that Western Europe has a serious structural issue.” says Seymur Tari, CEO of Turkish private equity firm Turkven.

Yves Serra, President and CEO of Swiss industrial components manufacturer Georg Fischer Ltd., is more positive. “We focus our efforts on where we see growth. This includes Asia and America, at least for our products, and also some sectors in Europe. …So the picture is not just black and white; there are definitely pockets of growth in Europe as well.”

The traffic isn’t going in only one direction, though. CEOs in the mature markets may be looking to various growth markets, but CEOs in growth markets are equally prepared to go further afield: 33% of CEOs in Asia Pacific and 19% of those in the Middle East are targeting the US, for example, while 27% of CEOs in Latin America and 18% of those in Africa are targeting China.


…I think what we have to do ... is look for the growth opportunities very carefully. The easy route is to say, well that’s an emerging market so that’s got to be good, that’s a mature market, that’s got to be tougher, but ... I think you’ve got to drill down to see where the growth really is. ... and there is growth in every market – but you’ve got to go granular.Alison Cooper, Chief Executive, Imperial Tobacco Group, United Kingdom


Concentrating on the customer Irrespective of the markets they’re in, CEOs have one overwhelming goal: to grow their customer base. Indeed, 51% say it’s a top three investment priority for the coming year.

That’s not surprising. What’s changed is the fact that CEOs are now trying to attract more customers while focusing on a smaller, more targeted range of growth strategies – no easy task in the current economic climate. The recession has hit some businesses and consumers badly, particularly those in richer countries. Between 2000 and 2011, consumer spending in the mature markets increased by just 2.1% a year. In the growth markets, by contrast, it increased by a much healthier 5.7%.18

Very different consumption volumes and patterns in different markets add to the challenge. Though the growth economies have some common characteristics, they also differ in key respects – and these differences are likely to intensify as they continue to develop. Some growth countries are primarily producers rather than consumers, for example (see Figure 8).

The purchasing power and preferences of consumers can also vary a lot within, as well as between, countries, and adapting to such disparate tastes requires a deep understanding of the local environment. “It all starts with the consumer – a rich and robust understanding of what they want, where they’re going, but, most importantly, what they want in the future,” Douglas D. Tough, Chairman and CEO of International Flavors & Fragrances, Inc., observes.

“We interview consumers all around the world to make sure we have a robust database, and we don’t extrapolate necessarily from any one country to get a global view.” But there are obvious risks for multinationals, he adds. “…they have to adapt properly to local needs.” The competition from local and regional rivals is also increasing all the time.

Figure 8: Not all growth markets are consumer-led economies

0

0 20 40 100%8060

-5

5

10

-10

15

-15

20

25

30

Pro

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-20

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th in

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ber

of p

eop

le o

f wor

king

age

)

Projected consumption potential over 2011-20 period(proxied by GDP per capita growth)

Nigeria

India

Indonesia

Vietnam

China

Russia

South Korea

South Africa

Brazil

Mexico

Malaysia

Saudi Arabia

Consumers and producers

Consumers

Producers

Note: Dotted lines represent average valuesSource: PwC analysis, UN population figures.

18 PwC, ‘Introducing the PwC Global Consumer Index’ (October 2012), http://press.pwc.com/GLOBAL/global-consumer-spending-slowdown-eases.-pwc-releases-first-ever-global-consumer-index-gci/s/bc11166a-cd72-4ea7-93fa-c167d10a5cb5

We keep close track of the real estate sector in order to remain on the cutting edge of all advanced trends in the construction of buildings, energy efficient technologies and environmentally friendly materials. We introduce ready-to-move-in residential apartments in our buildings in response to client suggestions.Valentina Stanovova, Senior Vice-President, Capital Group, Russia

In fact, nearly half the CEOs we polled see shifts in consumer buying patterns as a serious business threat. And they realise that being able to respond quickly and effectively to such changes is crucial.

Dr. Weihua Ma, President and CEO of China Merchants Bank Co. Ltd., puts the position particularly well: “We commercial banks are service institutions, so changes in customer demands are extremely important for us. Just as a chef in a restaurant will lose his job if his cooking cannot satisfy his customers, a service institution will not exist if it has no customers.”


Getting customers onside

So it’s no wonder that new strategies to stimulate demand and foster customer loyalty play a big part in CEOs’ plans for the next 12 months. A full 82% anticipate making changes on this score – and 31% have major changes in mind (see Figure 9).

One obvious measure is to take advantage of the new marketing platforms now emerging. Most organisations have traditionally used market research, competitive benchmarking and the like. But these sources of information can only show how customers behave en masse.

That’s not the case in the digital arena. Mining social media sites, blogs, consumer reviews and other such data sources helps an organisation find out what individual customers think and want. Equipped with these insights, it can then develop products and services for specific customer segments and craft more personalised marketing messages – as well as enhancing the brand. This may explain why three-quarters of CEOs say they’re increasing their technology investments.

Figure 9: Attracting – and keeping – more customers is a key priority

Q: To what extent do you anticipate changes at your company over the next 12 months?

0 1000 100

Increase in R&D and innovation capacity

Customer growth/retention/loyalty strategies

Don’t know/refused

%

Strategies for managing talent

Increase in technology investments

Organisational structure

Some change A major changeNo change

51 31 1%17

54 23 1%23

54 21

1%

25

52 22

1%

26

50 17 1%32


19 Bryan Urbick, ‘Innovation Through Co-creation: Consumers Can be Creative’, Innovation Management (26 March 2012), http://www.innovationmanagement.se/2012/03/26/innovation-through-co-creation-consumers-can-be-creative/

In terms of the importance of our different stakeholders, our customers are absolutely the most important. If we don’t give them a good service – affordable tariffs, high reliability, good customer service – then we know we are going to be in trouble.Andrew Brandler, CEO, CLP Holdings Ltd., Hong Kong, China

Engaging with customers isn’t just about communicating with them, though. It’s also about working with them to co-create new offerings, and helping them use the products and services they’ve bought more enjoyably or effectively. Boeing has perfected the first of these two approaches: it consults airlines and frequent flyers alike when it’s designing new planes.19 Digital music service Spotify has perfected the second by inviting subscribers to customise their playlists, which enhances the product offering for them and for others.


Making the most of disruption

Yet innovation – generally one of the most important factors in attracting and retaining customers – is surprisingly low down the schedule for many CEOs. It comes fifth on their list of investment priorities for this year. And though 67% plan to increase their company’s R&D capacity, only 17% intend to make major alterations.

The drive for efficiency explains why some CEOs are reluctant to invest more in R&D, but a closer look at the data also shows marked regional variations. CEOs in Africa, Asia Pacific and Latin America are more likely to be beefing up their company’s R&D than those in the rest of the world – possibly because the growth countries are still in catch-up mode.

Nevertheless, CEOs know that innovation isn’t possible without investment. That’s why a number of leading companies are adopting a more imaginative approach to the innovation process itself, whether it’s incremental changes or more fundamental changes to their business models, in order to become more agile and responsive to competitive threats or shifts in customer demand.

Finland-based international communications and information technology company Nokia is a case in point. “…our focus is very much on disruption – disrupting ourselves, disrupting the trends that have been established in the industry and moving forward with new strategies, new products and new ways of managing our organisation in order to keep pace and indeed accelerate the pace beyond others.” says President and CEO Stephen A Elop.

“One of the most important ways that we see to drive disruption is to focus on unique and differentiating consumer experiences. That’s a fancy way of saying, ‘how can we help you do something you couldn’t do before?’ … when you look at the patterns of disruption, particularly in the area of technology, it’s often something relatively focused, relatively simple that allows you as a person to do something you couldn’t do before, or to do it faster or more efficiently. And it’s those types of innovations that we’re focused on today,” he explains.

Human capacity is key to any company’s growth. The second important factor is R&D. Karen Agustiawan, President Director and CEO, PT Pertamina (Persero), Indonesia

…we want more than just satisfied consumers. We want to delight them – to go beyond their expectations. We are seen as a company that delivers excellence in terms of customer service. But our main innovations are our [retail] collections and how quickly we get them to market.José Galló, CEO and Director, Lojas Renner, Brazil


It all starts with the consumer – a rich and robust understanding of what they want, where they’re going, but, most importantly, what they want in the future.Douglas D. Tough, Chairman and CEO, International Flavors & Fragrances, Inc., US


Improving operational effectivenessUnder pressure to meet demanding customer growth targets within tightly defined investment parameters, CEOs know they’ll have to change the way their companies function. Nearly half say improving operational effectiveness is one of their top three investment priorities this year.

Anders Nyrén, President and CEO of global investment firm Industrivärden AB, based in Sweden, spoke for many CEOs when he told us: “Given that the global economy and the global pace of life are getting faster in all aspects, one needs to become more agile and efficient about everything – including running a company. It’s essential that you streamline operations and become leaner wherever you can, so as to be able to react more quickly to changing market conditions.”

Finding the right balance

Cost-cutting is still high on the agenda: 77% of CEOs have undertaken cost-saving initiatives in the past 12 months and 70% plan to do so in the next 12 months (see Figure 10). But they’re not wielding the knife indiscriminately; they’re trying to balance efficiency with other strategic

objectives. As Artem Konstandyan, CEO of Russia’s Promsvyazbank (PSB), notes, “Downsizing is not a goal in itself. We’re trying to streamline our operations and improve staff performance.”

An example? Many companies discovered in the aftermath of the tsunamis in Southeast Asia and Japan that the quest to maximise the efficiency of their supply chains had severely impaired their ability to cope with disruption. Today’s CEOs have clearly learned from that experience: 50% are diversifying their supply chains and working with suppliers in a wider range of territories.

CEOs are also wary about inadvertently cutting value in the course of cutting costs – and slashing the workforce is one action that can certainly backfire. This probably explains why 25% have kept their company’s headcount the same for the past 12 months, while 48% have actually increased it. It may explain, too, why 77% of CEOs plan to revise their strategies for managing talent in the coming year; they realise they won’t be able to attract and retain new customers without well-trained, highly motivated employees.

I think the underlying idea of trying to reduce cost in whatever we do actually makes us become creative and innovative.Aireen Omar, CEO, AirAsia Berhad, Malaysia

We believe the underlying growth trends will be slow. So we have to just be better than the competition in these markets, and that is also one of the reasons why we have to keep costs under control.Martin Blessing, Chairman of the Board of Managing Directors, Commerzbank AG, Germany

…we have had to look seriously at how we manage our business. And, we have had to learn how to be prepared to disrupt ourselves. So, rather than getting too rigid and bureaucratic and too procedures-driven, sometimes we’ve had to step outside of ourselves, but yet within ourselves, by creating new units to challenge the way that we do business and to extend that learning to the traditional parts of our business.Alex Arena, Group Managing Director, HKT Ltd., Hong Kong, China

Figure 10: Cost-cutting tops the list of restructuring activities CEOs plan to put in place in 2013

Q: Which, if any, of the following restructuring activities do you plan to initiate in the coming 12 months?

Implement a cost-reduction

initiative

70% 47% 31%Enter into a new strategic alliance

or joint venture

Outsource a business process

or function



20 Pankaj Ghemawat & Sebastian Reiche, ‘National Cultural Differences and Multinational Business’, Globalization Note Series, 2011. 21 Karen L. Newman & Stanley D. Nollen, ‘Culture and Congruence: The Fit Between Management Practices and National Culture’, Journal of International Business Studies 27, No. 4 (4th Quarter,

1996), pp. 753-779.

I prefer a management style based on openness and cooperation at every level; one that does not necessarily obey or respect hierarchy at all times. I believe in leadership that can stay flexible. Sándor Csányi, Chairman and CEO, OTP Bank Plc., Hungary

Figure 11: Involving less senior managers in strategic decisions is seen as most effective in preparing them for leadership

Q: Do you deploy any of the following to develop your leadership pipeline?Q: If so, how effective are they?

0

20

40

60

80

100

Active succession planning, including identifying multiple

successors

Dedicated executive

development programme

Encouraging global mobility

and international experience

Involving managers below

board level in strategic

decision-making

Programmes to encourage

diversity among

business leaders

Rotations to different functions/challenges

Shadowing senior

executives

Effectiveness of methods deployed to develop leadership pipeline

Somewhat effective Not very effective Not at all effective Don’t know/refusedVery effective

% of CEOs who deploy the following to develop their leadership pipeline

% of CEOs whodon’t rate theirinitiatives as highly effective

%

37

5861

6269 71

79

11 13

22 2219

24

33


Putting power in more hands

In fact, some CEOs are going considerably further: they’re devolving power more widely to make their organisations more agile and responsive. Although only 31% encourage all their staff to get involved in strategic planning, 79% include managers below board level in such decisions as part of the process of developing their leadership pipelines. And most CEOs think it’s the best way of nurturing their successors (see Figure 11).

“We don’t have one way of doing things nor do we have one point of authority to which all questions have to be directed,” says Carl Sheldon, CEO of United Arab Emirates-based global energy company TAQA. “Instead, our approach is to create a culture that empowers people and – within the context of a set of shared values – provides them with the freedom to take action. That gives you tremendous strength, flexibility, and agility.”

That said, there are pronounced regional variations in behaviour. CEOs in North America are far more likely to encourage their employees to participate in strategic decisions than those based in Central and Eastern Europe, Asia Pacific and Latin America. They’re also more likely to involve middle managers.

These variations obviously reflect cross-cultural differences in how decisions are made. CEOs in cultures that are relatively egalitarian typically adopt a more participative approach than those in cultures that are relatively hierarchical.20 But whereas participative management can improve profitability in less hierarchical cultures, it can worsen profitability in more hierarchical cultures.21 So using different decision-making styles in different cultures makes good business sense.


Sharing as well as buying

It’s not just the way management and employees interact within organisations that’s changing, though; it’s also the way organisations interact with each other. Nearly half the CEOs we polled aim to form a new strategic alliance or joint venture during the next 12 months, which is broadly in line with the pattern for the past four years.

At the same time, global M&A activity has declined sharply since the start of the global financial crisis, although CEOs in some sectors, like mining, power and utilities and communications, are much more likely to be prioritising investment in M&A in the coming year.

Even so, the aggregate value of the deals completed in the first half of 2012 was less than half the value of the deals completed in the first half of 2007.22 Further evidence of how cautious CEOs have become is the fact that three-quarters of the deals conducted in 2012 were cash-only transactions.23

Yet, some firms have plenty of money in their piggy banks. US companies are sitting on about $1.7 trillion in cash reserves.24 Canadian companies hold nearly $300 billion.25 And British businesses hold another £720 billion.26 Nearly two-thirds of the CEOs who participated in our survey also intend to boost their capital spending over the next 12 months, which suggests that they have enough cash to finance their plans or are confident of raising the funds. So, if money isn’t the issue, what is?

We believe the dip in M&A is being driven by current levels of uncertainty rather than a major change in emphasis. But we’re also seeing a move by businesses towards ‘sharing’, by forming partnerships or networks. Inspired by companies like Amazon and Apple, CEOs recognise that they’re no longer confined to the traditional options of ‘build or buy’.

Collaborating with other organisations in the same or adjacent industries provides new opportunities for generating business by co-developing products and services, taking advantage of a common infrastructure and sharing customers. It also carries much less risk than an M&A because it doesn’t require a significant upfront investment and doesn’t entail spending several years integrating the target company to realise the gains.

That’s not to say there’s no place for M&As. On the contrary, one study shows that firms using multiple modes to obtain new resources were much more likely to survive over a five-year period than those that relied solely on alliances, solely on M&As or solely on internal development.27

But partnering with other organisations, as distinct from purchasing them, does carry considerable organisational implications. The qualities needed to form a successful network are quite different from those needed to pull off an acquisition. Key among these is the high degree of collaboration that’s required to make an alliance work.28

Our innovation comes from globally collaborative efforts and a lot of encouragement from within. It is also about empowerment, decentralisation and encouragement to come up with new ideas for R&D programmes and product development.A.M. Naik, Executive Chairman, Larsen & Toubro Limited, India

22 mergermarket H1 round-up report (July 2012).23 mergermarket 2012 round-up report (January 2013). 24 Federal Reserve, ‘Flow of Funds Accounts of the United States’ (June 2012). 25 ‘Dead money’, The Economist (3 November 2012), http://www.economist.com/news/finance-and-economics/21565621-cash-has-been-piling-up-companies’-balance-sheets-crisis-dead 26 Michael Izza, ‘Business Confidence research suggests recovery has not yet taken hold’, ICAEW (5 November 2012), http://www.ion.icaew.com/MoorgatePlace/2568727 Laurence Capron & Will Mitchell, Build, Borrow, or Buy: Solving the Growth Dilemma (Harvard Business Review Press, 2012).28 PwC, ‘Creating successful alliances and joint ventures’ (2012).


One key point of our strategic advantage is the capability to ‘orchestrate’ the production and engineering value chain we create in partnership with other companies. That gives us the ability to scale up or scale down quickly and efficiently. We try to ensure our organisational structure is sufficiently fluid so that we can respond quickly to changes in demand. Pertti Korhonen, President and CEO, Outotec Oyj, Finland


It’s a question of trust

Figure 12: More stakeholders have more influence

Q: Thinking about the range of stakeholders, to what extent do they have a significant influence on your business strategy?

0 1000 100

Providers of capital (e.g. creditors and investors)

Your supply chain partners

Customers and clients

Don’t know/refused

%

Industry competitors and peers

Government and regulators

Employees (including trade unions/work councils)

Users of social media

The media

Local communities

Have some influence Have significant influenceHave little or no influence

17 80 1%3

45 45 1%9

47 36

1%

1%

1%

1%

16

35 5014

44 32

1%

2%22

35

45

40

40

39

16

12

10

1%24

38

46

49

Base: All respondents. (1,330)Source: PwC 16th Annual Global CEO Survey

We’ve discussed what CEOs are doing to make their organisations more agile, more appealing and more profitable. To succeed in, and align, these three goals, CEOs know they’ll have to repair the bridges between business and society. CEOs also recognise the important role that business can play in addressing social challenges and improving national outcomes.

The global financial crisis and questionable behaviour of some companies have badly damaged faith in institutions of every kind. And this is impacting their brand value and performance. CEOs are understandably concerned: 37% worry that lack of trust in their industry could endanger their company’s growth. They know that nothing they do to get closer to customers will work if they don’t have the confidence of the public.

But trust isn’t just an essential part of the customer relationship, it’s the glue that binds an organisation and all its stakeholders together – and there are now many more stakeholders to consider. Thanks to the social media revolution, many of these stakeholders also have an unprecedented amount of clout.

CEOs recognise this. While they regard customers, competitors, governments and regulators as their most influential stakeholders, they’re certainly not ignoring others, like employees, suppliers, investors or local communities (see Figure 12).

“As a public company we have to demonstrate growth and improve margins, quarter by quarter, because that is what the market wants to see. But we are a lot more than that,” says Alonso Quintana, CEO of Mexican construction and engineering company ICA. “We are a company that really affects many more people and many more stakeholders than one would think from just a financial perspective.”

The number one thing that will make people more at ease is transparency. Being a public company, the preservation of transparency is an inherent obligation for us. We keep in touch with our customers in order to understand their needs. Everything is interconnected. Dr. John Coustas, President and CEO, Danaos Corporation, Greece


Starting from withinSo what are the CEOs we surveyed doing to rebuild trust? They’re starting from within: 56% – rising to 72% in the Middle East and 76% in Africa – plan to focus more heavily on promoting an ethical culture this year (see Figure 13). That’s a logical place to begin. The more customer touchpoints there are, and the more decision-making is delegated, the more an organisation is exposed to the actions of individual employees.

Building a business with a strong ethical foundation is partly about aligning the values of employees with those of the organisation they work for to create a shared, socially useful sense of purpose. It’s also about shifting from a rules-based approach to one that rests on principles: moving from a culture of compliance to a culture in which people do the right thing for its own sake.

Figure 13: A range of non-financial priorities are getting CEOs’ attention

Q: To what extent does your organisation plan to focus on the following priorities over the next 12 months?

76%

51%

72%

50%

31%

68%

49%

40%

64%

41%

30%

Africa Middle East Africa Africa


North America Central and Eastern Europe

Central and Eastern Europe

North America

Framework to support a culture of

ethical behaviour

Workforce diversity and

inclusion

Reducing environmental

footprint

Non-financial reporting (incl. corporate

responsibility reporting)


56%

Base: All respondents. (North America=227; Central and Eastern Europe=95; Middle East=32; Africa=50)Source: PwC 16th Annual Global CEO Survey

People need a sense of purpose. Gross margins are not the stuff of which dreams are made. And even without going so far as to talk of dreams, you cannot inspire people to take action, create or motivate without instilling a sense of purpose, especially when times are difficult. Jean-Pascal Tricoire, President and CEO, Schneider Electric SA, France

An important part of achieving this is how businesses connect with their employees. Over three-quarters of the CEOs who see employees as influential on their strategy say they’re strengthening their employee engagement programme.

Organisational culture isn’t the only issue on the internal agenda, though: 50% of CEOs – including 72% of those in the Middle East – intend to develop a more diverse and inclusive workforce. Malaysia’s AirAsia Berhad is one such example.

“…we hire people from all sorts of backgrounds, all sorts of different cultures,” CEO Aireen Omar explains. “We understand and respect each other and at the same time it’s a way for us to share ideas and see what sits best for the whole company. ... Moreover, despite the fact that we have operations in different countries with different cultures and backgrounds, we are able to work effectively as a team in one company culture.”


Figure 14: CEOs see developing a skilled workforce as the top joint priority between business and government

Q: Which three areas should be the Government’s priority today?

00 20 40 60 80 %

20

40

60

%80

% o

f CE

Os

who

thi

nk is

sue

shou

ld

be

a to

p t

hree

gov

ernm

ent

prio

rity

% of CEOs raising investment to address issue

Creating and fostering a skilled workforce

Maintaining the health of the workforce

Ensuring financial sector stability

Improving the country’s infrastructure

Securing natural resources that are critical for business

Addressing the risks of climate change and protecting biodiversity

Reducing poverty and inequality


Many CEOs are also aiming, more broadly, to improve national outcomes. Over the next three years, 61% plan to invest more in creating a skilled workforce and 45% in maintaining the health of the workforce (see Figure 14). Demographic factors are clearly one driver of these efforts. And the focus on employee health is increasingly being driven by rising healthcare costs in the mature economies and rising healthcare expectations in the growth economies.

CEOs in the Middle East and Africa have especially ambitious goals: 81% and 86%, respectively, intend to increase the amount they spend on staff training, while 75% and 72%, respectively, intend to spend more on keeping their staff healthy. More than half of all CEOs in North America – where health insurance is one of the most prized employee perks – also expect to invest more in employee healthcare programmes.

CEOs know that treating the workforce well creates a virtuous circle. Organisations with a reputation for looking after their staff find it easier

29 Econsultancy, ‘Social Media Statistics Compendium, Global’ (November 2012). Marketers were asked to indicate the two most important uses of social.

Engaging with the outside worldThe majority of CEOs are strengthening their engagement with the stakeholders they see as influential. Social media is becoming an increasingly important tool – but many businesses see it more as a way to increase brand awareness, rather than as a customer engagement channel. One survey, for example, found that 64% of businesses that use social media do so for brand awareness, while only a quarter do so for customer service.29 This may explain why CEOs see social media users as having a much lower level of influence than customers – despite the fact that many of their customers are using these channels.

Looking beyond corporate walls, nearly half of CEOs plan to put more effort into reducing their organisation’s environmental footprint in the coming year. Meanwhile, 41% plan to focus more heavily on non-financial reporting, which often more fully reflects a company’s worth and the value it contributes to society.

to recruit and retain good people. And workers who feel valued talk more favourably about their employer. That matters more than ever, when disaffected employees can reach thousands of customers with a single tweet.

CEOs also increasingly recognise the importance of collaborating with government – both to promote their own commercial interests and to build a sustainable business ecosystem. They see developing a skilled workforce as one such shared responsibility (see Figure 14).

Nearly two-thirds of CEOs think governments should play a major role in ensuring the stability of the financial system and creating a strong national infrastructure, too – although they question how well governments have risen to the challenge. Yet, as the success of the private and public sectors becomes increasingly intertwined, it’s becoming evermore important for business and government to work honestly and effectively together.


Surviving and thriving amid disruptionIn conclusion, trust is the prerequisite for everything CEOs hope to achieve as they move from risk management to resilience. Businesses’ efforts to target the right opportunities, increase customer demand and loyalty and improve operational effectiveness are only as effective as their ability to build trustworthy relationships with all their stakeholders.

CEOs are recognising the need to align their strategies around a stronger social mandate – starting from the top – and through it create organisations that are more agile, adaptable and resilient.

This means developing a deep understanding of the changing needs of a growing range of stakeholders across existing and new markets, and investing to engage and empower them. Networks of trusted relationships, with shared vision, values and objectives, are helping to build strong yet flexible ecosystems that can not only survive, but flourish amid disruption.

From risk management to resilience

• How can you complement your longer term planning and strategy with real-time tools to improve operational decisions and continually adjust your course as necessary?

• How can you efficiently anticipate and execute in an environment of constant change, turning scenario planning from a theoretical exercise into a real decision shaper?

• How can you complement your enterprise risk management systems with a stronger focus on strategic and systemic risks – and ensure that the right behaviour and culture are in place across your organisation and wider networks?

Targeting the right opportunities

• Picking the right initiatives for investment is critical to success, especially in tough times. What criteria should you use to ensure that your investments are targeted to where they can best deliver value?

• Organisations are increasingly aware that opportunities in growth markets are highly nuanced. How do you evaluate the specific opportunities offered in these diverse and diverging markets, both newer and more established?

• How can you ensure that you’re effectively assessing opportunities in mature markets, and drilling deep enough to find growth in specific sectors and segments?

Concentrating on the customer

• Businesses haven’t changed their focus on customers. But they’re keeping a closer eye on costs – as are their customers. How can you best target highly disparate and ever-changing markets in order to find growth opportunities?

• There’s so much information out there about customers. How can you best capture and standardise this data across all your markets, and turn your IT systems into a powerful tool to understand shifting buyer preferences and improve customer loyalty?

• How can you use digital channels to better communicate with your customers, co-create products, capture customer insights, increase loyalty and measure your impact in all of these areas?

• How can you innovate more effectively and efficiently – and focus more on the customer in your innovation strategy and processes?

The following questions, derived from the conversations we’ve had with CEOs, focus on some of the biggest challenges facing today’s business leaders as they strive to find growth and stay competitive through constant turbulence.


Improving operational effectiveness

• Bottom line growth is of critical importance to organisations. But how do you ensure that you continue to create value, invest for growth and have the flexibility to bounce back from disruption?

• In order to take advantage of new opportunities before competitors do, how can you create the right degree of flexibility in your organisational structure and processes, which allows you to quickly deploy resources across your organisation to where they’re most needed?

• What should you be on the lookout for entering into a partnership or joint venture?

• Employees and their interactions with customers are critical for long-term success. Do you have the right people, processes and information to engage with customers as effectively as possible?

• How can you create networks of formal and informal trusted relationships which go beyond contractual terms to target a shared vision, set of values and objectives?

Building trustworthy relationships

• How can you create the mutual trust necessary for your employees to take personal responsibility for doing the right thing, even as each of them is increasingly exposed to the front line of customer interaction?

• How can your board members and senior executives lead by example, to embody the values and behaviour core to your organisation?

• How can you more effectively support skills development in the markets in which you operate?

• It makes sense to focus on how a country’s resources can improve the competitiveness of your local operations, whether it’s the talent pool, capital or raw materials. But what do you have that governments might be interested in accessing, and how can you collaborate for mutual success?

• Working with a wide range of other stakeholders is critical to succeeding in your markets. How can you best understand and meet the needs of customers, suppliers, local communities and other groups within the ecosystem in which you operate?

• How can you build more transparency into your reporting that better communicates how you’re working to create shared value in the markets in which you operate?

…social and environmental responsibility should be inherent not only in government authorities and the state but also in any commercial company in any country. The world of the future depends on solidarity in this area: the uniting of resources, efforts and initiatives from all economic entities.Andrei Dubovskov, President and CEO, MTS OSJC, Russia


…since we’re running scale businesses at a distance, every person leading each of those businesses is invested with trust from the centre. The leaders of our businesses have the authority to make decisions about the business they run. ...So part of becoming agile is creating a culture that invests its people with trust. ...our approach is to create a culture that empowers people and – within the context of a set of shared values – provides them with the freedom to take action. That gives you tremendous strength, flexibility, and agility.Carl Sheldon, CEO, TAQA, United Arab Emirates


Larry Fink Chairman and Chief Executive Officer BlackRock Inc. US

Martin BlessingChairman of the Board of Managing Directors Commerzbank AG Germany

Steve HollidayChief Executive Officer National Grid Group Plc. UK

Alex C. LoPresident Uni-President Enterprises Corporation Taiwan

Dr. João BentoChief Executive Officer Efacec Capital SGSP SA Portugal

Dr. John CoustasPresident and Chief Executive Officer Danaos Corporation Greece

José GallóChief Executive Officer and Director Lojas Renner Brazil

Alex ArenaGroup Managing Director HKT Ltd. Hong Kong, China

Andrei DubovskovPresident and Chief Executive Officer MTS OJSC Russia

Sándor CsányiChairman and Chief Executive Officer OTP Bank Plc. Hungary

Alison CooperChief Executive Imperial Tobacco Group UK

Andrew BrandlerChief Executive Officer CLP Holdings Ltd. Hong Kong, China

Artem KonstandyanChief Executive Officer Promsvyazbank (PSB) Russia

Pertti KorhonenPresident and Chief Executive Officer Outotec Oyj Finland

Piyush GuptaChief Executive Officer and Director DBS Group Singapore

Karen AgustiawanPresident Director and Chief Executive Officer PT Pertamina (Persero) Indonesia

Stephen A ElopPresident and Chief Executive Officer Nokia Finland

Yasuchika HasegawaPresident and Chief Executive Officer Takeda Pharmaceutical Company Ltd. Japan

CEO survey participants


Aireen OmarChief Executive Officer AirAsia Berhad Malaysia

Yves SerraPresident and Chief Executive Officer Georg Fischer Ltd. Switzerland

Alonso QuintanaChief Executive Officer ICA Mexico

Peter TeriumChief Executive Officer RWE AG Germany

Julio Patricio SupervielleGrupo Supervielle’s CEO and Banco Supervielle’s Chairman Argentina

Seymur TariChief Executive Officer Turkven Turkey

Valentina StanovovaSenior Vice-President Capital Group Russia

Carl SheldonChief Executive Officer TAQA UAE

Dr. Weihua MaPresident and Chief Executive Officer China Merchants Bank Co. Ltd. China

Shikha SharmaManaging Director and Chief Executive Officer Axis Bank Limited India

Peter TortoriciChief Executive Officer GroupM Entertainment Global US

Jean- Pascal TricoirePresident and Chief Executive Officer Schneider Electric SA France

Anders NyrénPresident and Chief Executive Officer Industrivärden AB Sweden

A.M. NaikExecutive Chairman Larsen & Toubro Limited India

Douglas D. ToughChairman and Chief Executive Officer International Flavors & Fragrances, Inc. US

To read quotes from interviews and watch selected videos, visit www.pwc.com/ceosurvey


In total, we conducted 1,330 interviews with CEOs in 68 countries between 5 September and 4 December 2012. By region, 449 interviews were conducted in Asia Pacific, 312 in Western Europe, 227 in North America, 165 in Latin America, 95 in Central and Eastern Europe, 50 in Africa and 32 in the Middle East. The interviews were spread across a range of industries, with further details by region and industry, available on request.

The majority of interviews were conducted by telephone, with some country exceptions: interviews were conducted face-to-face in Africa and the Philippines; postal surveys were used in Japan and Korea; and online surveys were completed in Australia, Iceland and Singapore. The US and Greece also used a mixed approach of telephone and online. In addition, members of our global CEO panel were invited to take part online, with 230 CEOs providing their views. All interviews were conducted in confidence and on an unattributable basis.

The lower thresholds for inclusion in the top 30 countries are companies with more than 100 employees or revenues of more than US$10 million. This is raised to 500 employees or revenues of more than $50 million in the top ten countries by GDP size. Forty-one percent of the companies had revenues of $1 billion and over, and a further 35% had revenues of over $100 million up to $1 billion. Additionally, 18% had revenues of up to $100 million. Company ownership is recorded as private for 48% of the companies, with a further 48% listed on at least one stock exchange.

To better appreciate CEOs’ perspectives for 2013, we also conducted in-depth interviews with 33 CEOs from five continents over the fourth quarter of 2012. Their interviews are quoted in this report, and more extensive extracts can be found on our website – at http://www.pwc.com/ceosurvey – where you can explore responses by sector and location.

PwC’s extensive network of experts and specialists has provided input into the analysis of the survey. Our experts span many countries and industries.

Note: Not all figures add up to 100%, due to rounding of percentages and to the exclusion of ‘neither/nor’ and ‘don’t know’ responses.

Research methodology and key contacts

This is the 16th Annual PwC Global CEO Survey

We’ve conducted interviews with CEOs in 68 countries worldwide, adjusting the number of interviews in line with each country’s GDP to ensure CEOs’ views are fairly represented.

For further information on the survey content, please contact:

Suzanne Snowden Global Thought Leadership +44 20 7212 5481 [email protected]

For media related enquiries, please contact:

Mike Davies Director of Global Communications +44 20 7804 2378 [email protected]

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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www.pwc.com.cy/ceo-survey

16th Annual Global CEO Survey Country summary: Key findings in Cyprus

Adapting to the new reality

January 2013

32CEOs in Cyprus

25%of CEOs are very confident about their revenue growth prospects over the next 3 years

25%of CEOs view organic growth in the domestic market and the development of new products/services as the main growth opportunities

Foreword 3Confidence in growth 4What worries the CEOs 7Achieving best management 9Changes in the headcount 13Potential opportunities and investment priorities

15

Business environment 18Conclusion 21PwC Cyprus 22

Table of contents

Notes: Not all figures add up to 100% due to rounding of percentages and to the exclusion of ‘neither/nor’ and don’t know’ responses. The Eurozone group includes Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Italy, Netherlands, Portugal and Spain.

Key findings in Cyprus 3

Foreword

The past year was very challenging for businesses in Cyprus with the recession, the lack of market liquidity and the economic uncertainty being the prevailing factors that are expected to continue in 2013.

Globally economic volatility and disruption have escalated, countries, economies and companies are more interconnected and interdependent than ever before and risks that were thought improbable have become the norm.

We live in a new reality and “we must learn to sail in high winds”. To do this, companies need to develop resilience and effectively manage the immediate impact of events with a capacity to adapt in changing conditions. We are helping our clients so as not only to survive through the “storm” but to be successful in the new reality.

Our survey aims to communicate the thinking and concerns of CEOs and stimulate a debate on the challenges faced by businesses today and their response. Economic recovery is dependent on having a vibrant and successful private sector creating jobs and making investments for the future.

The 16th Annual Global CEO Survey was launched on 22 January 2013 at the Annual Meeting of the World Economic Forum in Davos and we are very pleased to present the second Cyprus CEO survey which examines the views of 32 Cypriot business leaders.

Evgenios C EvgeniouCEO, PwC Cyprus

This year the global survey gathers insights from over 1,300 CEOs and focuses on their actions aimed at creating responsive organisations that are able to absorb shocks and turn adversity into opportunity.

In view of the fact that the interviews were carried out at a period of great economic uncertainty, the findings portray the complex and rapidly changing business landscape, the confidence levels of CEOs and reveal their views on where growth opportunities lie given the state of the economy.

Personally I would like to thank the 32 CEOs that have taken the time to share with us their views, contributing to our effort to provide insights on the challenges they face as well as on the actions taken to counter them. We appreciate that their time is valuable and we feel privileged by their willingness to participate and make this survey possible.

Evgenios C EvgeniouCEO, PwC Cyprus

4 16th Annual Global CEO Survey

Confidence in growth

According to the 16th Annual Global CEO Survey, the majority (34%) of CEOs in Cyprus, in the Eurozone (43%)and globally (45%) are somewhat confident about their company’s prospects for revenue growth over the next 12 months.

Just 6% of Cypriot CEOs stated “very confident” about their revenue prospects at a time where percentages reached 36% globally and 20% in the Eurozone.

It is worth noting that confidence levels have remained stable compared to the previous year, as the same percentage of 6% has stated “very confident” in the same question. The percentages both globally and in the Eurozone have decreased by 4 and 2 percentage points respectively, indicating that businesses

have become more reserved in their projections as the crisis continues.

However, CEOs in Cyprus appear more optimistic about their company’s prospects for revenue growth over the next 3 years. The percentage of CEOs who stated “very confident” reaches 25%, an increase of 22 percentage points compared to the percentage recorded last year. A total of 69% stated “somewhat confident” representing an increase of 40 percentage points.

In contrast, the percentage of Cypriot CEOs who are “not confident at all” drops to 3% compared to 45% recorded last year with the percentage of CEOs who appear to have confidence in their

Figure 1: Revenue growth prospects over the next 12 months

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months?

company’s revenue prospects in the next 3 years being higher in Cyprus (94%) compared to the global (90%) and Eurozone (82%) percentages.

According to the survey, Cypriot CEOs seem to regain their optimism regarding their company’s prospect for revenue growth despite the fact that the past year was challenging with the effects of the global and Eurozone crisis unfolding in Cyprus.

20112012

6%

34%

31%

28%

20%

43%

24%

13%

36%

45%

15%

4%

Cyprus

Eurozone

GlobalNot confident at all

Not very confident

Somewhat confident

Very confident

Don’t know/ Refused

6%

32%

29%

32%

22%

42%

24%

12%

1% 1%

40%

44%

12%

3%

Cyprus

Eurozone

Global


Figure 2: Revenue growth prospects over the next 3 years

Q: How confident are you about your company’s prospects for revenue growth over the next 3 years?

Don't know/ Refused

25%30%

46%

69%52%

44%

3%12%

8%

3%4%

1%

2%1%

GlobalEurozoneCyprus

Don't know/ Refused

3%32%

47%

29%41%

42%

19%17%

7%

45%9%

2%

3%2%

1%

2012

2011


When respondents in Cyprus were asked about the prospects of the global economy during the next 12 months, only 13% of them replied that they believe that the global economy will improve during the next year. 34% believe that it will stay the same, whereas the majority (53%) believes that the global economy will further decline.

Slightly more optimistic percentages are recorded at a Eurozone level where 16% of the CEOs believe that the global economy will improve, 45% that it will remain the same and 39% that it will decline.

Globally, 18% of the CEOs believe that the global economy will improve, 52% that it will stay the same and 28% that it will decline.

Figure 3: Prospects of the global economy

Q: Do you believe the global economy will improve, stay the same, or decline over the next 12 months?

The unprecedented economic challenges left companies straggling with squeezed liquidity. Demetra, the largest public investment company on the island, has managed to come out of the economic meltdown with a strong cash position; and the challenge now is to capitalise on the opportunities brought about by the crisis. We are looking to promote investments in the energy and infrastructure sectors that will contribute in accelerating economic growth and help revive the economy.

Dr Nicos Michaelas General Manager Demetra Investment Public Ltd

Cyprus Eurozone Global

Decline53%Stay the

same34%

Improve13%

Don't know/ Refused

1%

Decline39%

Stay the same45%

Improve16%

Don't know/ Refused

2%

Decline28%

Stay the same52%

Improve18%


Uncertain economic growth and the government’s response to fiscal deficit and debt burden may have a negative impact in business activity.

This is confirmed by 91% of Cypriot CEOs, 86% of CEOs in the Eurozone and 81% of CEOs at a global level.

What worries the CEOs

Figure 4 : Potential economic and policy threats

Q: How concerned are you about the following potential economic and policy threats to your business growth prospects?

Respondents who stated ‘extremely’ or ‘somewhat concerned’

41%

43%

51%

54%

61%

69%

71%

81%

31%

30%

39%

37%

69%

62%

82%

86%

66%

41%

38%

41%

88%

34%

88%

91%

0 10 20 30 40 50 60 70 80 90 100

Bribery and corruption

Inflation

Protectionist tendencies of national governments

Exchange rate volatility

Lack of stability in capital markets

Over-regulation

Government response to fiscal deficit and debt burden


%

Cyprus

Eurozone

Global


Even though CEOs at a global and Eurozone level agree that the increasing tax burden is the biggest business threat to their growth prospects, Cypriot CEOs appear anxious about their inability to finance growth. The percentage of CEOs in Cyprus who responded that they are concerned about their inability to finance growth reached 91%.

Cypriot CEOs also stated that they are concerned about the shift in consumer spending and behaviours (84%), and the increasing tax burden (69%). Changing

91% of Cypriot CEOs are concerned about their inability to finance growth compared to 39% of CEOs globally.

91%39 %

consumer behavior is a key issue concerning all CEOs as consumers now focus more on the cost and reduce their spending.

The availability of skills, named as the second biggest business threat at a global level, does not appear to pose a big threat for Cypriot CEOs possibly due to the increasing unemployment.

Figure 5 : Potential business threats

Q: How concerned are you about the following potential business threats to your growth prospects?

Respondents who stated ‘extremely’ or ‘somewhat concerned’

Energy costs were identified as the biggest business threat during the survey carried out last year. The explosion at the Mari naval base and its consequences created conditions that caused concerns to the Cypriot CEOs regarding the costs of energy. This percentage dropped from 94% to 63% this year.

Increasing tax burden

Availability of key skills

Energy and raw material costs

Shift in consumer spending and behaviours

Speed of technological change

New market entrants

Inability to finance growth

Lack of trust in your industry

Supply chain disruption

Inadequacy of basic infrastructure

Inability to protect Intellectual Property and customer data

69%

16%

63%

84%

31%

34%

91%

44%

34%

41%

13%

67%

36%

57%

58%

31%

36%

58%

46%

25%

22%

22%

62%

58%

52%

49%

42%

40%

39%

37%

35%

35%

34%



Achieving best management

The 16th Annual Global CEO Survey focused on the approach CEOs take to managing their organisations and on their strategy. CEOs need to adjust to the new business environment in order to take advantage of the new opportunities and effectively deal with the economic, policy and business threats.

CEOs in Cyprus appear to prefer a centralised approach to management with 75% of the respondents stating that strategic decision making is done at a senior executive and board level and just 22% encouraging all staff to get involved in strategic decision making. A similar picture was recorded at a global and Eurozone level.

CEOs in Cyprus focus their strategy on a few carefully selected initiatives (81%) rather than nurturing many strategic initiatives and allowing the strongest to succeed (19%). Respective percentages reached 74% in the Eurozone and 68% globally.

Half of the Cypriot CEOs said that they are diversifying their supply chain and are working with more partners across more varied geographies. Contrary, 38% is increasing concentration in their supply chain turning to fewer trusted partners.

As regards to their approach to risk management, CEOs in Cyprus stated

Figure 6: Extent of strategy change in the next 12 months

Q: To what extent do you anticipate your company’s strategy to change over the next 12 months?


28%

63%

9%

Cyprus

32%

54%

14%

Global

28%

63%

9%

CyprusNo change

Somewhat change

Change in fundamental ways

32%

49%

18%

Eurozone

that accountability is centralised (88%) and 53% primarily allocates risk management resources to predicting high-impact risk events.

The majority of Cypriot CEOs anticipates their company’s strategy to change over the next 12 months with 9% anticipating fundamental changes, 63% moderate changes and the remaining 28% no changes at all. More fundamental changes are anticipated by CEOs at a global and Eurozone level with the respective percentages reaching 18% and 14%.

The percentage of CEOs who are expecting moderate changes on the other hand drops to 49% in the Eurozone and to 54% globally whereas, 32% do not anticipate any changes in their strategy over the next 12 months.


Expected changes in Cyprus in the next 12 months mainly concern customer growth as well as retention and loyalty strategies (94%). This appears to be a global trend as similar changes in their strategy are anticipated by 82% of CEOs globally and by 80% of CEOs in the Eurozone.

A total of 69% of Cypriot CEOs also anticipate changes in their strategies for managing talent, their organisational structure, an increase in technology investments and in their approach to managing risk.

Figure 7 : Expected changes in the next 12 months

Q: To what extent do you anticipate changes at your company in the following areas over the next 12 months?

77%

61%

45%

29%

66%56%

69%55%Respondents who stated ‘Some change’ or ‘A major change’

Taking into consideration company and market data, we have every reason to believe that the outlook for the organisation in the following years is very positive. Our sector could contribute to the growth of the economic by providing low interest loans to companies operating in various sectors of the economy. In order to overcome the new economic conditions we will develop a flexible plan of action and restructuring.

Dr. Nearchos Ioannou General Manager Limassol Cooperative Savings Bank

Customer growth/retention/ loyalty strategies

Strategies for managing talent

Organisational structure

Increase in technology investments

Increase in R&D and innovation capacity

Approach to managing risk

M&A, joint venture or strategic alliance

Increase in capital investment

Investment in managing corporate reputation

Divestiture plans

94%

69%

69%

69%

50%

69%

63%

50%

50%

41%

80%

71%

75%

65%

61%

58%

58%

45%

55%

39%

82%

77%

74%

74%

67%

62%

61%

64%

53%

29%



In recent years, the economic crisis has forced businesses worldwide to proceed in cost reductions. This was reflected in the past two surveys with the majority of CEOs viewing cost reductions as the most effective approach to be followed in the upcoming year.

Beyond cost reductions, CEOs will also resort to a series of other restructuring activities in order to adapt to the changing economic conditions, with strategic alliances and joint ventures being at the top of their list.

Figure 8: Restructuring activities initiated in the past 12 months

Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months?

16%

19%

19%

19%

24%

31%

36%

77%

18%

20%

22%

20%

21%

33%

34%

87%

34%

19%

22%

13%

22%

38%

38%

97%

Ended an existing strategic alliance or joint venture

"Insourced" a previously outsourced business process or function

Divested majority interest in a business or exited a significant market

Completed a cross-border M&A

Completed a domestic M&A

Outsourced a business process or function

Entered into a new strategic alliance or joint venture

Implemented a cost-reduction initiative



Figure 9: Restructuring activities planned in the next 12 months

Q: Which, if any, of the following restructuring activities do you plan to initiate in the coming 12 months?

11%

16%

15%

26%

28%

31%

47%

70%

16%

16%

17%

26%

20%

35%

48%

80%

41%

25%

16%

28%

25%

50%

56%

94%

0 10 20 30 40 50 60 70 80 90 100

End an existing strategic alliance or joint venture

"Insource" a previously outsourced business process or function

Divest majority interest in a business or exit a significant market

Complete a cross-border M&A

Complete a domestic M&A

Outsource a business process or function

Enter into a new strategic alliance or joint venture

Implement a cost-reduction initiative

%

Cyprus

Eurozone

Global

31%

33%

35%

37%

41%

48%

50%

56%

20%

27%

25%

30%

39%

46%

41%

48%

38%

31%

41%

38%

41%

44%

41%

47%

0 10 20 30 40 50 60 70

Volunteering/ community work

Board level diversity

Philanthropy or social enterprise initiatives

Approach to tax planning and tax contribution

Non-financial reporting (incl. corporate responsibility reporting)

Reducing environmental footprint

Workforce diversity and inclusion

Framework to support a culture of ethical behaviour

%

CyprusEurozoneGlobal

Figure 10: Restructuring activities planned in the next 12 months

Q: To what extent does your organisation plan to focus on the following priorities over the next 12 months?

CEOs, with percentages reaching 47% in Cyprus, 48% in the Eurozone and 56% globally plan to focus on creating a framework which supports a culture of ethical behaviour during the upcoming year. 44% of the Cypriot CEOs plan to focus on reducing their environmental

footprint while 41% will be focusing on workforce diversity and inclusion, non-financial reporting including corporate responsibility reporting and social initiatives. 38% of CEOs in Cyprus will focus on volunteering and community work as well as on their

approach to tax planning and tax contribution. Finally a percentage of 31% of CEOs in Cyprus are planning to focus on board level diversity.

Respondents who stated ‘increase our focus somewhat’ or ‘increase our focus significantly’


A total of 44% of Cypriot CEOs say that the headcount of their company globally has decreased over the past 12 months. 38% say that their headcount has remained the same whereas only 18% of the respondents stated that their headcount has increased over the past year.

In Cyprus, the percentage of CEOs who stated that their headcount has decreased by more than 8% reached 28%. This percentage is higher by 14 percentage points compared to the Eurozone and by 21 percentage points compared to the global results.

Figure 11: Changes in the headcount over the past 12 months

Q: What happened to headcount in your company globally over the past 12 months?

9%

9%

38%3%

13%

28%

Don't know/ Refused

Increase by more than 8%

Increase by 5-8%

Increase by less than 5%

Stay the same

Decrease by less than 5%

Decrease by 5-8%

Decrease by more than 8%

Cyprus

3%15%

12%

21%25%

11%

7%7%

Don't know/ Refused


Increase by 5-8%


Stay the same


Decrease by 5-8%


Global

Eurozone

1% 7%

8%

18%

27%

16%

11%

14%Don't know/ RefusedIncrease by more than 8%Increase by 5-8%

Increase by less than 5%Stay the same

Changes in the headcount

9%

9%

38%3%

13%

28%

Don't know/ Refused


Increase by 5-8%


Stay the same


Decrease by 5-8%


9%

9%

38%3%

13%

28%

Don't know/ Refused


Increase by 5-8%


Stay the same


Decrease by 5-8%



But what do CEOs think for the future? Do they expect their headcount to decrease even further? How will the crisis affect them?

The percentage of CEOs in Cyprus who expects their headcount to decrease over the 12 months increases to 50%.

However, smaller decreases are expected during this year as the percentage of CEOs who anticipate a decrease of more than 8% drops to 9% compared to 28% who stated that they have experienced such decrease during the past 12 months (figure 11). 32% of Cypriot CEOs say that they expect the headcount of their company to stay the same and just 9% expects an increase in their headcount.

Figure 12: Changes in the headcount over the next 12 months

Q: What do you expect to happen to headcount in your company globally over the next 12 months?

010

2030

4050

Don't know/ Refused


Increase by 5-8%


Stay the same


Decrease by 5-8%


3%

11%

12%

22%

28%

14%

5%

4%

3%

2%

5%

16%

32%

22%

11%

9%

9%

3%

6%

31%

38%

3%

9%

%

Cyprus

Eurozone

Global


Potential opportunities and investment priorities

CEOs in Cyprus view organic growth in the domestic market (25%) and the development of new products or services (25%) as the main opportunities for growth over the next 12 months followed by new operations in foreign markets (22%), organic growth in existing foreign markets (16%) and a new M&A, joint venture and strategic alliance (13%).

Similar views were recorded at a global level with 32% of CEOs agreeing that organic growth in the existing domestic market is the main opportunity for growth within the next year. CEOs in the Eurozone on the other hand see organic growth in existing foreign markets (25%) and new product or service development (25%) as the main growth opportunities.

It is worth mentioning that according to the Professional Services report entitled “Driving jobs and growth in Cyprus” and commissioned by PwC Cyprus, services is the backbone of the Cyprus economy. The development of services should be seen as an opportunity to leverage our strengths as a country.

Figure 13: Growth opportunities for the next 12 months

Q: Which one of these potential opportunities for business growth do you see as the main opportunity to grow your business in the next 12 months?


19%

Organic growth in existing domestic market

New product or service development

32%

25%

New M&A/ joint ventures/ strategic alliances

Organic growth in existing foreign market

New operation(s) in foreign markets Don’t know / Refused

13%

17%

25%25%

25%

18%

16%

17%

25%22%

8%

11%

1%1%


According to the findings of the survey, Cypriot CEOs consider Russia (34%) as the most important country for their overall growth prospects in the next 12 months followed by the UK (19%) and Germany (19%), China (13%), USA (6%), Brazil (3%), India (3%) and Japan (3%).

CEOs at a global and Eurozone level agree that the top four countries in order of importance are China, USA, Brazil and Germany.

Figure 14 : Important countries for overall growth prospects

Q: Which countries, excluding the country in which you are based, do you consider most important for your overall growth prospects over the next 12 months?

3%

19%

34%

3%

19%

3%6%

13%

3% 2%

11%

1%

17%

9%

19% 19%

26%29%

5% 5% 6% 7% 8%10%

12%15%

23%

31%

Japan Canada UK Indonesia Russia India Germany Brazil USA China

Chart TitleCyprus Eurozone Global


The majority of all survey participants stated that growing their customer base is the top investment priority for the next 12 months. Enhancing customer service is among the top priorities for CEOs in Cyprus (53%), while the second priority for CEOs both in the Eurozone and globally is the improvement of operational effectiveness.

Only 22% of the Cypriot CEOs stated that R&D and innovation is included among their top 3 investment priorities. This is also confirmed by the Professional Services survey mentioned earlier, in which innovation was identified as an area for improvement for our country.

Figure 15 : Top investment opportunities

Q: What are your top 3 investment priorities over the next 12 months?

The ability of a business to have liquidity without bank lending and the ability of maintaining strong associates and clientele, as well as the insights to understand the needs of customers and associates, the promptness in decision-making and the creation and supply of new services in relation to dignity and respect create perspective for the future. At the same time management needs to have ‘‘soul and pride’’.

Stelios Georgallides General Manager Kentriki Insurance Ltd

2%

9%

19%

26%

27%

32%

33%

38%

49%

51%

1%

3%

6%

17%

32%

19%

33%

30%

42%

48%

52%

28%

22%

13%

22%

34%

53%

34%

66%

0 10 20 30 40 50 60 70

Don't know/refused

Other

Securing raw materials or components

Manufacturing capacity

Implementing new technology

Filling talent gaps

R&D and innovation


Enhancing customer service


Growing your customer base

%

Cyprus

Eurozone

Global


Business environment

The various stakeholders appear to have considerable influence upon private businesses with CEOs taking initiatives for strengthening their stakeholder engagement programmes.

The following groups have been identified by the CEOs in Cyprus as having some or significant influence on their business strategy:

• Customers and clients (94%)

• Industry competitors and peers (91%)

• Government and regulators (88%)

• Providers of capital such as creditors and investors (78%)

• Supply chain partners (66%)

• Local communities (63%)

• Users of social media (56%)

• Employees including trade unions and work councils (50%)

• The media (41%)

• Non Governmental Organisations (6%)

In the context of the economic reorganisation, the information technology industry can play a key role as a facilitator for increasing productivity, reducing operating costs and creating new jobs, which in turn will support sustainable economic growth.

Countries that promote innovation and invest in new innovative technologies, infrastructure and training as well as in the development of skills for their society will be those that will ensure a comparative advantage in the global market arena.

Dr. Adamos Christodoulou Managing Director NewCytech Business Solutions Ltd


The survey confirms the fact that businesses have a clear view regarding the role and the priorities of the Government, viewing financial sector stability as a top priority. 97% of Cypriot

Figure 16: Areas that should be the Government’s priority

Q: Which three areas should be the Government’s priority today?

97% of Cypriot CEOs believe that the government’s priority today should be to ensure financial sector stability.

97%

CEOs seem to believe just that. Financial sector stability however concerns all businesses as high percentages which reach 63% and 84% were recorded globally and at a Eurozone level

0 10 20 30 40 50 60 70 80 90 100

Addressing the risks of climate change and protecting biodiversity

Reducing poverty and inequality

Maintaining the health of the workforce

Improving the country's infrastructure

Creating and fostering a skilled workforce

Securing natural resources that are critical to business

Ensuring financial sector stability

17%

37%

18%

60%

57%

28%

63%

17%

35%

18%

38%

58%

26%

84%

9%

28%

13%

59%

44%

31%

97%

%

Cyprus

Eurozone

Global

respectively. 59% of CEOs in Cyprus stated that the government’s priority today should be improving the country’s infrastructure and 44% creating and fostering a skilled workforce.


When examining the role of the government, the majority of CEOs in Cyprus do not agree that the government has been effective at taking

Figure 17: The role of the government

Q: Thinking about the role of the Government in the country in which you operate how strongly do you agree or disagree with the following statements?

actions which support the business environment such as ensuring financial sector stability and reducing regulatory burden on corporations.

68%

56%

45%

45%

48%

41%

45%

30%

85%

63%

54%

50%

59%

55%

46%

53%

91%

81%

69%

66%

63%

72%

47%

97%

0 10 20 30 40 50 60 70 80 90 100

The government has reduced the regulatory burden on corporations

The government has been effective in helping create a skilled workforce

The government helps companies secure access to natural resources (e.g. raw materials, water, energy)

The government has maintained a level playing field despite having stakes in private enterprises

The government is driving convergence of global tax and regulatory frameworks

The government supports innovation in the private sector

The government is taking adequate steps to improve the country's infrastructure (e.g. electricity, water supply,

transport, broadband)

The government has been effective at ensuring financial sector stability and access to affordable capital

%

Cyprus

Eurozone

Global

Respondents who stated ‘disagree’ or ‘disagree strongly’

97% of Cypriot CEOs believe that the government has not been effective at ensuring financial sector stability and access to affordable capital.

97%


Conclusion

According to the findings of the survey, CEOs in Cyprus, for the second consecutive year, are less confident about their company’s prospects for revenue growth over the next 12 months in comparison to the CEOs on a global and Eurozone level. However, Cypriot CEOs are more optimistic about their company’s revenue growth prospects over the next 3 years with a percentage of 25% stating “very confident” representing an increase of 22 percentage points compared to the percentage recorded last year.

The fact that Cypriot CEOs are more optimistic for the future than they were one year ago, may be attributed to the fact that natural gas is expected to create economic opportunities. Reaching a final agreement on the memorandum of understanding will reduce uncertainty and in the end companies will adapt to the new reality. Investment and Development is the answer to the recession and unemployment.

The top investment priorities in the next year focus on customers with CEOs emphasising on growing their customer base and enhancing their customer service. CEOs view the uncertain economic growth, the government’s response to fiscal deficit and the lack of stability in capital markets as the biggest economic and policy threats to their growth prospects. They also appear anxious about their inability to finance

growth, the shift in consumer spending and behaviours, the increasing tax burden as well as the cost of energy and raw materials.

The past year was particularly challenging for businesses and the cost reduction initiatives which are expected to continue confirm that the year ahead will be even more challenging.

According to the survey CEOs believe that the government has not been effective at taking actions which support the business environment saying that ensuring financial sector stability and improving infrastructure should be government’s priority today.

The survey findings indicate that threats are now coming harder and faster forcing organisations to become more agile and adaptable. Cypriot CEOs are well aware of the challenges they are forced to face as well as the opportunities that may arise from this unstable environment. They follow domestic and global developments and are actively taking steps for managing the downside.

Uncertainty is the only certain characteristic of today’s business environment and successful organisations are pursuing resilience to survive and grow. We are confident that Cypriot business leaders will pursue the changes and strategies necessary to overcome the difficulties and successfully exit the current crisis.


PwC Cyprus

We are striving to offer our clients the value they are looking for, value that is based on the knowledge that our teams draw from 180.000 experts in 158 countries and based on experience adapted to local needs. PwC Cyprus focuses on two main areas: Assurance & Advisory Services and Tax & Legal Services. We work closely with our clients. We ask questions. We listen. We learn what they want to do, where they want to go. From all our international knowledge we share with them the piece that is more suitable for them and thus we support them on how to achieve their goals.

In the operation of the world’s capital markets we play an important role and as business advisors we help our clients solve complex business problems. We aim to improve their ability to manage risk and improve performance. At the same time we take pride in our quality services which help to improve transparency, trust and consistency of business processes.

Our position is strengthened with our almost 1.000 professionals and our offices throughout Cyprus.

Our Financial Assurance services comprise of statutory and regulatory audit services, which include evaluation of information systems, advisory services for capital market transactions, accounting and regulatory issues for all types of businesses through specialist industry divisions:

Financial Services (FS), Consumer and Industrial Products and Services (CIPS) and Technology, Information, Communications, Entertainment and Media (TICE).

Our Risk Assurance Consulting (RAC) offers expertise on internal audit services, internal controls optimisation, corporate governance and reporting, as well as assurance and advisory services related to security and controls of information technology systems including Enterprise Resource Planning (ERP) systems (e.g. SAP, Oracle, Navision), Project Implementation Assurance (PIA), Computer Assisted Audit Techniques (CAATs), Spreadsheet Integrity and IT Risk Diagnostic and Benchmarking. A particular focus of the team is in supporting the financial services industry on matters related to regulatory compliance, licensing and risk management.

Our Performance Improvement Consulting (PIC) is offering specialist advisory services on strategy and operational effectiveness, process improvement, cost reduction, people and change and sustainability issues.

Our Deals & Corporate Finance (DCF) provides consulting on M&A’s, valuations, feasibility studies, transactions support and crisis Management.

Assurance & Advisory Services


Our PwC network’s tax and legal services include Global Compliance Services, Direct and Indirect Tax Services, Services to Small and Medium Enterprises and Legal Services.

Global Compliance ServicesComprising the whole spectrum of company administration and corporate statutory compliance services, bookkeeping, accounting and payroll services as well as specialised services such as private client services, advice on establishment and administration of local and international business companies, collective investment schemes, UCITS, investment firms and trusts.

Direct tax services Corporate: Advisory Services for tax planning, international tax structuring, mergers and buyouts and other business issues, tax returns administration, agreement with Tax Authorities and obtaining tax rulings.

Personal: Tax planning, completion submission and agreement of tax returns, tax services to expatriates, pensioners and other non-Cypriot individuals.

Indirect Tax Services VAT: Advisory services for VAT, VAT recovery and VAT minimisation and tax compliance (administration of VAT returns, communication with VAT authorities, agreement of disputed assessments, etc).

Services to Small and Medium Enterprises (SME)The Services to Small and Medium Enterprises are addressed to individuals, small and medium - sized enterprises with local activity and cover the whole spectrum of accounting, tax, VAT, family business and financial structuring and statutory compliance services.

Legal ServicesThe legal firm, full member of the PwC international network, offers legal services that cover the whole spectrum of corporate and business law, including advising and representing clients in M&A transactions, re-organizations, European Union law and Competition law, setting up and regulating private companies, setting up joint ventures and other forms of businesses and carrying out legal due diligence.

Tax & Legal Services

Designed by: PwC Cyprus (Marketing & Communications Department)

www.pwc.com.cy/ceo-survey PwC Cyprus helps organisations and individuals create the value they’re looking for. We’re a member of the PwC network of firms in 158 countries with close to 180,000 people. We’re committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

© 2013 PricewaterhouseCoopers Ltd. All rights reserved. PwC refers to the Cyprus member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Contacts for PwC Cyprus

PwC gratefully acknowledges the contribution of the 32 Cypriot CEOs who have taken part in the 16th Annual Global CEO Survey: Cyprus Summary. Special thanks to the CEOs who have provided us with their comments:

Dr. Adamos Christodoulou Managing Director NewCytech Business Solutions Ltd

Mr Stelios Georgallides General Manager Kentriki Insurance Ltd

Dr. Nearchos Ioannou General Manager Limassol Cooperative Savings Bank

Dr Nicos Michaelas General Manager Demetra Investment Public Ltd

AcknowledgementsDownload the main report, access the results and explore the CEO interviews from our 16th Annual Global CEO Survey online at www.pwc.com/ceosurvey.

Evgenios C EvgeniouCEOT: 00357 22 555 000 [email protected]

Liakos M TheodorouHead of Assurance & Advisory T: 00357 25 555 000 [email protected]

Costas L MavrocordatosHead of Tax & Legal T: 00357 22 555 000 [email protected]

16th Annual Global CEO Survey contact

Konstantina LogothetiSenior ManagerMarketing & CommunicationsT: 00357 22 555 108 [email protected]

Innovare per crescere

www.pwc.com/it/ceosurvey

Analisi dei risultati italiani della 16th Annual Global CEO survey

“Dealing with disruption:Adapting to survive and thrive”

16th Annual Global CEO Survey - Addendum ItaliaSezione1: Executive summary p.7 | Sezione 2: Fiducia e prospettive di crescita p.11 | Sezione3: Opportunità e minacce p.17 |Sezione 4: Priorità strategiche p.23 | Sezione 5: Agenda manageriale p.32| Sezione 6: Organizzazione e Leadership p.39 | Industry highlights p.45

42Top Manager italiani

16th Annual Global CEO Survey

PwC | gennaio 20133

Nell’ultimo decennio la volatilità e l’incertezza del sistema economico hanno raggiunto livelli mai conosciuti prima.In un mondo globalizzato, dove gli Stati, le economie e le imprese sono interdipendenti come non mai, rischi che sembravano improbabili stanno diventando sempre più frequenti. Per i Top Manager di tutto il mondo “attendersi l’inattendibile” è ormai la quotidianità.

In occasione dell’incontro annuale del World Economic Forum di Davos, è stata presentata la 16th Global CEO Survey che fotografa il livello di fiducia sullo sviluppo globale e del proprio business di 1.330 CEO provenienti da oltre 68 Paesi e il loro punto di vista sulle sfide del mercato. L’analisi che segue concentra l’attenzione sulle risposte dei Top Manager italiani confrontandole, a seconda dei temi, con le medie globali o con le risposte dei Paesi a noi più vicini. Siamo certi che le indicazioni che emergono possano essere un valido confronto per chi ogni giorno nella propria azienda affronta le sfide quotidiane che il mercato impone.

Un ringraziamento speciale alle oltre 40 imprese nazionali che partecipando alla Survey ci hanno permesso di realizzare il rapporto italiano.

Ezio BassiPwC | Territory Senior Partner

““1.330

Top Manager mondiali

68Paesi

16th Annual Global CEO Survey - Italia | Innovare per crescere4

16th Annual Global CEO Survey: messaggi chiave

Soltanto il 36% dei CEO nel mondo è “molto fiducioso” sulla crescita della propria Società nei prossimi 12 mesi, dato in calo rispetto al 40% che l’anno scorso si dichiarava “molto fiducioso” sulla crescita di breve periodo, e al 48% del 2011.

Considerando l’economia globale, il 28% dei CEO ritiene che calerà ulteriormente nel 2013 e solo il 18% prevede un miglioramento contro un 52% che prevede resterà invariata. Anche se le previsioni dei CEO rimangono negative, rappresentano comunque un miglioramento rispetto all’anno passato, quando il 48% dei CEO prevedeva un declino dell’economia nel 2012.

A essere meno fiduciosi nella crescita del proprio fatturato nel breve periodo sono i CEO dell’Europa Occidentale. Con una recessione in corso, soltanto il 22% si dichiara fiducioso sulle prospettive di crescita, in calo rispetto al 27% dell’anno scorso e il 39% del 2011. Anche nel Nord America la fiducia nella crescita nel breve periodo è in calo al 33% (era il 42% nel 2012) e nell’Asia-Pacifico al 36% (42% nel 2012).In controtendenza, invece, i CEO dell’America Latina.

Il livello di fiducia di breve periodo è cresciuto lievemente rispetto all’anno passato raggiungendo il 53%.A livello nazionale si misurano ampie differenze: i più fiduciosi sono i CEO in Russia, con il 66% che crede nella crescita del fatturato nel 2013, seguiti dall’India (63%) e dal Messico (62%).

In generale, la fiducia dei CEO è stabile per il lungo periodo; il 46% si dichiara convinto delle prospettive di crescita per i prossimi tre anni, stabile rispetto all’anno scorso.

Le principali preoccupazioni dei CEO

Con il persistere delle difficili condizioni economiche aumentano le preoccupazioni dei CEO: al primo posto le continue incertezze sulla crescita economica (81%), al secondo le misure correttive dei Governi per il deficit di bilancio (71%), seguite dalla regolamentazione eccessiva (69%) e l’instabilità dei mercati di capitali (61%). Le preoccupazioni riguardo alla regolamentazione eccessiva hanno raggiunto il livello più alto dal 2006. Alla richiesta di valutare la risposta del Governo in merito, i CEO sono ancora più chiari: appena il 12% ritiene che i Governi dei loro Paesi abbiano ridotto il peso della regolamentazione nell’anno passato.

Alla domanda sui principali fattori di rischio per la crescita delle aziende, i CEO hanno citato anche il crescente peso delle tasse (62%), la disponibilità di risorse umane con competenze chiave (58%) e il costo dell’energia e delle materia prime (52%).

Affrontare l’incertezza

Per costruire Società in grado di vivere e prosperare nell’incertezza, i CEO seguono tre strategie specifiche: puntare su selezionate opportunità, valorizzare la relazione con il cliente e migliorare l’efficienza operativa.

1. Focalizzarsi su selezionate opportunità. Circa il 68% dei CEO si focalizza su iniziative specifiche accuratamente valutate. Considerate tutte le opzioni disponibili, selezionano pochi investimenti strategici e concentrano le risorse finanziarie per massimizzare le probabilità di successo.

PwC | gennaio 20135

16th Annual Global CEO Survey: messaggi chiave

Una delle principali sfide per i dirigenti resta la ricerca delle persone giuste e il loro mantenimento in azienda; la disponibilità di competenze chiave è citata come una delle principali minacce alle prospettive di crescita, menzionata dal 58% a livello globale.

In tale prospettiva, non sorprende che più di tre quarti dei CEO (77%) preveda di modificare le strategie di gestione dei propri talenti nei prossimi mesi, e circa un quarto di questi (23%) preveda di fare modifiche sostanziali.

I CEO riconoscono la necessità di costruire un clima di fiducia con una cerchia più vasta di stakeholder. Il 37% teme che la mancanza di fiducia nel settore in cui opera potrebbe mettere a rischio la crescita dell’azienda, mentre il 57% intende concentrarsi in modo più incisivo sulla promozione di una cultura etica. Inoltre, circa la metà dei dirigenti (49%) intende prestare maggiore attenzione alla riduzione dell’impatto ambientale delle proprie scelte manageriali nei prossimi 12 mesi.

2. Valorizzare la relazione con il cliente. Quasi la metà dei CEO (49%) ritiene che i cambiamenti nelle abitudini di acquisto dei consumatori rappresentino una seria minaccia; il 51% dichiara che la priorità negli investimenti dei prossimi 12 mesi è la crescita della base clienti. L’82% dei CEO progetta di modificare le strategie per la crescita e fidelizzazione della clientela - il 31% intende cambiare in modo radicale il proprio approccio commerciale.

3. Migliorare l’efficienza operativa. Gli investimenti per migliorare l’efficienza operativa sono una priorità per i CEO. Il 77% ha adottato iniziative di questo tipo nei 12 mesi passati e il 70% intende farlo nei prossimi.

Occupazione e ricerca di nuovi talenti

I CEO si rivelano cauti per quanto riguarda gli aumenti di personale per l’anno in corso. Il 45% pensa di fare nuove assunzioni nel 2013 (in calo rispetto al 51% del 2012), mentre il 23% progetta di ridurre i livelli di forza lavoro.

Se si osserva quali settori assumono e quali riducono i posti di lavoro, si ottiene un quadro interessante. I CEO che pensano di assumere nuovo personale operano nel settore dei servizi alle imprese (56%), ingegneria e costruzioni (52%), distribuzione (49%) e sanità (43%).Al contrario, i CEO che prevedono di ridurre il personale sono attivi nel settore bancario (35%), nelle industrie metallurgiche (32%) e nel settore della carta e legname (31%).


Agenda

Analisi ed elaborazionePwC | Strategy Nicola Anzivino, PartnerEdoardo Scornajenghi, Manager

Editorial BoardPwC | Marketing & Communications Cindy Evers | Giuseppina Floris

Realizzazione graficaPwC | Marketing & Communications Giulia Caldiroli | Claudio Loguercio

7

17

32

45

11

23

39

48

Sezione 1 Executive summary

Sezione 3 Opportunità e minacce

Sezione 5 Agenda manageriale

Industry highlights

Sezione 2 Fiducia e prospettive di crescita

Sezione 4 Priorità strategiche

Sezione 6Organizzazione e Leadership

AppendicesQuotations originali

PwC | gennaio 20137

Sezione 1Executive summary

16th Annual Global CEO Survey: obiettivo e partecipazione

L’obiettivo della survey è raccogliere il sentiment sulle tendenze economiche globali e nazionali degli ultimi mesi del 2012 e dei prossimi anni con particolare focus sul 2013.

Per questa edizione, a livello mondiale, 1.330 CEO di aziende pubbliche e private, di settori e dimensioni diversi hanno condiviso con noi il loro pensiero.

Per l’Italia sono stati intervistati 42 Top Manager, che ci hanno permesso di definire un quadro completo e significativo della business vision dei CEO di aziende italiane.

16th Annual Global CEO Survey - Italia | Innovare per crescere | Sezione 1: Executive summary8

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Innovare per crescere: key Italian messages 1

PwC | gennaio 20139

1. Fiducia e prospettive di crescita

2. Priorità strategiche

3. Agenda manageriale e organizzazione aziendale

• Le prospettive di crescita per il 2013 sono ancora limitate per l’Italia e per gli altri Paesi europei. Un possibile rallentamento della crescita cinese e l’incertezza negli USA sono due incognite significative per la crescita prospettica a livello nazionale e mondiale.

• La stabilità dei mercati finanziari è condizione necessaria per implementare nuovi piani di sviluppo. Il Governo Italiano ha agito bene sul tema stabilità negli ultimi 12 mesi ma servono nuove politiche di supporto all’innovazione e alla crescita secondo l’opinione dei CEO intervistati.

• Innovazione di prodotto e di processo e sviluppo internazionale soprattutto verso i BRIC e gli Stati Uniti sono le priorità strategiche delle Società italiane per crescere in “nicchie globali” ad alta specializzazione industriale e valore aggiunto.

• Gli investimenti strategici saranno incentrati su: I) riorganizzazione industriale attraverso l’internazionalizzazione e il right sizing, II) investimenti in tecnologia per rendere più efficace l’attività di Ricerca & Sviluppo, III) miglioramento della flessibilità operativa sfruttando le opportunità della digital transformation nel settore manifatturiero e dei servizi.

• Il difficile accesso ai fondi per finanziare la crescita e l’andamento dei costi della materie prime e dell’energia sono le principali minacce per lo sviluppo prospettico delle Società italiane ed europee.

• L’agenda manageriale sarà focalizzata su: I) ridisegno organizzativo con valorizzazione dei nuovi talenti, II) ottimizzazione della supply chain per sfruttare le migliori opportunità globali, III) qualificazione del personale per avere nuove leve manageriali di gestione, IV) etica dei comportamenti di business, V) reputazione aziendale, VI) impatto ambientale delle scelte aziendali e VII) corporate social responsibility e relativi sistemi di non-financial reporting.

• Le scelte di outsourcing ed offshoring saranno sempre più collegate alla necessità di innovare sia a livello di prodotto sia di processo, con opportunità di reshoring nelle economie avanzate.

• Ricambio e nuova crescita manageriale a livello di leadership team e riassetto dei piani di retribuzione dei top manager sono temi importanti per le Società nei prossimi anni.

• Visione, capacità di motivare e di innovare sono le caratteristiche principali dei leader del futuro secondo le interviste condotte per la Survey.

L’Agenda dei CEO per i prossimi 12 mesi: ACTION Points

Agilità e flessibilità come elementi distintivi per adattarsi ai trend emergenti e anticipare i cambiamenti di business servendo al meglio i propri clienti.

Clienti: nuovo focus manageriale incentrato su una strategia dual-track, Big Bets globali e strategie specifiche per mercato.

Transformation: pensare a nuovi prodotti e processi capaci di creare valore attraverso l’implementazione di modelli di business innovativi.

Organizzazione: right sizing e ridisegno organizzativo per allinearsi ai cambiamenti del business model aziendale nelle attuali situazioni d’incertezza.

Iper-velocity nel processo di decision making e riconsiderazione della business segmentation per competere in contesti complessi creando nuovi talenti manageriali.

Nuove competenze distintive aziendali con la creazione di network tra agenti nella catena del valore caratterizzati da alta specializzazione industriale.

16th Annual Global CEO Survey - Italia | Innovare per crescere | Sezione 1: Executive summary10

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PwC | gennaio 201311

Sezione 2Fiducia e prospettive di crescita

Fiducia nella crescita dell’economia

Lo sviluppo mondiale si sta “clusterizzando” fortemente tra economie in crescita e Paesi in difficoltà.A livello mondiale i CEO rimangono incerti sulle prospettive dell’economia per i prossimi 12 mesi, il 28% prevede una flessione rispetto al 2012.

Anche i CEO italiani percepiscono il 2013 come un anno ancora difficile, sostanzialmente allineato al 2012.

Ritiene che l‘economia globale migliorerà, rimarrà stabile o subirà una flessione nei prossimi 12 mesi?

16th Annual Global CEO Survey - Italia | Innovare per crescere | Sezione 2: Fiducia e prospettive di crescita 12

2

Scenari internazionaliSecondo lei, quanto è probabile che si verifichino i seguenti scenari?

In quale misura la sua azienda sarebbe in grado di far fronte ai seguenti scenari, se si verificassero entro 12 mesi?

Le preoccupazioni dei CEO riguardano un ampio spettro di criticità per le prospettive di crescita del loro business.

I CEO a livello mondiale vedono il rallentamento della crescita cinese e la recessione negli USA, in relazione al debt ceiling, tra gli scenari internazionali futuri più probabili.

Le aziende in Europa e in Italia, sono solo parzialmente preparate ad affrontare queste criticità con potenziali impatti sulle loro prospettive di crescita.


2

Crescita dei ricavi

I CEO italiani sono meno fiduciosi dell’anno scorso nelle prospettive di crescita dei ricavi delle proprie aziende a 12 e 36 mesi, complessivamente la fiducia è ai minimi rispetto agli ultimi 4 anni. Il gap di fiducia rispetto ai CEO di altri Paesi europei è significativo a 12 mesi.

La differenza di fiducia nelle prospettive di crescita dei ricavi a 12 e 36 mesi da parte dei CEO dell’Europa Occidentale, rispetto agli USA e alla media mondiale, è correlato alle prospettive di risoluzione dei problemi macroeconomici dell’Eurozona.

Quanto si sente fiducioso delle prospettive di crescita dei ricavi della sua azienda nei prossimi 3 anni?

Quanto si sente fiducioso delle prospettive di crescita dei ricavi della sua azienda nei prossimi 12 mesi?


“Se focalizziamo adesso i nostri sforzi, ci sono molte probabilità che quando le cose andranno meglio, saremo nella condizione di finalmente accelerare”

Fonte: CEO intervistato, PwC’s 16th Annual Global CEO Survey

2

Le priorità del Governo

In un periodo di incertezza economica, la stabilità dei mercati finanziari diventa un requisito essenziale per una nuova fase di crescita economica, soprattutto in Europa.

In particolare in Italia, il 74% dei CEO ritiene che il Governo abbia un ruolo fondamentale nel garantire la stabilità del settore finanziario, in Germania il valore è ancora più alto con l’86%.

Ad oggi, quali tre aree dovrebbero costituire le priorità del Governo?


2

L’efficacia delle azioni del Governo

Permangono forti dubbi in merito alla capacità dei Governi di supportare le aziende private in Europa nell’affrontare le prospettive di crescita del futuro.

Emerge un dato positivo in relazione alle misure poste dal Governo Italiano nell’ultimo anno nel garantire stabilità al settore finanziario.

Oltre 90% degli intervistati italiani ritiene che le azioni del Governo siano ancora insoddisfacenti in relazione al sostegno all’innovazione, alla formazione del personale e alla semplificazione normativa per le imprese con un gap significativo rispetto a Germania e Francia.

Se pensa al ruolo del Governo nel Paese in cui esercita la sua attività, in quale misura è d’accordo o in disaccordo con le seguenti affermazioni?


2


Sezione 3Opportunità e minacce

Opportunità di business

Innovazione e sviluppo nei mercati internazionali rappresentano le principali opportunità di crescita nei prossimi 12 mesi per le Società italiane.

All’attenzione dei top managers italiani anche selezionate operazioni di natura straordinaria quale leva per accelerare la crescita.

Solo il 12% dei CEO in Italia punta sul mercato domestico, da evidenziare il forte gap rispetto al dato tedesco e medio mondiale.

Quali delle potenziali opportunità di crescita aziendale elencate è la principale per la crescita della sua azienda nei prossimi 12 mesi?

16th Annual Global CEO Survey - Italia | Innovare per crescere | Sezione 3: Opportunità e minacce18

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Crescita internazionaleQuali sono i Paesi, ad esclusione di quello in cui risiede, che considera più importanti per le prospettive di crescita generali della sua azienda nei prossimi 12 mesi?

Nei Paesi indicati, qualeobiettivo spera di raggiungere nei prossimi 12 mesi?

I CEO italiani vedono una significativa opportunità in relazione all’espansione all’estero. Cina e Brasile sono i Paesi più attrattivi, ma anche gli Stati Uniti rimangono tra i principali mercati a cui i CEO guardano per crescere a livello internazionale.

Il diversi settori industriali hanno dinamiche diinternazionalizzazione diverse per area geograficain ragione della dinamica della domanda locale e dell’attrattività per lo sviluppo di nuovi siti industriali.

L’obiettivo principale delle scelte di internazionalizzazione è allargare la base clienti. In particolare, si intende perseguire questo obiettivo negli Stati Uniti (77%), Cina (74%) e Brasile (57%).

Il secondo obiettivo prioritario è l’acquisizione/sviluppo di siti industriali con l’obiettivo di servire i mercati locali in modo più competitivo e veloce.


Le opportunità di crescita geografica individuate dai CEO italiani e tedeschi sono allineate

3

Sviluppo prospettico delle economie emergenti

Le economie emergenti saranno caratterizzate da trend di crescita eterogenei, sia in termini produttivi sia di consumi prospettici, con significative implicazioni strategiche per le Società europee.

La presenza strategica a livello commerciale e industriale nei mercati emergenti deve essere analizzata in modo congiunto nel lungo termine dalle Società italiane, l’alta flessibilità diventa un fattore chiave per affrontare al meglio i possibili scenari di business prospettici.

Cina, Vietnam, India e Indonesia sono i principali mercati in cui si attende una crescita dei consumi significativa nei prossimi anni in relazione allo sviluppo della classe media nei principali centri urbani.


3

Minacce economiche e politicheDi seguito un elenco di fattori di natura politica ed economica potenzialmente destabilizzanti per le prospettive di crescita.

Quanto è preoccupato/a, nel caso lo sia, per ciascuno di essi riguardo le vostre prospettive di crescita?

Incertezza, instabilità economica e nuove azioni governative di natura fiscale sono le principali minacce alla crescita secondo i CEO italiani, una percezione condivisa dai CEO tedeschi e francesi.

L’eccesso di regolamentazione viene visto come un freno alla crescita da quasi il 70% dei CEO italiani intervistati, dati ancora superiori sul tema sono registrati in Germania e Francia.


3

Criticità legate al business

L’aumento dell’imposizione fiscale, il costo delle materie prime e il difficile accesso al credito per finanziare la crescita sono i principali fattori di rischio per le imprese italiane.

In particolare l’aumento della pressione fiscale, tema da sempre prioritario per le aziende nazionali, assume un rilievo senza precedenti: l’86% dei CEO italiani vede come criticità per il business un eventuale incremento della tassazione.

Oltre all’aumento dei costi delle materie prime, la capacità di finanziare la crescita preoccupa molto i CEO italiani: sono infatti consapevoli che la crescita dimensionale delle loro aziende per sostenere la competizione internazionale è strettamente legata alla disponibilità di adeguate risorse finanziarie.

Diseguito un elenco di fattori di natura aziendale che rappresentano potenziali minacce per le prospettive di crescita.

Quanto è preoccupato/a, nel caso lo sia, per ciascuno di essi riguardo le vostre prospettive di crescita?


3


Sezione 4Priorità strategiche

“La nostra visione è orientata al cambiamento, al cambiamento di noi stessi, al cambiamento dei trend chiave nel settore in cui competiamo, per procedere con nuove strategie, nuovi prodotti e nuove modalità di gestione della nostra organizzazione al fine di tenere il passo ed, anzi, accelerare rispetto agli altri”


Cambiamento nelle strategie

Volatilità, incertezza e complessità dell’attuale contestoeconomico richiedono un ripensamento delle scelte strategiche del passato. Infatti, un approccio tattico non permette di affrontare in modo strutturato la “stabile instabilità” del mercato globale.

I CEO italiani ritengono un cambiamento di strategia nei prossimi 12 mesi necessario (76%), valori superiori rispetto a quanto registrato dai CEO di altri Paesi europei. Tuttavia, il bisogno di un cambiamento radicale si è fortemente ridimensionato rispetto allo scorso anno (dal 33% al 12%) allineandosi a quello degli altri Paesi presi a riferimento tra le economie avenzate (Germania, Francia e USA).

In quale misura prevede che la strategia della sua azienda cambierà nei prossimi 12 mesi?

16th Annual Global CEO Survey - Italia | Innovare per crescere | Sezione 4: Priorità strategiche24

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Approccio strategicoConfronto tra una serie di affermazioni alternative in merito all’approccio gestionale della sua azienda in un ambito competitivo complesso e mutevole.

Per ciascuna alternativa indichi la situazione che, secondo lei, è più probabile che si verifichi.

I dati raccolti della survey indicano che i CEO si stanno focalizzando su poche ma ben definite iniziative strategiche, accuratamente selezionate.Il dato italiano è coerente con i risultati raccolti dalle interviste con i CEO tedeschi e statunitensi.

Si evidenzia un crescente utilizzo della pianificazione strategica attraverso la metodologia dello scenario- planning, molto dinamico e adattabile all’attuale situazione rispetto alle tradizionali metodologie adottate in fase di maggiore stabilità economica.


4

Le priorità di investimento

La necessità pressante di adattarsi a obiettividi crescita ambiziosi attraverso parametri di ritorno finanziario sugli investimenti molto precisi spinge i CEO a rivedere il funzionamento delle proprie imprese. Più della metà dei CEO italiani, infatti, afferma che il miglioramento dell’efficienza operativa è tra le prime 3 priorità di investimento per quest’anno.

Ricerca & Sviluppo collegata all’innovazione di prodotto/processo, ampliamento della base clienti ed inplementazione di nuove tecnologie sono le altre priorità chiave d’investimento dei CEO italiani.

Quali sono le vostre 3 principali priorità di investimento nei prossimi 12 mesi?


Agilità e adattabilità operativa e organizzativa per affrontare in modo efficace ed efficiente scenari di business inattesi

“Un punto chiave del nostro vantaggio strategico è la capacità di organizzare la produzione e progettare la spply chain in partnership con altre Società. Questo ci da la possibilità di allargare o ridurre la nostra scala di attività in modo veloce ed efficiente. Cerchiamo di rendere la nostra organizzazione sufficientemente flessibile affichè sia in grado di rispondere ai cambiamenti della domanda”

Fonte: CEO intervistato, PwC’s 16th Annual Global CEO Survey4

Change managementIn che misura prevede modifiche nella sua azienda in ciascuna delle seguenti aree nei prossimi 12 mesi?

Lo sforzo dei CEO italiani per realizzare il cambiamento strategico nei prossimi 12 mesi è focalizzato sulla ridefinizione della struttura organizzativa attraverso la gestione dei talenti; sulle strategie di retention e di sviluppo della base clienti; e sull’innovazione attraverso il potenziamento della funzione Ricerca & Sviluppo con nuovi investimenti in tecnologia.

Inoltre, nell’agenda strategica dei CEO italiani spicca il tema della reputazione aziendale, aspetto significativo anche per le aziende tedesche.


Focus su iniziative di Value Strategy piuttosto che Growth Strategy nelle economie avanzate

“Considerando che l’economia globale ed il ritmo della vita sono, in tutti i loro aspetti, sempre più veloci, è neessario diventare più agili ed efficienti in tutto, compresa la gestione aziendale. È necessario snellire le operations e la struttura, in modo da essere in grado di reagire più rapidamente alle condizioni di mercato”


4

87% Cina

67% USA

Innovazione: sentieri di crescita

Per crescere in un contesto macroeconomico complesso e molto competitivo occorre puntare su specifiche iniziative d’innovazione in relazione al segmento industriale di appartenenza.

Un percorso di crescita intensiva si ottiene attraverso l’innovazione:

• di Prodotto sia nel design sia nei materiali utilizzati;

• di Processo che comprende innovazione di Sistemi (Big data, Advanced Analytics, Social Technologies), di Produzione (Robotica, Modellizzazione digitale, Stampa 3D, Green Manufacturing) e di Modelli di Business (Circular Economy, Frugal Innovation, Mass Customisation).

• Manageriale (Processi decisionali, organizzazione, gestione delle risorse, pianificazione, reporting e risk management).


89%Germania

87%Giappone

73%

69%

Economie in via di sviluppo

Economie avanzate

Incidenza % della spesa R&D del settore manifatturiero sul totale spesa R&D di ogni Paese

Incidenza % delle esportazioni del settore manifatturiero sul totale esportazioni

Il settore manifatturiero è chiave per lo sviluppo dell’innovazione e per la crescita delle esportazioni sia nelle economie avanzate sia in quelle in via di sviluppo.

4

Fonte: Elaborazione PwC dati OECD Eurostat

Influenza degli stakeholderSe pensa all’ampia realtà dei stakeholder, in quale misura ritiene che esercitino un’influenza?

I CEO italiani sono sottoposti ad una significativa influenza dei concorrenti, del Governo e dei propri dipendenti nelle scelte strategiche, e intendono investire in programmi per rinforzare la partecipazione anche dei clienti nella definizione degli obiettivi aziendali.


4

Partecipazione degli stakeholder alla definizione degli obiettivi aziendali

Nei piani dei CEO italiani sono previsti investimenti per rinforzare ulteriormente la partecipazione degli stakeholder alla definizione degli obiettivi aziendali.

I dipendenti ed i clienti sono le due tipologie di stakeholder con i programmi di partecipazione più significativi.

In quale misura pensa di rafforzare il programma di partecipazione?


4

Processo decisionale strategicoConfronto tra una serie diaffermazioni alternative in merito all’approccio gestionale della sua azienda in un ambito competitivo complesso e mutevole.


La responsabilizzazione manageriale nelle scelte strategiche aziendali è vista come modalità gestionale per creare maggior valore nelle Società Italiane.

La complessità di business è affrontata attraverso una maggiore responsabilità responsabilità del middle management a livello di decisioni strategiche, soprattutto nelle aziende di piccole e medie dimensioni.


“Non abbiamo un unico modo di fare le cose né abbiamo un solo referente governativo al quale porre tutte le domande. Il nostro approccio, invece, è quello di creare una cultura che fornisca alle persone - nell’ambito di un insieme di valori condivisi - la libertà di agire. Ciò consente di avere straordinaria forza, flessibilità e agilità”


“Il capitale umano è fondamentale per la crescita di qualsiasi Società”


4

16th Annual Global CEO Survey - Italia | Innovare per crescere | Sezione 5: Agenda manageriale32

Sezione 5Agenda manageriale

Attività di ristrutturazioneQuali attività di ristrutturazione ha avviato negli ultimi 12 mesi e quali pensa di avviare nei prossimi?

In relazione al perdurare della crisi, i CEO in Italia e nel resto del mondo hanno focalizzato le attività di ristrutturazione negli ultimi 12 mesi su attività di right sizing, attraverso iniziative di riduzione dei costi, outsourcing e Alleanze e JV.

Da evidenziare il crescente interesse per le opportunità di Alleanze strategiche e JV nei prossimi mesi (24% negli ultimi 12 mesi, 45% nei prossimi).


Negli ultimi 12 mesi Italia Mondo Negli prossimi 12 mesi Italia

Riduzione dei costi 83% 77% Riduzione dei costi 81%

Outsourcing 38% 31%

Outsourcing 38% 24% 36%

45%

Alleanze strategiche e joint venture

Alleanze strategiche e joint venture

5

Outsourcing, offsourcing e reshoring: nuove scelte manageriali

Nei prossimi anni, la crescita dei salari nei Paesi emergenti e le difficoltà nel reperire risorse con competenze tecniche adeguate spingeranno le aziende a possibili scelte di reshoring in relazione ad alcune attività industriali.

Le scelte di localizzazione industriali saranno caratterizzate da crescente complessità e interconnessione con i target di crescita di innovazione in termini di prodotto/processo delle Società operanti nelle economie avanzate.


Reshoring: i driver prospettici

• Incremento del costo del lavoro nei mercati emergenti;

• Velocità di risposta ai clienti nelle economie avanzate;

• Riduzione del costo del lavoro locale grazie ad accordi con i sindacati nelle economie avanzate;

• R&S più vicina alla produzione;

• Riduzione dei costi di trasporto e logistica;

• Attività di manufacturing, design e sviluppo accorpati in un unico sito;

• Problemi di qualità nei mercati emergenti;

• Difficoltà nell’assumere personale con le giuste competenze nei mercati emergenti.

5


M&A e joint venturesIn quali regioni ha intenzione di realizzare un’acquisizione o fusione, una joint-venture o un’alleanza strategica?

Le Società con bilanci forti e risorse finanziarie disponibili si muoveranno in modo aggressivo per realizzare nuove acquisizioni a contenuto strategico, nei mercati di riferimento e in quelli adiacenti.

I CEO dei Paesi europei si focalizzeranno sul consolidamento regionale e prevedono future operazioni sia in Europa occidentale sia orientale. L’Europa è di forte interesse anche per futuri investimenti da parte degli operatori cinesi e statunitensi.

5


La gestione del rischio

Per confrontarsi sempre più con un panorama mutevole, i CEO comprendono che il risk management è sempre più una funzione chiave a supporto del business e non di ostacolo alla crescita aziendale.

I CEO italiani e a livello mondiale stanno centralizzando le attività di risk management, focalizzando le prorprie risorse su poche iniziative per la gestione del rischio di eventi ad alto impatto.

Confronto tra una serie di affermazioni alternative in merito all’approccio gestionale della sua azienda in un ambito competitivo complesso e mutevole.


5


La gestione della supply chainConfronto tra una serie di affermazioni alternative in merito all’approccio gestionale della sua azienda in un ambito competitivo complesso e mutevole.


Nella supply chain i CEO prevedono dei cambiamenti con l’obiettivo di ridurre i rischi di dipendenza da specifici fornitori.

La maggioranza dei CEO italiani (55%) sta diversificandola supply chain delle propria Società con la scelta di un maggior numero di partner in diverse aree geografiche.

L’analisi competitiva internazionale evidenzia trend fortemente diversificati per settore industriale.

5


Le altre priorità dei CEO

Sempre più la reputazione e la credibilità aziendale sono collegate a temi un tempo considerati “soft”, quali il comportamento etico, l’impatto ambientale delle scelte aziendali, e il reporting non-finanziario.

Guardando oltre i confini italiani in USA e Cina emerge come priorità la pianificazione fiscale.

In quale misura la sua azienda intende concentrarsi sulle seguenti priorità nei prossimi 12 mesi?

5


Sezione 6Organizzazione e Leadership

16th Annual Global CEO Survey - Italia | Innovare per crescere | Sezione 6: Organizzazione e Leadership40

Numero di dipendenti: situazione attuale e prospettica

I CEO italiani hanno limitate aspettative di crescita per quanto riguarda l’occupazione nei prossimi 12 mesi.

I segnali di difficoltà in relazione all’attuale incertezza economico-finanziaria sono evidenti in termini di nuove assunzioni anche in Francia e Germania, dove invece il trend negli ultimi 12 mesi era stato abbastanza positivo.

Qual è la situazione in merito al numero di dipendenti della sua azienda negli ultimi 12 mesi?

Quali sono le sue previsioni per i prossimi 12 mesi?

6


Iniziative sull’organizzazione aziendaleConfronto tra una serie di affermazioni alternative in merito all’approccio gestionale della sua azienda in un ambito competitivo complesso e mutevole.


Il 57% dei CEO italiani investirà nella creazione di forza lavoro competente, una priorità anche a livello mondiale.

Negli ultimi anni sono state implementate politiche di incentivazione del personale ad ampio spettro, finalizzate all’aumento della produttività aziendale.

6


Sviluppo della leadership in azienda

I CEO hanno adottato numerose strategie per lo sviluppo della leadership in azienda, ottenendo risultati soprattutto attraverso i programmi di coinvolgimento del middle management nel processo decisionale strategico e di rotazione in diversi funzioni aziendali.

In Italia prevediamo che aumenteranno i nuovi talenti manageriali e i leader stranieri o caratterizzati da background multiculturali, al fine di affrontare adeguatamente l’internazionalizzazione di business.

Per sviluppare la leadership, mettete in pratica qualcuna delle seguenti strategie?

In quale misura tali strategie forniscono buoni risultati?

6


Le qualità dei leaderQuali sono gli aspetti che ammira in un leader?

Tre stili di leadership sono apprezzate dai CEO globalmente:

• By Vision: è quella preferita dai CEO a livello globale (43%). Questo tipo di leader possiede vision a lungo termine, competenze adeguate al ruolo e capacità di riconoscere e implementare aree di innovazione.

• By Example: il 32% dei CEO apprezza la “leadership by example” in virtù della capacità di motivare, di gestire le incertezze e di prendere decisioni con tempestività.

• By Politics: solo il 15% dei CEO sceglie la “leadership by politics”. Questi leader sono caratterizzati soprattutto dall’attenzione all’etica e al pragmatismo della gestione aziendale.

“Le persone hanno bisogno di uno scopo. La marginalità non è la sostanza della quale sono fattii sogni. Ed anche senza arrivare al punto di parlare disogni, non si possono motivare le persone ad agire,creare e ispirare altri senza aver dato loro unoscopo specialmente quando i tempi sono difficili”


6


I compensi dei manager

I CEO italiani avvertono la necessità di allineare maggiormente i compensi dei manager ai rischi assunti e alle condizioni di mercato.

Questo allineamento tra raggiungimento degli obiettivi e compensi sarà sempre più importante al fine di premiare il merito dei manager nella gestione di impresa.

In che misura è d’accordo con le seguenti affermazioni in merito all’allineamento delle prestazioni dei dirigenti con le esigenze dell’azienda e, più in generale, con quelle degli stakeholder?

6


Industry highlights

16th Annual Global CEO Survey - Italia | Innovare per crescere | Industry highlights46

Industry highlights

Banking & Capital Markets I CEO del settore Banking e Capital Markets sono fiduciosi per le prospettive di crescita delle loro Società - quasi il 90% si aspetta un incremento nella crescita dei ricavi nel prossimo anno. Limitati i timori in relazione al tracollo dell’Euro: solo il 19% reputa che tale evento sia probabile. Per contrastare la crisi, gli sforzi manageriali sono focalizzati sul miglioramento dell’efficienza operativa, sull’individuazione di nuove modalità per attirare talenti, e sullo sviluppo di nuove strategie per creare valore in relazione ai cambiamenti regolatori, tecnologici, e nelle aspettative dei clienti.

Technology

I CEO del settore Technology ripongono molta fiducia nelle proprie capacità di sviluppo delle proprie aziende - oltre l’80% dei CEO intervistati si aspetta un incremento dei ricavi nei prossimi anni. L’attenzione dei top manager rimane concentrata nel breve termine su operazioni di acquisizione e joint venture, e sull’introduzione di nuovi prodotti e servizi. La priorità strategica è l’investimento in R&S ed innovazione, necessari per alimentare la crescita soprattutto in America Latina, nel Sud - Est asiatico e in Nord America, prevedendo una contestuale crescita dei livelli di occupazione.

Entertainment & Media

Il cambiamento delle modalità di spesa e dei comportamenti dei consumatori, e la rapidità di evoluzione delle tecnologie di riferimento rappresentano temi centrali per i CEO del settore. Crescente il ruolo di consumatori, clienti e degli utenti dei social media, che influenzano sempre più le strategie di business, portando il focus dei CEO sul rafforzamento dei programmi di engagement e partecipazione degli stakeholder. Si registra inoltre una preoccupazione crescente in relazione ai rischi legati alla proprietà intellettuale e alla conservazione dei dati dei consumatori.

Healthcare

I CEO del settore ritengono che l’esperienza del paziente debba avere un ruolo sempre più centrale nell’erogazione dei servizi. Le nuove tecnologie contribuiranno al miglioramento della qualità delle prestazioni, e allo stesso tempo, al fine di riproporzionare la struttura di costi ai nuovi ridotti budget del settore, consentiranno di rendere le attività più efficienti. Critico il ruolo delle risorse umane: i CEO del settore pianificano l’incremento degli investimenti per creare una forza lavoro sempre più competente.

Industrial Manufacturing

Un terzo dei CEO del settore prevede uno sviluppo ancora negativo per l’economia: molta preoccupazione soprattutto in relazione al prezzo dell’energia e delle materie prime. Per contrastare la crisi il focus è sugli investimenti in R&S, sullo sviluppo di alleanze con i player della supply chain, e sull’efficienza produttiva - ma non sul ridimensionamento del personale. La Cina diventa un mercato chiave per lo sviluppo industriale del futuro.

Power & Utilities

Più del 90% dei CEO del settore Power & Utilities riconosce la grande influenza dei clienti sulle proprie strategie di business - oltre l’80% prevede di rafforzare i programmi di engagement con tali stakeholder chiave. I CEO prevedono un focus degli investimenti su efficienza operativa, e sull’implementazione di nuove tecnologie. Sempre più importanti forme di partnership con i player della supply chain per sviluppare insieme soluzioni in tema di smart energy, e valorizzare le opportunità di crescita offerte dai mercati locali presidiati.

Retail & Consumer

I CEO del settore prevedono una crescita organica negli esistenti mercati domestici come principale opportunità di espansione nei prossimi anni, ma mantengono l’attenzione anche sui mercati emergenti. Social media, smart phones, shopping online: le abitudini di consumo e di spesa dei consumatori cambiano ed i CEO del settore ritengono che dovranno cambiare anche le strategie di crescita e di fidelizzazione dei clienti al fine di soddisfare i bisogni dei consumatori in modalità sempre nuove. Preoccupazioni sia per i prezzi delle materie prime che dell’energia con i relativi impatti sulla marginalità di business.


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AppendicesAllegati


Quotations originali

Lingua originale

“If we put the effort in now, there’s a good chance that as things improve we’ll be in good shape to accelerate away.”

“Our focus is very much on disruption - disrupting ourselves, disrupting the trends that have been established in the industry and moving forward with new strategies, new products, and new ways of managing our organisation in order to keep pace and indeed accelerate the pace beyond others.”

“One key point of our strategic advantage is the capability to “orchestrate” the production and engineering value chain we create in partnership with other companies. That gives us the ability to scale up or scale down quickly and efficiently. We try to ensure our organizational structure is sufficiently fluid so that we can respond quickly to changes in demand.”

“Given that the global economy and the global pace of life is getting faster in all aspects, one needs to become more agile and efficient about everything - including running a company. It’s essential that you streamline operations and become leaner wherever you can, so as to be able to react more quickly to changing market conditions.”

“We don’t have one way of doing things nor do we have one point of authority to which all questions have to be directed. Instead, our approach is to create a culture that empowers people and - within the context of a set of shared values - provides them with the freedom to take action. That gives you tremendous strength, flexibility, and agility.”

“Human capacity is key to any company’s growth. The second important factor is R&D.”

“People need a sense of purpose. Gross margins are not the stuff of which dreams are made. And even without going so far as to talk of dreams, you cannot inspire people to take action, create or motivate without instilling a sense of purpose, especially when times are difficult”

Traduzione

“Se focalizziamo adesso i nostri sforzi, ci sono molte probabilità che quando le cose andranno meglio, saremo nella condizione di finalmente accelerare”

“La nostra visione è orientata al cambiamento, al cambiamento di noi stessi, al cambiamento dei trend chiave nel settore in cui competiamo, per procedere con nuove strategie, nuovi prodotti e nuove modalità di gestione della nostra organizzazione al fine di tenere il passo ed, anzi, accelerare rispetto agli altri”

“Un punto chiave del nostro vantaggio strategico è la capacità di organizzare la produzione e progettare la spply chain in partnership con altre Società. Questo ci da la possibilità di allargare o ridurre la nostra scala di attività in modo veloce ed efficiente. Cerchiamo di rendere la nostra organizzazione sufficientemente flessibile affichè sia in grado di rispondere ai cambiamenti della domanda”

“Considerando che l’economia globale ed il ritmo della vita sono, in tutti i loro aspetti, sempre più veloci, è neessario diventare più agili ed efficienti in tutto, compresa la gestione aziendale. È necessario snellire le operations e la struttura, in modo da essere in grado di reagire più rapidamente alle condizioni di mercato”

“Non abbiamo un unico modo di fare le cose né abbiamo un solo referente governativo al quale porre tutte le domande. Il nostro approccio, invece, è quello di creare una cultura che fornisca alle persone - nell’ambito di un insieme di valori condivisi - la libertà di agire. Ciò consente di avere straordinaria forza, flessibilità e agilità”

“Il capitale umano è fondamentale per la crescita di qualsiasi Società”

“Le persone hanno bisogno di uno scopo. La marginalità non è la sostanza della quale sono fatti i sogni. Ed anche senza arrivare al punto di parlare di sogni, non si possono motivare le persone ad agire, creare e ispirare altri senza aver dato loro unoscopo specialmente quando i tempi sono difficili”


Contatti

Nicola AnzivinoPartner | Strategyemail: [email protected]

www.pwc.pl/ceo-survey

16. coroczne badanie Global CEO Survey

1. Perspektywy wzrostu / 2. Zagrożenia dla rozwoju / 3. Działania restrukturyzacyjne / 4. Szanse na rozwój / 5. Zmiany strategiczne / 6. Zarządzanie firmami i kształtowanie przywództwa

Polska perspektywa

1330

88%

68%

Restrukturyzacja i zarządzanie w trudnych czasach

członków zarządównajwiększych globalnyych firm

polskich prezesów obawia się niestabilności gospodarczej

polskich prezesów planuje intensyfikację prac badawczo-rozwojowych

2 16. coroczne badanie Global CEO Survey: Polska perspektywa

Na całym świecie w badaniu PwC CEO Survey 2013 wzięło udział 1330 członków zarządów największych globalnych firm. Badanie przeprowadzone zostało w ostatnim kwartale zeszłego roku.

Podobnie jak to miało miejsce w latach poprzednich, przeprowadziliśmy także oddzielne dodatkowe badanie wśród polskich firm. W tym roku przeprowadziliśmy w sumie 73 wywiady z czego 20 członków zarządu polskich firm zgodziło się wziąć udział w badaniu globalnym, a pozostali udzielili odpowiedzi ankieterom współpracującej z nami firmy badawczej na potrzeby uzupełniającego badania krajowego.

O badaniu

16. coroczne badanie Global CEO Survey: Polska perspektywa 3

Szanowni Państwo!

Szesnaste badanie PwC Annual Global CEO Survey przeprowadzono wśród 1330 menedżerów zarządzających firmami w 59 krajach. Tak jak w poprzednich latach pytaliśmy respondentów o najistotniejsze z ich punktu widzenia trendy we współczesnej gospodarce oraz o ich plany dotyczące zmian w strategii działania i rozwoju firm.

Globalna gospodarka nadal zmaga się z efektami potężnego kryzysu, rozpoczętego załamaniem finansowym w latach 2007-2008. Wciąż aktualne są obawy dotyczące sytuacji instytucji finansowych, szczególnie tych silnie zaangażowanych w krajach Europy Południowej, przeżywających obecnie największy kryzys, związany ze szczególnie trudną sytuacji finansów publicznych. W całej Europie Zachodniej w roku 2012 mieliśmy do czynienia z recesją, a w tym roku spodziewany wzrost PKB niewiele przekracza zero. Przedłuża to niepokój menedżerów światowych firm o rozwój sytuacji w najbliższych miesiącach. Jednocześnie wciąż bardzo silne są pytania o kierunki w jakich zmierza globalna gospodarka w dłuższej perspektywie i o to, jak przygotować firmy do czekających nas zmian.

Prowadzone rokrocznie badanie PwC umożliwia śledzenie zmian nastrojów panujących w globalnych korporacjach. Pozwala obserwować prawdopodobne kierunki strategicznych działań, mających na celu dostosowanie do wyzwań stawianych zarówno przez globalny kryzys, jak i przez głębsze trendy strukturalne. Wraz z ankietą światową, przeprowadziliśmy po raz kolejny dodatkowe badania polskiej perspektywy. Polskim menedżerom zadaliśmy pytania podobne do tych, na które odpowiadali respondenci z całego świata. Prezentowane w tym raporcie wyniki dają ciekawy materiał do przemyśleń. Zachęcamy do lektury i zapraszamy do dyskusji i refleksji nad optymalnymi strategiami rozwoju firm w naszym kraju.

Wstęp

Olga GrygierPrezes ZarząduPwC

Witold M. OrłowskiGłówny Doradca EkonomicznyPwC


Podsumowanie

W badaniu PwC CEO Survey 2013 wzięło udział 1330 członków zarządów największych globalnych firm. W Polsce przeprowadziliśmy 73 wywiady. Badanie przeprowadzone zostało w ostatnim kwartale roku 2012.

Opinie respondentów dotyczące perspektyw wzrostu ich firm z jednej strony są zgodne z tym, czego możemy się spodziewać w roku charakteryzującym się wysokim stopniem niepewności na całym świecie, z drugiej strony pozwalają nam wejść w nowy rok z pewną dozą optymizmu. Silne przekonanie co do wzrostu przychodów swoich firm w ciągu 12 miesięcy wyraża 36% uczestników ankiety (wobec 40% rok wcześniej). Nieco większy jest optymizm wobec perspektyw wzrostu przychodów w okresie 3-letnim – tu odsetek silnie przekonanych co do wzrostów wyniósł 46% (wobec 47% rok temu).

Polscy menedżerowie, choć wciąż pozostają pesymistyczni wobec sytuacji w krótkim okresie, wykazują więcej optymizmu w dłuższym horyzoncie czasowym. Tylko 26% (wobec 28% rok temu) twierdzi, że przychody ich firm zdecydowanie wzrosną w ciągu najbliższych 12 miesięcy, ale już 45% (wobec 33% rok temu) wyraża podobne oczekiwania co do okresu 3-letniego. Ostrożność polskich menedżerów może wynikać z ich głębokich obaw co do rozwoju globalnej sytuacji gospodarczej. Aż 88% ankietowanych wyraża głębokie obawy co do możliwych wahań wzrostu PKB w Polsce w najbliższym czasie. Nieco mniej (67%) niepokoi niestabilność kursu walutowego.

Polscy menedżerowie relatywnie nisko oceniają skalę zagrożeń natury mikroekonomicznej. Dostępność kluczowych umiejętności, zmiany technologiczne czy problemy z ochroną własności intelektualnej budzą u nich mniejsze obawy niż średnio na świecie. Świadczy to między innymi o tym, iż świadomość narastania globalnych procesów natury strukturalnej wciąż dociera do naszego kraju z pewnym opóźnieniem.

W ramach koniecznej restrukturyzacji firmy, zarówno w Polsce (45% odpowiedzi), jak i za granicą (70% odpowiedzi) planują kompleksowe programy restrukturyzacji kosztów, zazwyczaj związane ze zmniejszaniem zatrudnienia. W sumie aż 32% polskich firm planuje redukcje zatrudnienia w ciągu najbliższych 12 miesięcy. Jest to co prawda mniej niż w Europie Zachodniej (40%), ale więcej niż średnia dla świata (25%) i naszego regionu (24%).

Aż 55% ankietowanych w Polsce i 57% na świecie zależy na promocji zachowań etycznych. Ma to związek z częstym identyfikowaniem głębokich przyczyn obecnego kryzysu w braku tego rodzaju kultury zachowań w największych światowych korporacjach.

Zarówno w Polsce, jak i na świecie ponad 30% ankietowanych upatruje szans przede wszystkim w dalszym rozwoju organicznym na rynkach lokalnych. Tylko 12% polskich menedżerów (wobec 21% w zeszłym roku i 25% na świecie) widzi szanse w działaniach innowacyjnych. Dobrą informacją wydaje się to, iż 68% z nich planuje intensyfikację działań

w dziedzinie prac badawczo -rozwojowych. Także 12% polskich firm będzie szukać możliwości rozwoju na nowych rynkach zagranicznych (wzrost z 5% w zeszłym roku).

W okresie niepewności zmienia się podejście do zarządzania firmą. Z jednej strony stopniowej centralizacji ulega proces decyzyjny, a z drugiej firmy starają się zapewnić sobie jak najbardziej zróżnicowaną bazę kontrahentów. Aż 82% menedżerów w Polsce (66% na świecie) deklaruje, że strategiczne decyzje w ich firmach podejmowane są na poziomie kierownictwa wyższego szczebla. Coraz bardziej scentralizowaną odpowiedzialność za zarządzanie ryzykiem deklaruje 71% menedżerów w Polsce i 63% na świecie. Decentralizacja i zróżnicowanie dominuje natomiast w podejściu do zarządzania łańcuchem dostaw. Firmy starają się współpracować z jak największą liczbą partnerów – deklaruje to 64% ankietowanych w Polsce i 50% na świecie.

Ciekawe zarówno z punktu widzenia sposobu zarządzania firmami, jak i z perspektywy kształtowania postaw przyszłych liderów są opinie menedżerów dotyczące sposobu i mechanizmu wynagradzania kadry kierowniczej. Tylko 24% ankietowanych w Polsce (wobec 36% na świecie) zgadza się ze stwierdzeniem, iż modele wynagrodzeń uzależnionych od wyników nie działają należycie. Natomiast 55% ankietowanych w Polsce (wobec 36% na świecie) uważa, że obecna struktura bonusów dla kierownictwa nie jest wcale zbyt skomplikowana.


trend ten, choć w dalszym ciągu dominujący, nie był już tak uniwersalny. Odsetek uczestników ankiety silnie przekonanych o tym, że przychody ich firm wzrosną w ciągu najbliższych 12 miesięcy, wciąż niestety spadał – z 40% rok wcześniej do 36% obecnie. Z drugiej jednak strony, choć tendencja ta jest wciąż silna w Ameryce Północnej (spadek z 42% do 33%) i Europie Zachodniej (spadek z 27% do 22%), to w naszym regionie (Europa Środkowa i Wschodnia) widać już poprawę nastrojów (wzrost odsetka ocen optymistycznych z 41% do 42%).

Wyniki w skali globalnej wskazują na nieco większy optymizm

1. Perspektywy wzrostu

Podobnie jak w poprzednich latach analizę wyników CEO Survey zaczynamy od przedstawienia poglądów respondentów dotyczących perspektyw wzrostu sprzedaży zarządzanych przez nich przedsiębiorstw. Są one zgodne z tym, czego możemy się spodziewać w roku charakteryzującym się wahaniami nastrojów oraz wysokim stopniem niepewności na całym świecie, a w szczególności w Europie. Z drugiej strony wyniki te pozwalają nam wejść w nowy rok z pewną dozą optymizmu.

Rok temu mieliśmy do czynienia z gwałtownym i wspólnym dla wszystkich rejonów świata pogorszeniem nastrojów. W tym roku

w odniesieniu do perspektyw wzrostu przychodów w okresie 3-letnim, choć i tu odsetek menedżerów silnie przekonanych co do wzrostów nieznacznie spadł (z 47% do 46%). Menedżerowie największych firm na świecie dostrzegają więc pogorszenie sytuacji w krótkim okresie, ale wykazują znacznie więcej ufności co do długookresowych perspektyw rozwojowych swoich firm.

Podobnie jak miało to miejsce rok temu, polscy menedżerowie wciąż pozostają pesymistycznie nastawieni co do sytuacji ich firm w krótkim okresie. Tylko 26% procent z nich twierdzi, że ich przychody zdecydowanie wzrosną w ciągu

Odsetek respondentów silnie przekonanych co do wzrostu w ciągu najbliższych 12 miesięcy

Źródło: Badanie własne PwC

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Perspektywy wzrostu przychodów firm (% odpowiedzi)

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Świat Polska Europa Zachodnia CEE


Menedżerowie największych firm na świecie dostrzegają pogorszenie sytuacji w krótkim okresie, ale wykazują znacznie więcej ufności co do długookresowych perspektyw rozwojowych swoich firm.

najbliższych 12 miesięcy w porównaniu z 28% rok wcześniej. Jest to z jednej strony znacznie poniżej średniej dla naszego regionu i świata, ale z drugiej nieco lepiej niż średnia dla Europy Zachodniej, z którą wiążą nas najściślejsze więzy gospodarcze.

Wyraźnie poprawiły się za to oczekiwania polskich menedżerów dotyczące perspektyw rozwojowych firm w dłuższym okresie. Podczas gdy rok temu jedynie 33% z nich było zdecydowanie przekonanych co wzrostu przychodów w ciągu najbliższych trzech lat, to w badaniu tegorocznym tak silnym optymizmem wykazuje się aż 45% ankietowanych.

Warto też zauważyć, że gdy zsumujemy liczby tych, którzy wykazują zdecydowany i umiarkowany optymizm co do wzrostu przychodów ich firm, wyniki dla Polski i przeciętne dla całego świata są nieomal identyczne. Zsumowany odsetek umiarkowanych i zdecydowanych optymistów w horyzoncie 12-miesięcznym jest dokładnie taki sam i wynosi 81%, a w horyzoncie 3-letnim wynosi odpowiednio 89% w Polsce i 90% na świecie. Można więc powiedzieć, że wśród polskich zarządzających firmami odsetek optymistów jest równy średniej światowej, choć jest to optymizm ostrożniejszy.

Perspektywy wzrostu przychodów firm (% odpowiedzi)


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2. Zagrożenia dla rozwoju

Ostrożność polskich menedżerów może wynikać z ich głębokich obaw co do rozwoju globalnej sytuacji gospodarczej, a zwłaszcza co do perspektyw rozwojowych Zachodniej Europy. Aż 44% z nich (wobec 32% na świecie) uważa, że sytuacja pogorszy się w ciągu najbliższych 12 miesięcy, a tylko 11% (wobec 18% na świecie) wierzy w jej poprawę. Pesymizm ten jest specyficzną cechą naszego regionu, choć nie przekłada się on w pełni na gorsze oczekiwania co do perspektyw rozwojowych konkretnych firm.

Brak przełożenia wzmożonych obaw co do rozwoju sytuacji globalnej na perspektywy własnej firmy może wynikać z tego, iż pesymistyczne oceny mają charakter dość ogólny. Gdy pytamy o konkretne negatywne wydarzenia mogące mieć wpływ na światową gospodarkę, obawy polskich menedżerów okazują się umiarkowane:

• tylko 4% z nich (wobec 16% na świecie) wierzy w możliwość rozpadu strefy euro,

• 15% (wobec 25% na świecie) wierzy w możliwość ograniczonego dostępu do surowców z powodów konfliktów militarnych lub handlowych,

• 8% (wobec 20% na świecie) wierzy w cyberatak lub inne zagrożenie Internetu.

Polscy menedżerowie wykazują się także względnym optymizmem dotyczącym rozwoju sytuacji w kraju. Nie wierzą w możliwość wystąpienia w Polsce niepokojów społecznych – obawy co do tego wyraża tylko 7% ankietowanych. Tylko 26% wierzy

w możliwość wystąpienia w Polsce recesji w roku 2013 (21% w to powątpiewa). To, że ponad połowa pytanych (53%) nie ma zdania w tej kwestii, jest także interesującym wynikiem, pokazującym jak zróżnicowane sygnały napływają z rynku. Pokazuje to, jak duży jest popyt na wiarygodną prognozę dotyczącą oczekiwanego tempa rozwoju naszego kraju w ciągu najbliższych kilkunastu miesięcy.

Znaczna niepewność towarzysząca prognozie tempa rozwoju polskiej gospodarki w najbliższych miesiącach przekłada się na wzmożony niepokój respondentów. Aż 88% ankietowanych wyraża głębokie (30%) bądź słabsze (55%) obawy co do możliwych wahań wzrostu PKB w Polsce w najbliższym

czasie. Silny niepokój budzi także: możliwa reakcja władz państwowych na problem zadłużenia oraz potencjalna niestabilność na rynkach kapitałowych.

Wciąż istotnym i budzącym poważne obawy czynnikiem jest niestabilność kursów walutowych, choć tu odsetek zaniepokojonych jest mniejszy, niż miało to miejsce wcześniej – 67% obecnie wobec 81% rok temu. Ze zrozumiałych względów polscy menedżerowie wciąż jednak obawiają się tego czynnika bardziej niż ich odpowiednicy na świecie.

Ciekawym wynikiem, który obserwowaliśmy także rok temu, jest mniejsza obawa polskich menedżerów dotycząca tendencji protekcjonistycznych władz

Opinia o rozwoju sytuacji na świecie w ciągu nadchodzących 12 miesięcy(% odpowiedzi)


polepszy siępogorszy się


Przekonanie co do możliwości zmaterializowania się zagrożeń (% odpowiedzi)


państwowych. Może ona wynikać z tego, iż zarządzają oni przedsiębiorstwami o mniejszej skali i protekcjonizm może się dla nich w krótkim okresie okazać korzystny, może to też oznaczać większą wiarę w wolnorynkowe poglądy rządzących.

Obawy menedżerów budzą też zagrożenia natury biznesowej. W tym przypadku jednak poziom zaniepokojenia jest nieco mniejszy niż możliwymi negatywnymi tendencjami makroekonomicznymi – zagrożenia natury biznesowej budzą niepokój średnio 45% ankietowanych w Polsce i na świecie, a natury makroekonomicznej odpowiednio 63% i 60%.

Polscy menedżerowie najbardziej obawiają się negatywnych tendencji makroekonomicznych.

Relatywnie duży niepokój wśród polskich menedżerów budzą możliwe zmiany zachowań konsumentów (77%), potencjalny wzrost kosztów energii i surowców (64%) oraz możliwość wzrostu obciążeń podatkowych – czyli te zagrożenia biznesowe, które w silnym stopniu związane są z obecną sytuacją makroekonomiczną. Zagrożenia natury strukturalnej, takie jak dostępność kluczowych umiejętności, zmiany technologiczne czy problemy z ochroną własności intelektualnej, zdaniem polskich menedżerów nie są aż tak niepokojące.

Tak wyraźnego podziału nie widać natomiast w wynikach globalnych. Tutaj jednym z najbardziej niepokojących czynników jest dostępność pracowników z kluczowymi umiejętnościami. Większe są też obawy dotyczące zmian technologicznych czy też problemów z ochroną własności intelektualnej. Świadczy to między innymi o tym, iż świadomość znaczenia globalnych procesów natury strukturalnej wciąż dociera do naszego kraju z pewnym opóźnieniem.


Makroekonomiczne zagrożenia dla rozwoju (% odpowiedzi)


Biznesowe zagrożenia dla rozwoju (% odpowiedzi)



Działania restrukturyzacyjne planowane na następnych 12 miesięcy


3. Działania restrukturyzacyjne

Utrzymująca się niepewność i obawy co do tempa rozwoju gospodarki polskiej i światowej wymuszają na firmach kontynuowanie działań restrukturyzacyjnych, służących wzrostowi odporności na ewentualne kolejne zawirowania.

Struktura planowanych na 2013 rok działań restrukturyzacyjnych nie zmieniła się w stosunku do roku 2012. Firmy zarówno w Polsce (45% odpowiedzi), jak i za granicą (70% odpowiedzi) planują przede wszystkim kompleksowe programy restrukturyzacji kosztów. W roku 2012 działania takie podjęło odpowiednio 52% firm w Polsce i 77% firm na świecie.

Na drugim miejscu wśród planowanych działań w Polsce jest wyprowadzenie na zewnątrz (outsourcing) procesów lub funkcji biznesowej (30% odpowiedzi), na świecie natomiast częściej planowanym krokiem jest zawarcie nowego aliansu strategicznego lub joint-venture (47% odpowiedzi). Z podobną sytuacją mieliśmy także do czynienia w roku 2012.

Nasze badania potwierdzają tezę, iż outsourcing jako działanie restrukturyzacyjne nie jest procesem jednokierunkowym. W roku 2012 19% firm na świecie i 21% firm w Polsce ponownie przejęło do realizacji procesy wyprowadzone wcześniej na zewnątrz.

W roku 2013 działania takie planuje odpowiednio 16% i 12% ankietowanych menedżerów.

Niestety, planowane kompleksowe restrukturyzacje kosztów nieodzownie związane są ze zmniejszaniem zatrudnienia. Plany polskich menedżerów są w tej kwestii podobne do zachodnioeuropejskich. W sumie aż 32% z nich planuje redukcję zatrudnienia w swoich firmach w ciągu najbliższych 12 miesięcy. Jest to co prawda mniej niż w Europie Zachodniej, gdzie redukcje planowane są w 40% firm, ale więcej niż średnia dla świata (25%) i niż wynik dla Europy Środkowej i Wschodniej (24%).


Oczekiwana zmiana liczby pracowników (% odpowiedzi)


Koncentracja na optymalizacji obciążeń podatkowych


Koncentracja na budowaniu kultury zachowań etycznych


W związku ze specyficznymi cechami obecnych zawirowań ekonomicznych ankietowani przez nas menedżerowie planują także inne działania dostosowujące ich firmy do nowej sytuacji lub zmniejszające ujawnione w czasie kryzysu ryzyka. Jednym z takich działań jest planowany przez znaczną część respondentów wzrost koncentracji na działaniach służących optymalizacji obciążeń podatkowych. Deklaracje takie złożyło 47% menedżerów w Polsce i 37% na świecie. Działania optymalizacyjne mają niewątpliwie związek ze wzmożonymi obawami dotyczącymi ewentualnych podwyżek podatków.

Interesujący jest także duży odsetek menedżerów planujący zwiększenie koncentracji na działaniach budujących kulturę zachowań etycznych w firmach. Działania takie pragnie zintensyfikować 55% ankietowanych w Polsce i 57% na świecie. Ma to związek z częstym identyfikowaniem głębokich przyczyn obecnego kryzysu w niedostatku tego rodzaju kultury zachowań w największych światowych korporacjach.

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Odsetek respondentów upatrujących szans rozwojowych w poszczególnychprzedsięwzięciach


4. Szanse na rozwójNiepewne czasy gospodarcze to nie tylko obawy i konieczność restrukturyzacji, ale także okres, w którym pojawiają się nieznane lub niezauważane do tej pory szanse rozwojowe. Zarówno w Polsce, jak i na całym świecie ankietowani przez nas menedżerowie szukają ich przede wszystkim w dalszym rozwoju organicznym na rynkach lokalnych. Taka ostrożność w poszukiwaniu nowych możliwości charakteryzuje przede wszystkim zarządzających firmami w regionie Europy Środkowej i Wschodniej, gdzie głównie takich szans upatruje aż 40% ankietowanych. W Polsce jest to 33%, a na świecie 32%.

Nieco innych szans na rozwój szukać będą w przyszłym roku menedżerowie w krajach Europy Zachodniej. Po 25% z nich skupi się przede wszystkim na rynkach zagranicznych, na których ich firmy już działają lub na opracowaniu nowego produktu lub usługi. Jest to zrozumiałe, zważywszy na niekorzystne perspektywy

rozwojowe w tej części świata, ale także z racji na dojrzałość tamtejszych rynków i nasycenie już istniejącymi produktami.

Dla większości polskich menedżerów możliwość wejścia na rynek z własnym innowacyjnym produktem wciąż wydaje się być działaniem mało interesującym – tylko 12% z nich upatruje szansy w takich działaniach. Co ciekawe, jest to mniej niż w badaniach zeszłorocznych, gdzie taką możliwość rozwojową jako główną postrzegało aż 21% ankietowanych w naszym kraju.

Z drugiej strony w porównaniu z ubiegłorocznymi badaniami znacznie wzrosła liczba polskich menedżerów, którzy będą szukać możliwości rozwoju na nowych rynkach zagranicznych. Rok temu gotowość taką deklarowało tylko 5% ankietowanych, w tym toku jest to już 12%. Polskie firmy coraz częściej widzą w kryzysie szansę na ekspansję ze swoimi dobrymi jakościowo i jednocześnie stosunkowo tanimi produktami i usługami.


Zakres oczekiwanych zmian w przedsiębiorstwie w ciągu 12 miesięcy (% odpowiedzi)


Procent menedżerów planujących zmiany strategii firmy

5. Zmiany strategiczne

intensyfikacji prac badawczo -rozwojowych (68%), jest to także obszar, w którym najczęściej planowane są zmiany fundamentalne (22%). Oznacza to, że choć wciąż nie dostrzegają oni w nowych produktach szans rozwojowych w krótkiej perspektywie, to najwyraźniej widzą takie szanse w dłuższym okresie czasu.

Ponad 60% polskich menedżerów planuje także zmiany w podejściu do zarządzania ryzykiem (66%) oraz w sposobie zarządzania talentami

(63%). Plany te szczególnie w zakresie zarządzania ryzykiem są oczekiwaną reakcją na identyfikowane źródła i mechanizmy obecnych światowych problemów gospodarczych.

Z drugiej strony nie ma planów dotyczących istotnych zmian strategicznych w obszarze fuzji i przejęć (34% odpowiedzi). Jest to obszar, w którym widać największe różnice pomiędzy zarządzającymi firmami w Polsce i na świecie, gdzie zmiany strategii planuje aż 61% ankietowanych.

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Szybko zmieniające się warunki ekonomiczne powodują konieczność stałej gotowości do zmiany strategii firmy. Nie jest więc zaskakujące, że aż 75% menedżerów w Polsce i 68% na świecie planuje takie zmiany w ciągu najbliższych 12 miesięcy. Zmiany te jednak w większości przypadków (odpowiednio 60% i 54% odpowiedzi) nie będą fundamentalne.

Dobrą informacją wydaje się to, że znaczny odsetek polskich menedżerów planuje zmiany

świat

Polska


Zarządzanie w okresie niepewności (%odpowiedzi)


W okresie niepewności zmienia się podejście do zarządzania firmą. Z jednej strony stopniowej centralizacji ulega proces decyzyjny, z drugiej firmy starają się zapewnić sobie jak najbardziej zróżnicowaną bazę kontrahentów. Tendencje te widoczne są zarówno w wynikach dla Polski, jak i w badaniu globalnym, przy czym w naszym kraju są one nieco silniejsze.

6. Zarządzanie firmami i kształtowanie przywództwa

Aż 82% menedżerów w Polsce (66% na świecie) deklaruje, że strategiczne decyzje w ich firmach podejmowane są na poziomie kierownictwa wyższego szczebla. Tylko 18% ankietowanych w naszym kraju, wobec 31% na świecie, deklaruje, iż wszyscy pracownicy zachęcani są do angażowania się w proces podejmowania strategicznych decyzji.

W tym samym kierunku zmierza ewolucja podejścia do zarządzania ryzykiem oraz do wyboru inicjatyw strategicznych. Coraz bardziej scentralizowaną odpowiedzialność za zarządzanie ryzykiem deklaruje 71% menedżerów w Polsce i 63% na świecie. Wybór strategii w oparciu o kilka starannie dobranych inicjatyw deklaruje natomiast odpowiednio 63% i 68% ankietowanych.

-24%

odpowiedzialność za zarządzanie ryzykiem jest coraz bardziej scentralizowana

odpowiedzialność za zarządzanie ryzykiem jest coraz bardziej zdecentralizowana

zwiększamy koncentrację w naszym łańcuchu dostaw, zmniejszając liczbę zaufanych partnerów

wprowadzamy zróżnicowanie w naszym łańcuchu dostaw, współpracując z większą liczbą partnerów w różnych regionach

strategiczne decyzje są podejmowane na poziomie kierownictwa wyższego szczebla i zarządu

wszyscy pracownicy są zachęcani do angażowania się w proces podejmowania strategicznych decyzji

nasza strategia jest oparta na kilku starannie wybranych inicjatywach

próbujemy wielu różnych inicjatyw strategicznych, z których wybierana jest najlepsza

zasoby z zakresu zarządzania ryzykiem alokujemy głównie na potrzeby przewidywania zdarzeń wysokiego ryzyka

zasoby z zakresu zarządzania ryzykiem alokujemy głównie na potrzeby radzenia sobie z konsekwencjami zdarzenia

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Stosowanie narzędzi kształtowania przywództwa (% odpowiedzi)


Decentralizacja i zróżnicowanie dominuje natomiast w podejściu do zarządzania łańcuchem dostaw. Firmy starają się współpracować z jak największą liczbą partnerów – deklaruje to 64% ankietowanych w Polsce i 50% na świecie, tak by zapewnić sobie bezpieczeństwo na wypadek zawirowań społecznych lub politycznych w różnych częściach świata. Zróżnicowanie to może także odzwierciedlać obawy co do perspektyw przetrwania niektórych kontrahentów na rynku.

Centralizacja zarządzania firmami oznacza, iż bardzo istotne dla

długookresowego rozwoju firmy staje się zarówno przygotowanie odpowiednich następców dla obecnej kadry kierowniczej, jak i opracowanie efektywnych metod wyłaniania przyszłych liderów.

Praktyki stosowane w polskich firmach są w tym obszarze bardzo zbliżone do tych stosowanych na świecie. Najczęściej stosowane narzędzia to: angażowanie menedżerów niższego szczebla w podejmowanie decyzji strategicznych (78% w Polsce wobec 79% na świecie), dedykowane programy rozwoju (odpowiednio 66% i 68%) oraz

rotacje pomiędzy funkcjami (odpowiednio 63% i 62%). Promowanie różnorodności oraz aktywne planowanie sukcesji są natomiast w Polsce stosowane zauważalnie rzadziej (o odpowiednio 36% wobec 56% oraz 55% wobec 71%).

Nie ma też specjalnych różnic w ocenie skuteczności poszczególnych programów. Wszystkie są przez stosujące je firmy oceniane generalnie jako skutecznie, a i wyniki dla Polski są bardzo zbliżone do wyników globalnych. Jako najefektywniejsze oceniane jest angażowanie menedżerów


Ocena skuteczności programów rozwoju przywództwa (% odpowiedzi)


niższego szczebla w podejmowanie strategicznych decyzji, następnie aktywne planowanie sukcesji oraz dedykowane programy rozwoju. Wszystkie one zebrały około 90% pozytywnych ocen polskich i światowych menedżerów, choć średnie oceny w naszym kraju są nieco wyższe.

Ciekawe zarówno z punktu widzenia sposobu zarządzania firmami, jak i z perspektywy kształtowania postaw przyszłych liderów są opinie menedżerów dotyczące sposobu i mechanizmu wynagradzania kadry kierowniczej. Dane te pokazują z jednej

strony dość spore zróżnicowanie ocen pomiędzy poszczególnymi menedżerami, ale także nieznaczne różnice pomiędzy poglądami menedżerów w Polsce i na świecie.

Szczególnie wiele przeciwstawnych odpowiedzi otrzymaliśmy na trzy pytania: o zależność sposobu ustalania wynagrodzeń członków kierownictwa od ocen interesariuszy, o ocenę stopnia komplikacji struktury bonusowej oraz o ocenę mechanizmu wynagradzania menedżerów uzależnionego od wyników.

dedykowany program rozwoju dla osób na stanowiskach kierowniczych

praktyki u boku kierownictwa wyższego szczebla

rotacje pomiędzy funkcjami i nowe wyzwania

programy promujące różnorodność wśród liderów biznesu

zachęcanie do globalnej mobilności i zdobywania doświadczeń międzynarodowych

angażowanie menedżerów poniżej poziomu zarządu w podejmowanie decyzji strategicznych

aktywne planowanie sukcesji, włącznie z identyfikowaniem kilku następców

W trudnych czasach menedżerowie biorą na siebie więcej odpowiedzialności oraz ryzyka.


Opinia o modelach wynagradzania kierownictwa (% odpowiedzi)


Bardzo podobna liczba ankietowanych udzieliła pozytywnych i negatywnych odpowiedzi na pytania o zależność wynagrodzeń od ocen interesariuszy. Zarówno w Polsce, jak i na świecie było to około 30%. Opinie są tu podzielone i krajowi menedżerowie nie różnią się w tej różnorodności zdań od średniej światowej. Wyraźnie widać za to różnice w polityce poszczególnych firm.

Z inną sytuacją mamy do czynienia w dwóch pozostałych przypadkach. Tutaj zdania też są podzielone, ale rozkładają się one nieco inaczej wśród menedżerów polskich i globalnych.

Aż 55% ankietowanych w Polsce nie zgadza się ze stwierdzeniem, że obecna struktura bonusów dla kierownictwa jest zbyt skomplikowana – na świecie zdanie takie podziela 36% respondentów.

Nieco mniejsze ale też widoczne różnice pomiędzy wynikami polskimi i globalnymi obserwujemy w przypadku oceny modeli wynagrodzeń uzależnionych od wyników. 24% menedżerów w Polsce i 36% na świecie uważa, że nie działają one dobrze.

Jeśli zgodzimy się z popularną w ostatnim czasie diagnozą, iż źródeł obecnego kryzysu gospodarczego należy upatrywać w zbyt wysokiej skłonności do ryzyka menedżerów wynagradzanych w oparciu o krótkookresowe wyniki przedsiębiorstw, to można wywnioskować, iż polscy ankietowani nieco rzadziej uważają te diagnozy za słuszne lub też nie wyciągają z nich aż tak silnych wniosków jak zarządzający firmami w innych częściach świata.

Zmieniamy sposób ustalania wynagrodzeń

dla członków kierownictwa w odpowiedzi na reakcje

interesariuszy i ogółu

Polska Polska Polska Polska PolskaŚwiat Świat Świat Świat Świat

Wynagrodzenie oraz wyniki powinny być ustalane

z uwzględnieniem podejmowanego ryzyka

Modele wynagrodzenia uzależnionego od wyników

nie działają jak należy

Musimy dostosować warunki wynagrodzenia

do warunków rynkowych, aby utrzymać najbardziej

utalentowanych pracowników

Obecna struktura bonusów dla kierownictwa jest zbyt

skomplikowana

silnie się zgadzam silnie się nie zgadzamnie zgadzam sięzgadzam się

Zaprezentowane wyniki bazują na założeniu, że uzyskane informacje ze źródeł innych niż PwC, są kompletne i dokładne we wszystkich aspektach. PwC zakłada, że uzyskane dane i odpowiedzi są zgodne z prawdą, w związku z czym nie dokonywano przeglądu lub jakiejkolwiek innej weryfikacji otrzymanych danych. Niniejsza analiza jest pewną interpretacją otrzymanych danych i nie może być traktowana jako ostateczna rekomendacja, czy też porada odnośnie wyboru metod działania lub jako sugestia w zakresie zastosowania konkretnych rozwiązań. Dokumentu tego nie należy traktować jako substytutu konsultacji z profesjonalnymi doradcami. W związku z powyższym PwC nie przyjmuje odpowiedzialności wobec żadnego podmiotu, który będzie bez konsultacji z profesjonalnym doradcą wykorzystywać informacje zawarte w niniejszej analizie.

© 2013 PwC Polska Sp. z o.o. Wszystkie prawa zastrzeżone. W tym dokumencie nazwa „PwC” odnosi się do PwC Polska Sp. z o.o., firmy wchodzącej w skład sieci PricewaterhouseCoopers International Limited, z których każda stanowi odrębny i niezależny podmiot prawny.

www.pwc.pl/ceo-survey

Kontakt

Olga Grygier Prezes Zarządu

+48 22 523 [email protected]

Mateusz Walewski Ekonomista

+48 22 746 6956 [email protected]

Witold Orłowski Główny Doradca Ekonomiczny

+48 22 523 [email protected]

PwC ayuda a organizaciones y personas a crear el valor que están buscando. Somos una red de firmas presente en 158 países con más de 180.000 profesionales comprometidos en ofrecer servicios de calidad en auditoría, asesoramiento fiscal y legal y consultoría. Cuéntanos qué te preocupa y descubre cómo podemos ayudarte en www.pwc.es

© 2013 PricewaterhouseCoopers S.L. Todos los derechos reservados. “PwC” se refiere a PricewaterhouseCoopers S.L, firma miembro de PricewaterhouseCoopers International Limited; cada una de las cuales es una entidad legal separada e independiente.

Escanea este código QR con tu smartphone para tener más información sobre la Encuesta Mundial de CEOs o accede a www.pwc.es

• Los CEOs coinciden de forma unánime en el cambio radical que ha sufrido en los últimos años el contexto en el que se mueven sus compañías, marcado por la volatilidad y por el impacto en sus negocios de acontecimientos imprevisibles.

• La incertidumbre económica, las medidas que están poniendo en marcha los gobiernos para combatir los déficits, la complejidad de los sistemas fiscales o el aumento de los precios de la energía y de las materias primas, entre las principales amenazas para los primeros ejecutivos.

• Las estrategias de los CEOs para intentar crecer en el momento actual se están centrando en apostar por oportunidades y nichos de negocio muy concretos, en retener y fidelizar a sus clientes intentando adelantarse a sus comportamientos y en mejorar la eficiencia de sus operaciones.

• Los presidentes y consejeros delegados tanto mundiales como españoles son pesimistas sobre la evolución de sus negocios y de la economía mundial en 2013. Las

perspectivas mejoran cuando se les pregunta por el largo plazo –tres años–.

Las claves

www.pwc.es

Gestionar lo imprevisibleLas estrategias de los CEOs para crecer en un entorno volátil

Resumen ejecutivoDécimosexta Encuesta Mundial de CEOs. Foro Económico Mundial de Davos

Contacto

Carlos MasPresidente de PwC Teléfono: 915 684 [email protected]

Amenazas económicas y de negociosLos primeros ejecutivos destacan dos tipos de amenazas: económicas y políticas y de negocio. Entre las primeras, las más señaladas tanto por los CEOs españoles como por los mundiales son la incertidumbre económica, las medidas que están poniendo en marcha los gobiernos para combatir los déficits fiscales, la volatilidad de los mercados y la sobreregulación. En cuanto a los mayores riesgos potenciales para sus negocios, la complejidad de los sistemas fiscales, al aumento de los precios de la energía y de las materias primas o el cambio que está experimentando el comportamiento de los consumidores son los más destacados.

Estrategias para crecer en un entorno volátil¿Qué están haciendo los primeros ejecutivos mundiales para enfrentar la ya prolongada crisis? Aquí las recetas son comunes para todos los CEOs que, fundamentalmente, se están centrando en tres tipos de acciones. En primer lugar, están apostando por oportunidades de negocio y nichos de mercado muy concretos que les permitan maximizar y rentabilizar al máximo sus inversiones.

En segundo lugar, se están centrando en los clientes y en poner en marcha estrategias que les ayuden a retenerlos y fidelizarlos, adelantándose a sus comportamientos. Destaca que el 80% de los CEOs españoles y el 82% de los mundiales reconocen que deben cambiar de forma inminente sus políticas comerciales. En este ámbito, el uso de las redes sociales se revela como una prioridad. Y, por último, están mejorando la eficiencia de las operaciones de sus compañías.

Oportunidades de negocio y perspectivas de empleoEl 48% de los CEOs españoles, por ejemplo, cree que en 2013 las principales oportunidades de negocio vendrán del crecimiento orgánico de sus empresas en el exterior y de la entrada en nuevos mercados extranjeros. Mientras que un 26% estima que el aumento de sus ingresos vendrá por el lanzamiento de nuevos productos y servicios.

En cuanto a las perspectivas de empleo, la mitad de los

Sólo el 36% de los primeros ejecutivos mundiales encuestados tiene “mucha confianza” en el crecimiento de los ingresos de sus compañías en los próximos doce meses. Respecto a la marcha de la coyuntura económica mundial, la percepción es parecida: el 52% de los CEOs considera que ésta permanecerá igual en 2013, un 28% que empeorará y solo un 18% estima que mejorará.

Los altos directivos españoles son partícipes de esta opinión. Un escaso 20% –16 puntos menos que sus colegas mundiales–, asegura tener “mucha confianza” en la evolución de sus negocios este año. Un 44% prevé que la situación económica siga igual y un 34% espera que empeore. Esto sitúa a nuestros CEOs entre los más pesimistas, junto con los de otros países de nuestro entorno como Italia o Francia.

El documento, por primera vez, clasifica a las principales economías del mundo en cuatro grandes grupos en función del crecimiento medio esperado para el bienio 2013-2015. El primero de ellos está integrado por los países en crecimiento pero con riesgos de desaceleración, entre los que se encuentra Estados Unidos, Alemania, Francia, Reino Unido o Japón.

ejecutivos españoles –el 25% de los mundiales– afirma haber reducido su plantilla en 2012 y un 48% de nuestros CEOs –por el 23% de los mundiales- reconoce que seguirá haciéndolo en 2013. En menor medida, menos del 10% de empresas lo hacen de forma explícita bajo dicha nomenclatura. Asimismo, existen diferencias significativas entre los elementos que conforman el modelo de negocio entre unas empresas y otras.

En el segundo, formado por aquellos estados que está luchando por que sus economías emprendan esta senda, se encuentran España, Italia, Portugal y Grecia. Un tercero, lo componen Indonesia, Brasil y Sudáfrica, que crecen a buen ritmo y se que estima aceleren ese crecimiento. Y, por último, un cuarto grupo, integrado por países con economías que están creciendo pero están en fase de desaceleración, como China, India o Arabia Saudí. Las opiniones se tornan más optimistas cuando hablamos del largo plazo donde los primeros espadas tanto mundiales como nacionales se muestran mucho más esperanzados y esperan claramente que en los próximos tres años la situación económica mejore.

Preparados para lo imprevisible

La confianza de los CEOs en la evolución de los negocios, estancada

Los CEOs de todo el mundo coindicen en señalar el cambio radical que ha sufrido el entorno en el que se mueven sus compañías y reconocen que se enfrentan a más amenazas y que estas son más complejas que nunca. Por eso, entienden que deben gestionar estos riesgos de forma distinta a como lo han venido haciendo hasta ahora.

La confianza de los presidentes y consejeros delegados tanto mundiales como españoles en el crecimiento de sus negocios y de la economía seguirá estancada en 2013. Si hablamos del largo plazo –tres años– las expectativas mejoran.

Por decimosexto año consecutivo PwC ha presentado en el World Economic Forum de Davos su Encuesta Mundial de CEOs. El informe recoge la opinión de 1.330 presidentes y consejeros delegados de 68 países de todo el mundo –50 españoles– sobre el futuro de la economía, de sus negocios y de cómo crecer en un entorno tan volátil.

Informe completo

También puedes descargarte el pdf completo con la decimosexta Encuesta Mundial de CEOs de 2013 con el código QR que encontrarás en la contraportada de este documento.

% de CEOs que asegura tener mucha confianza en el crecimiento de sus negocios en 2013 (por países)

Evolución del % de los CEOs que asegura tener mucha confianza en el crecimiento de sus empresas (2010-2013, españoles vs mundiales)

Principales amenazas políticas y económicas (CEOs españoles vs CEOs mundiales)

Principales amenazas de negocio (CEOs españoles vs CEOs mundiales)

Incertidumbre económica

Complejidad de los sistemas fiscales

Precio de la energía y de las materias primas

Cambio en el comportamiento de los consumidores

españa

mundial

contestaciones ceos mundiales

españa

global

global

Medidas de los gobiernos contra el déficit fiscal

Sobreregulación

Volatilidad de los mercados

Qué países considera más importantes para el crecimiento de sus negocios

88%

82%

60%

64%

81%

71%

69%

61%

72% 62%

68% 52%

62% 49%

Rusia 66%

Alemania 31%

Italia 21%

Reino Unido 22%

EEUU 30%

EEUU

Brasil

ChinaAlemania

México 62%

Brasil 44%

India 63%

China 40%

Japón 18%

Corea 6%

Francia 13%

España 20%

2010 2011 2012 2013

31%

48%

40%

36%

23%

31% 30%

20%

españa

contestaciones ceos españoles

23%22%

15%

18%31%

32%

PwC ayuda a organizaciones y personas a crear el valor que están buscando. Somos una red de firmas presente en 158 países con más de 180.000 profesionales comprometidos en ofrecer servicios de calidad en auditoría, asesoramiento fiscal y legal y consultoría. Cuéntanos qué te preocupa y descubre cómo podemos ayudarte en www.pwc.es

© 2013 PricewaterhouseCoopers S.L. Todos los derechos reservados. “PwC” se refiere a PricewaterhouseCoopers S.L, firma miembro de PricewaterhouseCoopers International Limited; cada una de las cuales es una entidad legal separada e independiente.

Escanea este código QR con tu smartphone para tener más información sobre la Encuesta Mundial de CEOs o accede a www.pwc.es

• Los CEOs coinciden de forma unánime en el cambio radical que ha sufrido en los últimos años el contexto en el que se mueven sus compañías, marcado por la volatilidad y por el impacto en sus negocios de acontecimientos imprevisibles.

• La incertidumbre económica, las medidas que están poniendo en marcha los gobiernos para combatir los déficits, la complejidad de los sistemas fiscales o el aumento de los precios de la energía y de las materias primas, entre las principales amenazas para los primeros ejecutivos.

• Las estrategias de los CEOs para intentar crecer en el momento actual se están centrando en apostar por oportunidades y nichos de negocio muy concretos, en retener y fidelizar a sus clientes intentando adelantarse a sus comportamientos y en mejorar la eficiencia de sus operaciones.

• Los presidentes y consejeros delegados tanto mundiales como españoles son pesimistas sobre la evolución de sus negocios y de la economía mundial en 2013. Las

perspectivas mejoran cuando se les pregunta por el largo plazo –tres años–.

Las claves

www.pwc.es

Gestionar lo imprevisibleLas estrategias de los CEOs para crecer en un entorno volátil

Resumen ejecutivoDécimosexta Encuesta Mundial de CEOs. Foro Económico Mundial de Davos

Contacto

Carlos MasPresidente de PwC Teléfono: 915 684 [email protected]

www.pwc.co.uk/ceosurvey

Dealing with disruptionAdapting to survive and thrive

16th Annual Global CEO SurveyCountry Summary: Key findings in the UK

January 2013

2 PwC 16th Annual Global CEO Survey – Country Summary: the UK

Leaders and their organisations are now operating in a world where uncertainty and volatility have increased to unprecedented levels, and economic growth varies widely between countries and regions. It’s against this background that we have conducted our 16th PwC Annual Global CEO Survey.

Our study shows that UK CEOs have been focusing on short term challenges; that they expect economic difficulties to continue, and that they are concerned with building resilience into their organisations–both to meet those challenges and seize future opportunities.

Resilience combines a short-term ability to ride out the immediate impact of shocks, with the flexibility to ‘future-proof’ the organisation by adapting, over the longer term. Resilience is a quality that’s becoming ever more important in today’s highly connected world, where previously isolated risks have become both contagious and commonplace.

In this context, our study highlights three priorities that UK CEOs are intending to focus on: first, reshaping their operations for growth in a changing world; second, building– and in some cases re-building–relationships and trust, and finally, finding and keeping the talent they need to succeed.

This year’s research covers more than 60 countries and includes the views of over 1300 CEOs, as well as many PwC specialists, providing valuable insights which we hope will stimulate debate over the coming months.

Ian Powell Chairman and Senior Partner

Foreword: The hunt for growth and resilience

Ian Powell

Chairman and Senior Partner

Our study highlights threethemes on which UK CEOs saythey want to focus their attention:

1. Reshaping their operations for a changing world.

2. Building – and in some cases re-building – relationships and trust with stakeholders.

3. Finding and keeping the talent they need to succeed.

PwC 16th Annual Global CEO Survey – Country Summary: the UK 3

Reshaping for a changing worldAcross the globe, profound structural changes are creating a new world order. With the European economy largely flat and the US remaining fragile, opportunities to expand are concentrated in growth markets. UK CEOs are actively reshaping their businesses for this, with three-quarters anticipating changes in their company’s organisational structure over the coming year.

Some 83% plan cost-reduction initiatives in 2013, well above the global average. Strategic deals are also on the agenda, with over half of UK respondents having entered a new strategic alliance or joint venture in the past year, and 60%–the highest proportion in Western Europe–planning to do the same in the coming year.

While 30% are contemplating cross-border M&A, a much higher proportion are planning a domestic deal – 43% of UK CEOs, compared to a Western European average of just over a quarter and just 11% in Germany. This suggests that UK businesses see more opportunity than their European counterparts to generate growth in their mature–and currently subdued–home market.

However, it may also be a signal that UK CEOs are more concerned about the risks associated with overseas acquisitions or are struggling to find acceptable international targets. Either way, the focus on the low growth home market is perplexing. This overly domestic focus is borne out by the fact that only a third of UK CEOs say China’s GDP growth rate falling below 7.5% would be bad news for their business. This is a far lower proportion than in Germany, which has more exposure to China’s economic fortunes through higher exports and more China-based operations.1

Also, at a time when the UK Government is encouraging businesses to invest in innovation to drive high-value exports, UK CEOs are half as likely to name R&D as a top three priority over the next 12 months as Western European CEOs (17% versus 41%). And only half of UK CEOs say they intend to increase R&D capacity over the coming year, compared to two-thirds of German and three-quarters of French CEOs. Instead, UK CEOs say they’re keener to invest in growing their customer base and improving operational effectiveness.

The challenge is to understand how and where UK businesses will generate growth in the future. Our experience shows that many recognise the need to be present in fast-growth economies, but end up targeting the UK, US or Western Europe because these markets are more familiar and promise returns on investment within a shorter timeframe. We believe sustainable, longer-term growth requires a longer-term view. Additionally, with many

1 Source: PwC UK Economic Outlook November 2012, page 26

Figure 1: Priorities for UK CEOs over the next 12 months

Q: What are your top 3 investment priorities in the next 12 months?

Base: All UK CEOs (63) Source: PwC 16th Annual Global CEO Survey

Lower R&D may point to a shorter-term view

“For some time, there have been signs that business leaders have become increasingly short-term in their outlook. Risk aversion and scepticism about the benefits of R&D have institutionalised a cycle of lowered expectations that looks more to quarterly performance rather than a longer-term view of where new growth might come from. These figures suggest that short-termism is now entrenched in the minds of UK business leaders.”Norman Lewis, Director, PwC

New M&A /joint ventures /

strategic alliances

Fillingtalent gaps

Enhancingcustomer service

Growing yourcustomer base

Improvingoperational

effectiveness

CEOs often in the position for shorter terms, the role company boards and strategy teams play in supporting longer-term change is a vital one.


Events over the past few years appear to have undermined trust in public and private institutions. Against this background, an ability to establish trust among all stakeholders is a vital part of the resilience companies need to foster. This is underlined by the fact that regulators now talk openly about changing the ‘culture’ of organisations – reinforcing the view that companies need to focus on cultures and behaviours alongside policies, procedures and mission statements.

UK CEOs score higher than most other CEOs on the intention to build a framework to support a culture of ethical behaviour over the next year. However, 60% of UK CEOs say they’re not concerned about trust in their own industry. One area where trust appears to be under strain is executive remuneration. But while 60% of UK CEOs admit that executive incentive pay structures are too complex, only three in ten say they’re taking action to change them.

CEOs that actively engage in building and sustaining trust may find that they will help to create and sustain longer-term value for all stakeholders.

Widening stakeholder relationships

“A few years ago, Imperial would have seen shareholders as the key stakeholder, and almost the only stakeholder we really focused on. It’s absolutely valid and right for a plc to focus on driving shareholder returns, but the reality is you do that through focusing on other stakeholders. That’s the key shift that we’ve made over the last couple of years: if we want to drive those shareholder returns we’ve got to get other stakeholders right. That means changing our approach in terms of our employees, in terms of our customers and in terms of our suppliers.” Alison Cooper, CEO, Imperial Tobacco Group

Figure 2: CEOs strengthening their engagement programmes with users of social media

Q: For those stakeholders with some or significant influence, to what extent are you strengthening your engagement programme?

Base: All CEOs in those countries with who say social media has some/significant influence on their business strategy (UK=35, US=89, Spain=30, Japan=75, China & HK=61, India=42) Source: PwC 16th Annual Global CEO Survey

Building relationships and trust

Spain India

China and HK

USJapan

UK


Social media changes the game with consumers

“Leaders who recognise how their relationship with consumers has changed forever also know that data is the ingredient that will help them thrive.”Matthew Tod, Partner, PwC

Virtually all UK CEOs talk about strengthening their organisation’s engagement with customers, and 87% are planning to change their strategies for customer growth, retention and loyalty. At the same time, 91% – against a global average of 78% – are seeking to strengthen their engagement programmes with users of social media.

However, establishing the right approach to reputation management in the age of social media and rising transparency is a major challenge. In its Global Risks 2013 report, the World Economic Forum highlights the rising threat from ‘digital wildfires’ that can turn local events into global corporate crises in a few hours. Companies need to understand how to manage such risks whilst using the insights social media provides to build competitive advantage.

Our experience shows that the companies that make the most effective use of social media tend to do two things. First, they use social networks not as a one-way communications channel, but as a forum for hosting dialogue, learning, and seeing themselves from their stakeholders’ point of view. Second, they use it not just to react to events, but also to monitor, anticipate and head off future issues.


UK CEOs portray themselves as custodians of a reliable pipeline of future leaders, with 84% claiming to have an active succession planning programme in place. And nine out of ten say their strategic decision-making processes involve managers below board-level, the highest proportion of any major economy, bar the US.

However, there seem to be challenges here. The availability of key skills remains a concern for two-thirds of UK CEOs, higher than anywhere else in Western Europe.

In addition to this, a similar proportion are planning to increase investment in building a skilled workforce over the next three years, while an even higher proportion – 83% – see a need to change their talent management strategies in the next year. This seems to indicate that while UK CEOs voice a deep commitment to developing people, many organisations are still finding it difficult to implement and enforce the right strategy to ensure an effective talent pipeline.

Another reason why organisations may be struggling to develop the talent they need is because they oversee fewer dedicated executive development programmes than the global average, and are much less likely to actively encourage future leaders’ global mobility and international experience.

When asked what should be the Government’s priorities for business, four out of five CEOs point to creating and fostering a skilled workforce– the highest response rate in any country surveyed, and well above the global average of 57%.

These findings may be a reflection of the worrying tendency for some UK companies to take a short-term view and stay in their comfort zone, or look to government to drive talent strategies. Skills and talent are the lifeblood of the UK’s economic future–and smarter, more forward-looking companies will invest in them.

The need to invest in skills

“In the US and the UK, the statistics on the number of kids doing science, technology, engineering and maths show that we’re not creating enough people with the necessary skills today to fuel the industry in the future. So an awful lot of work has to be done by companies like ours to ensure understanding of the jobs and rewards that are there, to keep people doing subjects that, in both the US and the UK, they view as harder.” Steve Holliday, CEO, National Grid Group Plc

Finding talent, developing talent

Figure 3: The leadership pipeline

Q: Do you deploy any of the following to develop your leadership pipeline?

A. Shadowing senior executives B. Rotations to different functions/challenges

C. Encouraging global mobility and international experience

USFranceUKGermany

Base: All CEOs in those countries (UK=63, Germany=36, France=38, US=167) Source: PwC 16th Annual Global CEO Survey


As UK CEOs attempt to build greater resilience in their organisations, they must also scour the horizon for new sources of growth. When asked which non-domestic market is most important to their overall growth prospects next year, UK CEOs put the United States first at 24%, followed by China (19%), Germany (11%) and France (11%).

This represents a slightly more dispersed focus than last year, when 40% cited the US, with China and Germany equal second on 26%. UK CEOs in this year’s survey also quote a wider variety of other markets, such as Singapore and the UAE. But a greater proportion also said they were unsure where to look.

It’s against this changing backdrop that companies need to build a platform for future global growth. Currently, UK CEOs have a tendency to look closer to home, with 38% – a higher figure than in any other major Western European country – citing organic domestic growth as their main opportunity to expand. Only 14% regard organic growth in an existing foreign market as the key opportunity, against 36% of German and 37% of French CEOs.

These findings may be influenced by the markets in which companies have ‘existing’ operations: for example, over a third of German firms have operations in East Asia, against only 14% of UK companies. This disparity

Looking forward: the hunt for growth

Figure 4: This year’s global investment priorities

Q: Which one of these do you see as the main opportunity to grow your business in the next 12 months?

Base: All respondents (1,300) and All CEOs in those countries (UK=63, Germany=36, Russia=41, Brazil=45, China & HK=132, US=167) Source: PwC 16th Annual Global CEO Survey

should be of critical interest both to the UK business community and government. However, more positively, UK companies’ stronger presence in markets such as the Middle East and Australasia suggests they can close the gap if they commit themselves to doing so.

The opportunity to build revenues in growth markets is underlined by the confidence of companies based in them. In Western Europe (including the UK), around one-third of CEOs are ‘very confident’ over revenue growth for the next three years. However, the proportion of Mexican CEOs voicing strong confidence over future revenue growth however is 61%, rising to 79% across Africa, and an overwhelming 85% in India. The long-term impact

0

10

20

30

40

50

60

70

Global Total

Russia

Brazil

US

China & Hong Kong

UK

Germany

Improvingoperational

effectiveness

Implementingnew technology

Growing yourcustomer

base

Filling talent gaps

New M&A / joint ventures /

strategic alliances

Enhancingcustomerservice

Securing rawmaterials orcomponents

Manufacturingcapacity

R&D andinnovation

%


Global economic shifts

“The shift in the global economic centre of gravity is clear; but there are still major challenges for the emerging economies to sustain their recent strong growth. At the same time, there are huge opportunities for Western companies in the emerging markets – but also great competitive challenges from fast-growing emerging market companies.

of such differences is reflected in the latest update of PwC’s ‘World in 2050’, which has E7 counties overtaking G7 in terms of purchasing power just four years from now, and in absolute GDP terms before 2030.

For UK businesses seeking growth, these shifts encapsulate both the challenges and the opportunities ahead. How long will current uncertainties persist? How reliably can they look forward, and how far? Where should they target growth, and why? UK businesses have been concentrating on survival, but the route to growth will mean embracing change, resilience, and extending their plans over the longer term.

Figure 5: Where UK firms have key operations

Q: In which regions does your business have key operations?

Latin America

WesternEurope

South-East Asia

Africa

Middle East

North America

South Asia

Central andEastern Europe/Central Asia

East Asia

Australasia

Base: All UK CEOs (63) Source: PwC 16th Annual Global CEO Survey

UK businesses are relatively strong in the kind of tradable services that may grow strongly in future decades due to rising demand from the BRICs and other emerging economies – such as creative industries, business and financial services, university education and healthcare/pharmaceuticals. So we should see the rise of these emerging markets as an opportunity to be grasped for UK business rather than a threat.”John Hawksworth, chief economist at PwC




The Design Group PwC UK 21352

Key contacts

Further reading

For further information on the survey content, please contact:

Vicki Boaden PwC UK Client & Market Development +44 20 7212 6621 [email protected]

For media related enquiries, please contact:

Derek Nash PwC Media Relations +44 20 7804 3058 [email protected]

UK Economic outlook - November http://www.pwc.co.uk/the-economy/publications/uk-economic-outlook/ukeo-november-2012-full-report.jhtml

The World in 2050http://www.pwc.co.uk/the-economy/issues/the-world-in-2050.jhtml

www.pwc.co.uk/ceosurvey

2013 US CEO Survey Creating value in uncertain times

16th Annual Global CEO Survey 2013

US Executive Summary

The experiences they will be able to pass on to the next generation will shape a new perspective on the importance of resilient leadership through uncertainty. “Persistent,” “ethical” and “pragmatic” were the words many CEOs used to describe traits of historical leaders they most admire.

I would like to thank all who participated in the survey, particularly the CEOs who took the time to sit down with us to share their perspectives on the opportunities and challenges businesses are facing today. Their insights greatly informed our survey, and you can view our interviews with them, along with the full report, at www.pwc.com/usceosurvey.

Bob Moritz US Chairman, Senior Partner PwC

Overview

US CEOs in our 16th Annual Global CEO Survey are showing less confidence for growth in the next year but are optimistic about the longer-term horizon. They are far more confident in their company’s ability to navigate through the anticipated volatility expected over the next three years.

As you’ll discover in our report, today’s CEOs are focused on building resilient organizations. They’re setting the foundation for long-term growth by finding new ways to extend their competencies. They’re sharing value as well as risks as they increasingly operate within networks of alliances and partnerships.

Half of the 167 US CEOs participating in our survey have been heading their company for less than five years. The operating environment over the past few years has been unlike anything seen before, so this group has admittedly learned a lot—and gained a lot, too.

www.pwc.com/usceosurvey

Leaders most admired by US-based CEOs

We asked CEOs, “As a leader, can you share an example from literature or history where someone exhibited good leadership? What did you admire about their actions?” These leaders topped the US CEOs’ list.

Base: 130. Source: PwC, 16th Annual Global CEO Survey, January 2013. #1 Winston Churchill

“He explained the reality of what people faced and he mobilized them to deal with it.”

Nelson Mandela

“Excellent moral leadership, a skill that has been lost or forgotten in the new era.” —Australian CEO

#2 Abraham Lincoln

“He understood the greater good and he understood the bigger picture.”

#3 Ronald Reagan

“His mantra—‘trust, but verify’—is a very good leadership skill.”

Leaders most admired by CEOs globally

1. Winston Churchill

2. Steve Jobs

3. Mahatma Gandhi

4. Nelson Mandela

5. Jack Welch

6. Abraham Lincoln

7. Margaret Thatcher

8. Ronald Reagan

9. John F. Kennedy

10. Napoleon Bonaparte

Base: 1,351. Source: PwC, 16th Annual Global CEO Survey, January 2013.

116th Annual Global CEO Survey 2013—US Executive Summary

The additive effect of a decade’s worth of volatile global growth cannot be under-stated. Short-term confidence is faltering: A third of US CEOs are ‘very confident’ their companies will see revenue growth over the next 12 months, down from 41% in 2012. Of course, CEOs have historically been less bullish about short-term prospects;

2013 is shaping up as a pivotal year. CEOs are redirecting investments and strategies against a backdrop of global fiscal and economic uncertainties. They are honing approaches, focusing on organic growth, their customers, and operational effectiveness. Here’s what the 167 US-based CEOs tell us they’re doing to adjust—and to set the foundation for new growth.

#1 Building resilience to disruptionExpect more strategic alliances and partnerships this year. CEOs are seeking to increase their companies’ ability to swiftly respond to demand changes by collaborating with partners more closely or by diversifying to best ensure uninterrupted business operations through a range of scenarios.

#2 Taking the home-field advantageLook for a sharpened focus on the US market this year. CEOs are planning to consolidate advantages on their home turf. They’re considering domestic deals, and 41% see expanding their customer base in the US as the main avenue for growth in 2013.

#3 Siding with the customerExpect interest in predictive analytics and other customer-oriented strate-gies to keep growing. CEOs are setting the customer as their beacon to build businesses that last. Getting the right read on changing customer demands will help on a number of fronts: where manufacturing is located; where to consider acquisitions; how to spend precious R&D funds; and where to form alliances to extend competencies.

Confidence falters for US CEOs

How confident are you about your company’s prospects for revenue growth over the next 12 months? Over the next three years?

Next 12 months

Next 3 years47%

54%

30%

19%

Next 3 years(2012 survey)

3%

7%

Not confident about prospects of revenue growth

Very confident about prospects for revenue growth

US CEOs

Bases: US 2012: 161; 2013: 167. Sources: PwC, 15th Annual Global CEO Survey, January 2012; PwC, 16th Annual Global CEO Survey, January 2013.

Creating value in uncertain times

according to our survey, confidence in near-term growth has only surpassed 50% twice in the past decade—in 2008 and 2007.

Push out the horizon three years, and CEO spirits revive. They are far more confident in their companies’ ability to navigate the anticipated volatility.

PwC2

Growth How prepared are we for greater competition in the US market?

4 Talent How will we foster the next generation of leaders in our company?

12

Deals How can we take advantage of a potentially healthier deals market in 2013?

6 Customer focus How can we more effectively put our customers at the center of our growth initiatives?

13

Risks What can we do to make our company more resilient to significant and unpredictable risks?

7 Sustainability What more can we do to prepare for global constraints on critical natural resources?

14

Tax How can we forge ahead amid uncertainty about tax and regulations?

9 Social media Do we really *like* social media? 16

Operations What are the most important transformations in operations that our company needs?

10 Cybersecurity How do we get to a place where cyberattacks are less of a threat to our network?

17

Supply chain How can we shore up our supply chain so that it’s better able to withstand disruptions?

11


Based on what we heard in the 16th Annual Global CEO Survey, these are some of the questions US CEOs will be asking themselves and their management teams as they pursue growth in the year ahead. PwC surveyed 167 business leaders based in the US. We’ve grouped their responses into the following issues.

US CEO agenda for 2013

How prepared are we for greater competition in the US market?

Two goals head the growth agenda in 2013 for many US CEOs: capturing more share in existing markets, whether in the US or internationally, and making greater use of acquisitions or strategic alliances to advance that aim.

What has changed? Just a year ago, US CEOs saw growth drawn more evenly across a range of potential opportunities. Surely, weak prospects for Europe

(where 47% of US CEOs said they have key operations) and less clear growth trajectories in some fast-growing econo-mies matter. As does increasing competi-tion in international markets. For example, this year, a higher percentage of German CEOs said that China became a more important market than the US.

Yet the range of potential outcomes in the US factor in, too. Tilting positively

US CEOs see US market expansion as primary growth driver in 2013

What do you see as the main opportunity to grow your business in the next 12 months?

Organic growth in existing domestic market

New M&A/joint ventures/strategic alliances


Organic growth in existing foreign market


41%

22%

17%

16%

4%

Increased share in existing markets


New geographic markets

Mergers and acquisitions

New joint ventures and/or strategic alliances

38%

26%

16%

13%

6%

2012 2013

Note: There were variations in the survey question from year to year. Base: 2012: 161; 2013: 167. Sources: PwC, 15th Annual Global CEO Survey, January 2012; PwC, 16th Annual Global CEO Survey, January 2013.

When people ask me what’s going to happen in the next five years, I throw up my hands and say, ‘I have no idea and neither do you.’ How do you cope with that degree of uncertainty? Well, I think first by having the right attitude about the process of change and reinvention. And second, is by forming partnerships, collaborations and alliances with other like-minded companies that have something to contribute beyond what you can provide.—Peter Tortorici, CEO, GroupM Entertainment Global

is a fledgling housing recovery and the shale gas revolution.1

It bears repeating: International markets are crucial to CEOs no matter where they are based. Foreign revenue now accounts for around 40% of total revenue for global companies.2 And sources of global growth

1 PwC, Shale Gas: A renaissance in US manufacturing? 2011

2 MSCI Global Index.

Growth

4 PwC

http://www.pwc.com/en_US/us/industrial-products/assets/pwc-shale-gas-us-manufacturing-renaissance.pdf

and investment flows have been shifting for some time, with the 2008 financial crisis accelerating the trend. China, India and Brazil will together add around $1 trillion to the world economy in 2013.3

Over the next three years—as global competition intensifies—CEOs will need to develop a keener sense of what will drive growth and how to create sustainable busi-nesses.4 That is perhaps what has changed for CEOs the most.

3 PwC, Global Economy Watch, January 2013.

4 PwC, Growth in new markets: It’s all about how, 2012.

China still #1, but German, Canadian and Mexican markets rise in importance for US CEOs

Which three countries, excluding the US, do you consider most important to overall growth prospects over the next 12 months?

China 48%

Brazil 24%

India 17%

UK 16%

Germany 12%

Canada 11%

Mexico 9%

China 41%

Brazil 21%

Germany 21%

Canada 20%

UK 15%

India 13%

Mexico 13%

2012 2013

Base: 2012: 161; 2013: 167. Sources: PwC, 15th Annual Global CEO Survey, January 2012; PwC, 16th Annual Global CEO Survey, January 2013.

This is the manufacturing heartland. It always has been, and if we can develop [shale gas] resources and take advantage of them, we have an opportunity to see real and sustained growth, not only from an economic development standpoint across all sectors—residential, commercial, as well as industrial—but the spin off that flows from additional manufacturing in this area. This is the greatest opportunity we’ve had in years in this country to reposition ourselves again as a leader in manufacturing and in advanced technologies.—Anthony Alexander, President and CEO, FirstEnergy, Oct. 5, 2012


http://www.pwc.co.uk/economic-services/global-economy-watch/january-2013-summary.jhtml

http://www.pwc.com/en_GX/gx/consulting-services/globalisation/assets/pwc-globalisation-growth-in-new-markets.pdf

US CEOs are more intent on M&A in 2013 than their global peers, and they’re concen-trating on consolidation and expansion in the US market. Consider that 42% of US CEOs said they’re planning to complete a domestic deal this year. It will mark a significant uptick if they’re able to deliver: 30% said they completed a domestic deal in 2012.

The US deals market, while in better shape than some markets elsewhere, remains restrained. Increasing interest in strategic alliances is a factor,1 yet the fundamentals for growth in the deals market are in place. Interest rates are low and over $1 trillion in cash sits on corporate balance sheets.

1 PwC, Navigating Joint Ventures and Business Alliances, 2012.

How can we take advantage of a potentially healthier deals market in 2013?

Fiscal and economic uncertainties loom large, yet there are some sector-specific shifts in play that may drive activity. Sweeping reforms in the Affordable Care Act are likely to spur consolidation as healthcare revenue models change.2 Another example: Financial services companies continue to pursue divestitures to bolster capital levels and unlock asset value.

In fact, divestitures have been important—representing around a third of deal volume in 2012—and they are expected to retain a prominent strategic position in 2013 for US and European CEOs. Companies are tapping into a variety of exit options in this market.3

CEOs based outside North America are a second source for US activity: 30% of global CEOs said they plan an acquisition or alliance in North America, led by phar-maceuticals & life sciences (52%); power & utilities (44%); transportation & logistics (42%); and technology CEOs (39%).

2 PwC, Health reform re-elected: ACA implementation in tough fiscal times, 2012.

3 PwC, Corporate exit strategies: Selecting the best strategy to generate value, 2012.

We’re about a $1.5 billion system right now. To compete in this market, we need to probably be in the $3 to $5 billion dollar range … Therefore, one would think that consolidation is something that will likely occur, just as it is occurring in many other places across the country.—Dr. Larry Kaiser, President and CEO, Temple University Health System

Domestic deals, alliances on 2013 agenda for US CEOs

Which, if any, of the following restructuring activities have you initiated in the past 12 months? Plan to initiate in the coming 12 months?

Completed dealsin 2012

Planning dealsin 2013

Domestic M&A

US CEOs

30%

23%

25%

42%

42%

28%

22%

57%

24%

19%

19%

36%

28%

26%

15%

47%

Cross-border M&A

Divestitures/market exits

New alliances/JVs

Global CEOs

Base: US: 167; Global: 1,330. Sources: PwC, 15th Annual Global CEO Survey, January 2012; PwC, 16th Annual Global CEO Survey, January 2013.

Deals

6 PwC

http://www.pwc.com/en_US/us/transaction-services/publications/assets/pwc-navigating-joint-ventures-and-business-alliances.pdf

http://www.pwc.com/en_US/us/transaction-services/publications/assets/pwc-navigating-joint-ventures-and-business-alliances.pdf

http://www.pwc.com/us/en/health-industries/publications/affordable-care-act.jhtml

http://www.pwc.com/us/en/health-industries/publications/affordable-care-act.jhtml

http://www.pwc.com/en_US/us/transaction-services/assets/pwc-corporate-exit-strategies.pdf

http://www.pwc.com/en_US/us/transaction-services/assets/pwc-corporate-exit-strategies.pdf

US CEOs recognize they’ll have to work around a flock of new risks, from global debt burdens to social media scrutiny. Growth strategies should factor in how government policies could shock the economy—90% of US CEOs worry about uncertain or volatile economic growth, a greater share than their global peers. In their view, potential outcomes for 2013 are wide-ranging. On average, CEOs expect more than one major risk event to occur.

The future increasingly depends on unpredictable risks far beyond core operations—financial meltdowns or cyber breaches, to name two. Scenario testing offers one example of concrete measures some business leaders are taking to better understand where their companies’ vulner-abilities lie.

What can we do to make our company more resilient to significant and unpredictable risks?

US CEOs rate a wide range of possible high-impact risks

How likely are the following scenarios to occur? And how would your organization cope with the following scenarios if they happened within the next 12 months?

0% 10% 20% 30% 40% 50%

40%

60%

80%

100%

CEOs who think it’s likely to occur

CE

Os

who

thi

nk it

’s li

kely

to

have

neg

ativ

e im

pac

t

China’s GDP growthfalling below 7.5%China’s GDP growthfalling below 7.5%

Recession in the USRecession in the US

Cyberattack ormajor disruptionCyberattack ormajor disruption

Military or tradetensions affectingaccess to naturalresources

Military or tradetensions affectingaccess to naturalresources

Natural disaster disrupting a majortrading/manufacturing hub

Natural disaster disrupting a majortrading/manufacturing hub

Break-upof the EurozoneBreak-upof the Eurozone

Health crisisHealth crisis

Major social unrestin the country in whichyou are based

Major social unrestin the country in whichyou are based

Base: 167. Respondents who stated ‘likely to occur’ and respondents who stated ‘it would have a negative impact.’ Source: PwC, 16th Annual Global CEO Survey, January 2013.

I don’t think that organizations that are slow to adjust and that are reactive are going to thrive in the years ahead. So we are going to invest time, resources and attention to become a more innovative organization, and to do it quickly. —Steven H. Lesnik, Chairman, President and CEO, Career Education Corporation

Risks


Another comes from the modern, flexible supply chain—one area of operations that has been tested heavily in recent years. Companies are now working more closely with a range of supply chain partners to ensure they can quickly scale up or down in response to sudden changes in demand.1

Agility requires thinking about the system, not just the enterprise. US CEOs are responding by engaging more broadly across sprawling networks. More than half

1 PwC, 10Minutes on supply chain flexibility, 2013.

We need to find a way to create trust so that we can look beyond the next year. We need to create confidence and a partnership between government and business, so that CEOs worldwide and their leadership teams put that money into capital expenditures and people and building better opportunities for the future. Because buying back your shares is only a short-term solution. It does not solve the long-term growth that is necessary to have a high-performing stock.—Larry Fink, Chairman and CEO, BlackRock, Inc.

of US CEOs said their strategies are influ-enced by local communities, users of social media, industry competitors and peers, governments and regulators, as well as those closer to their operations. They also plan to strengthen engagement with a majority of their influential stakeholders.

These steps all add up to businesses building resilience to move forward and grow in an increasingly uncertain environment.

8 PwC

http://www.pwc.com/en_US/us/10minutes/assets/pwc-supply-chain-flexibility.pdf

Tax issues top US CEO concerns, with almost three-quarters concerned (of which 40% are ‘extremely’ concerned) about how tax reform could potentially slow activity, turn profits into higher tax bills and make them less globally competitive.

Taxes are particularly thorny for global companies. And while much is changing—more countries continue to take steps to ease the tax compliance burden on business1—few CEOs expect overall relief on global tax standards anytime soon. More than two-thirds of US CEOs said that governments are not succeeding in harmonizing global tax and regulatory frameworks.

1 PwC, World Bank and IFC, Paying taxes 2013.

How can we forge ahead amid uncertainty about tax and regulations?

Fiscal policy, tax uncertainties weigh heavily on US CEOs

How concerned are you about the following potential business, economic and policy threats to your growth prospects?



67%

53%

35%

39%

Over-regulation 44% 30%

Increasing tax burden 40% 25%

US CEOs Global CEOs

Base: US: 167; Global: 1,330. Respondents who stated ‘extremely concerned.’ Source: PwC, 16th Annual Global CEO Survey, January 2013.

The global community of regulators—as well as the political classes—are keen on ensuring the stability of the financial system. And that implies a completely new order, a new set of rules to play by. In these cases, it’s not uncommon to wind up in a situation of regulatory overreach.—Piyush Gupta, CEO and Director, DBS Group, Singapore, 16th Annual Global CEO Survey

Yet despite being much more concerned about taxes than their global counterparts, US CEOs are only marginally more likely to take a closer look at their approaches to tax planning and contribution (40% vs. 37% globally).

Keep an eye on tax policy in 2013. Reforms can drive up tax bills, but well-targeted changes can increase business confidence and open new opportunities.

Tax


http://www.pwc.com/gx/en/paying-taxes/key-findings.jhtml

US CEOs continue to keep costs in check. Last year, 81% implemented cost-cutting measures. In 2013, 71% are planning cuts.

In an environment of pricing pressure and slow demand growth, every element of direct and SG&A expense is getting a fresh look. Businesses are redoubling efforts to analyze—and scrutinize—dynamics on many fronts, including customer demand,

labor costs, technology, transportation and regulatory/tax regimes.

Yet CEOs are seeking more from opera-tional leaders than holding the line on costs. They’re also being asked to create value and contribute to growth. Forty-four percent of US CEOs are investing to increase their company’s operational effectiveness.

What are the most important transformations in operations that our company needs?

Underlying every business model is an operating model that marshals assets, partners, technologies and systems to actu-ally make things happen. Thus CEOs seek opportunities for competitive advantage in their operating models to offer customers more and to do so at a lower cost.

Such opportunities lie in core processes like product innovation, supply chain and service delivery; or in transforming corpo-rate functions like procurement, tax and marketing. Leading companies take a global view, and some are seeing performance gains from setting up a global business services structure that integrates functions and focuses them on customer needs.1

1 PwC, 10Minutes on creating value from Global Business Services, 2012.

Fast pace of strategic change drives cost agenda for US CEOs

To what extent do you anticipate your company’s strategy will change over the next 12 months? Any of the following areas over the next 12 months? Which, if any, restructuring activities do you plan to initiate in the coming 12 months?

61% expect some level of strategic change in their companies in 2013

68% anticipate changes to their company’s organizational structure

29% plan to outsource a business process or function

17% plan to “insource” a previously outsourced business process or function

Base: 167. Source: PwC, 16th Annual Global CEO Survey, January 2013.

I see more movement toward looking at population health management and the fact that we need to learn how to manage the chronic diseases in a population, which account for so much of the healthcare dollar.—Joel Allison, President and CEO, Baylor Health Care System

Given that the global economy and the global pace of life are getting faster in all aspects, one needs to become more agile and efficient about everything—including running a company. It’s essential that you streamline operations and become leaner wherever you can, so as to be able to react more quickly to changing market conditions.—Anders Nyrén, President and CEO, Industrivärden AB, 16th Annual Global CEO Survey

Operations

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http://www.pwc.com/us/en/10minutes/creating-value-global-business-services.jhtml

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A recent host of factors, including market and demand volatility, the speed of process automation, transparency needs, and even disruptions due to natural disasters have led to questions about what strong supply chain performance looks like. Companies that run the supply chain as a strategic asset want their suppliers to be true partners in helping them cope with the ups and downs.1

In the year ahead, more than half of US CEOs (53%) plan to strengthen engagement

1 PwC, Next-generation supply chains: Efficient, fast and tailored, 2012.

with key suppliers to both minimize costs and maximize supply chain flexibility and delivery performance. Globally, industries most focused on supply chain engagement include industrial manufacturing (84%), consumer goods (80%), energy, oil and gas (79%) and technology (76%).

They’ll have a full agenda. In many cases they’ll be collaborating on delivery issues and requirements to tailor products to different consumer needs; 43% of US CEOs said 2013 will bring more shifts in consumer spending behaviors. Many US CEOs are concerned about energy and

How can we shore up our supply chain so that it’s better able to withstand disruptions?

raw material costs (41%). They’ll be looking at how low-cost options for shale gas change sourcing options, in addition to other benefits of reshoring.2

A more sustainable supply chain is of interest, too. Reducing the company’s envi-ronmental footprint—much of which falls along the supply chain—makes the radar (43%). But sustainability doesn’t come without significant challenges: The use of low-cost and best-cost country sourcing can make it more difficult to control envi-ronmental and social risks.

2 PwC, 10Minutes on US manufacturing resurgence, 2012.

CEOs to strengthen engagement with partners to fortify supply chains against array of risks

How concerned are you about the following potential business, economic and policy threats to your growth prospects?

Uncertain or volatile economic growthAvailability of key skillsProtectionist tendencies of national governments Shift in consumer spending and behaviors Speed of technological change Exchange rate volatilityEnergy and raw material costsInability to protect intellectual property and customer dataInadequacy of basic infrastructureBribery and corruptionSupply chain disruption

US CEOs Global CEOs

90% 81%

54% 58%

47% 51%

43% 49%

43% 42%

41% 54%

41% 52%

36% 34%

27% 35%

24% 41%

23% 35%

Base: US: 167; Global: 1,330. CEOs who responded ‘extremely’ or ‘somewhat’ concerned, select answers shown. Source: PwC, 16th Annual Global CEO Survey, January 2013.

Every crisis is also a learning experience and an opportunity to deepen your crisis management capabilities. But our operations are now scaled so broadly that we have to accept the fact that there are some events that just aren’t predictable. A degree of fragility is part and parcel of the system.—Peter Tortorici, CEO, GroupM Entertainment Global

Supply chain


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Talent availability remains a significant concern for CEOs everywhere. In an age in which companies are increasingly differentiated by the talent they can deploy, this shouldn’t come as a surprise.1

More than half of US CEOs point to the availability of key skills as a potential threat to growth in 2013. With talent widely recognized as central to powering growth, more CEOs are taking action. In fact, nearly three-quarters of US CEOs expect to change their talent management strategies, with 18% prepared to make major changes in the coming year.

To do that, they are willing to commit resources, with 65% of US CEOs planning to invest in creating and fostering a skilled workforce in their home country. But they also don’t expect to do it alone: 68% of US CEOs said building a skilled workforce should be a top government priority. They also believe there’s considerable room for improvement, with only 3% saying that the government has been effective in doing so.

Where else will they focus when it comes to talent? For those who agree employees are important stakeholders, 80% plan to strengthen employee engagement programs. They also are focusing on

1 PwC, 10Minutes on talent priorities, 2012.

developing their leadership pipelines, including active succession planning (89%) and programs to encourage diversity among business leaders (64%). They say that the most effective of these strategies include involving managers in strategic decision-making and active succession planning.

How will we foster the next generation of leaders in our company?

CEOs identify the most effective strategies for managing the leadership pipeline

How effective are the following options at developing your leadership pipeline?

Involving managers below board level instrategic decision-making

Active succession planning includingidentifying multiple successors

Rotations to different functions/challenges

Encouraging global mobility andinternational experience

Dedicated executive development program

Programs to encourage diversity amongbusiness leaders

Shadowing a senior executive

US CEOs Global CEOs

84% 70%

74% 59%

51% 52%

50% 51%

47% 59%

46% 44%

20% 29%

Base: US: 167; Global: 1,330. Respondents who stated ‘very effective’ or ‘somewhat effective.’ Source: PwC, 16th Annual Global CEO Survey, January 2013.

There is clearly a supply-demand issue when it comes to top-level talent globally. Given the demographics, the technology changes that we’re seeing today, and the economic environment in which we’re operating, the supply-demand issue is not going to go away overnight.— L. Kevin Kelly, CEO, Heidrick & Struggles

Talent

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http://www.pwc.com/en_US/us/10minutes/assets/pwc-10minutes-on-talent-priorities.pdf

CEOs are rallying their organizations around the “customer” in 2013. It is the clearest refrain from this year’s survey. This is a top three investment priority for CEOs (63%); expanding their customer base is where more US CEOs believe their main opportunities lie.

What’s different this time? A lot—and US CEOs are signaling they’ll invest time and money to catch up. Nearly half of US CEOs worry that shifts in consumer spending and behaviors threaten their companies’ growth prospects. But this isn’t just about retailers and the intense online competition they face. It’s never been easier for a customer to walk away from an established company relationship, regardless of the industry. Consider that orders for many US contract manufacturers go global from day one. In the power & utilities industry, which until recently had a virtually captive customer base, 80% of senior executives acknowledge that shortcomings in customer engagement could limit the potential impact of smart grid technology.1

Thus ‘getting closer to the customer’ is escalating into putting the customer at the heart of the company. Ninety percent of US respondents said they are

1 PwC, The shape of power to come, 2012.

strengthening their customer and client engagement programs.

In the CEO’s corner are evolving technology tools, such as predictive analysis, that open the door to a deeper understanding of their customers’ behaviors and help to measure success.2 Collaboration initiatives provide another example: Leading companies

2 PwC, “The third wave of customer analytics,” Technology Forecast: Reshaping the workforce with the new analytics, 2012.

How can we more effectively put our customers at the center of our growth initiatives?

CEOs show disparity in customer-centered investment priorities

What are your top three investment priorities over the next 12 months?

0% 20% 40% 60%

US CEOs rankingcustomer as a top threeinvestment priority

Growing yourcustomer base

Enhancingcustomerservice

South Africa

US

Mexico

Africa

Western Europe

Global

Asia Pacific

Japan

China & Hong Kong

Latin America

India

Russia

Brazil

Bases: Western Europe: 312; Asia Pacific: 449; Japan: 162; China & Hong Kong: 132; India: 73; US: 167; Latin America: 165; Brazil: 45; Mexico: 110; Russia: 41; Africa: 48; South Africa: 56. Source: PwC, 16th Annual Global CEO Survey, January 2013.

Some of the key elements in IFF’s success model are based around customer intimacy and consumer insights. It all starts with the consumer—a rich and robust understanding of what they want, where they’re going, but, most importantly, what they want in the future.—Douglas D. Tough, Chairman and CEO, International Flavors and Fragrances, Inc.

configure their supply chains for specific customer segments, adopting collaborative planning with customers and suppliers.

Companies with the strongest customer-centered DNA have CEOs who double as the chief customer officer, in spirit if not in title.

Customer focus


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CEOs investing more to secure natural resources

How strongly do you agree or disagree that the government helps companies secure access to natural resources (e.g., raw materials, water and energy)? How much does your company plan to increase its investment over the next three years to secure natural resources that are critical to business in the country in which you are based?

Agree that the government helps companies secure access to natural resources (e.g., raw materials, water, energy)

Plan to increase investment over the next three years in securing natural resources

20%

52%

17%

35%

Emerging-marketCEOs

Developed-marketCEOs

Base: Emerging-market CEOs: 671; Developed-market CEOs: 659. Respondents who stated ‘Agree’ or ‘Agree strongly’ and who stated ‘small’ increase, ‘some’ increase or a ‘significant’ increase. Source: PwC, 16th Annual Global CEO Survey, January 2013.

Energy is on the radar for US CEOs, with 41% of US CEOs and 52% of global CEOs concerned about rising energy costs as a threat to growth prospects.

Global energy demand is set to grow more than one-third between now and 2035.1 Environmentally, that’s unsustain-able. On this path, not only will green-house gas emissions soar, but energy will become thirstier. Water needed for energy

1 World Energy Outlook 2012, ©OECD/IEA, November 2012.

production is set to grow at twice the rate of energy demand, due to more diversity in the energy supply.2 Add a trend toward greater interactions between fuels, markets and prices, and the result is little immunity from global energy market fluctuations.3

Thus CEOs are intent on securing natural resources now, including energy, water and raw materials. Over the next three years, 35% of developed-market CEOs plan to

2 Ibid.

3 Ibid.

What more can we do to prepare for global constraints on critical natural resources?

Sustainability

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increase investment in securing natural resources, and 52% of emerging-market CEOs said the same.

Beyond securing what they’ll need, CEOs will make energy efficiency and water conservation measures pay off in both cost and reputation; 43% of US CEOs plan to increase efforts to reduce their companies’ environmental impacts.

Other stakeholders—including employees, local communities, govern-ments and supply chain partners—are important, too. Half of US CEOs plan to increase their companies’ focus on a framework to support a culture of ethical behavior. Nearly one-third plan to increase their focus on non-financial reporting, giving stakeholders a better view of the company’s worth and the value it contributes to society.

Environmental and social issues get more CEO attention

How concerned are you about lack of trust in your industry as a threat to your growth prospects? To what extent does your organization plan to focus on the following priorities over the next 12 months?

US

Lack of trust in your industry? Framework to support a culture of ethical behavior


Social enterprise initiatives

Non-financial reporting (including corporate responsibility reporting)

27%

Global

39%

50% 43% 30% 30%

56% 48% 35% 41%

Base: US: 167; Global: 1,330. Respondents who stated ‘extremely’ or ‘somewhat concerned’ and ‘increase our focus somewhat’ or ‘increase our focus significantly.’ Source: PwC, 16th Annual Global CEO Survey, January 2013.

Sustainability is important to our customers, and increasingly it’s become very important to our employees who want to see the company as a highly responsible, sustainable organization. Beyond that, it’s just good business. The triple bottom line of environmental and consumer safety and profitability all come together, and reduced waste generates savings for the company.—Douglas D. Tough, Chairman and CEO, International Flavors & Fragrances, Inc.


Increasingly sophisticated investors, regu-lators and customers reward greater trans-parency. On the other hand, new disclosure rules and viral reaction cycles punish frank talk. What’s a CEO to do?

Opting out of social media is no longer a viable option. Customers, competitors and employees are all participants in a global

flow of information about a company’s brand and industry. And 69% of US adult online users are connected to at least one social media platform.1 Word-of -mouth marketing has turned into instantaneous reviews by customers—56% of consumers say they are more likely to recommend a

1 Social Networking, Pew Internet Project, 2012.

Do we really *like* social media?

brand after “liking” it on Facebook.2 One in three social media users say they prefer to use the platform over the phone for customer service.3

Thus many businesses today are experi-menting with social media, taking steps like embedding digital tools and methods into workflow. The more advanced are social by design, not by reflex. They are converging customer, sales and social data to empower the sales process, using measurement and analytics to improve predictability. The fully engaged are seeing results in increased revenue and loyalty.

CEOs recognize the power of their online dialogues; 53% of US CEOs said social media users influence their business strategy. The viral nature of social media puts company behavior—internal and external—potentially on display. The heightened reputational risk is not lost on business leaders: 50% of US CEOs said they’re increasing their focus on supporting a culture of ethical behavior.

2 10 Quick Facts You Should Know About Consumer Behavior on Facebook, Constant Contact and Chadwick Martin Bailey, 2011.

3 State of the Media: The Social Media Report, Nielsen, 2012.

US CEOs catching up to rise of social media

To what extent do users of social media influence your business strategy?

US CEOs who say social media usersinfluence their business strategy

US adult online users connected toat least one social network

53% 69%

Base: 167. Sources: PwC, 16th Annual Global CEO Survey, 2013; Pew Internet Project, Social Networking, November 2012.

People are communicating differently today, and I think it’s important to stay in touch with the frontlines.—Steve Smith, CEO and President, Equinix, Inc.

Social media

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With intellectual property, trade secrets, financial information and even national security at risk, CEOs and boards are paying more attention to what once was consid-ered an IT issue. Cyberattacks are now a routine part of doing business; among US CEOs, 31% believe a cyberattack or major Internet disruption is likely to occur.

Company leaders are acknowledging that as we’ve become more reliant on informa-tion assets, cyberthreats are an intrinsic part of the digital business ecosystem. And many are also realizing that cybersecurity underpins everything they do—product

and service development, mergers and acquisitions, and operations. Companies that are adopting this new mindset have identified their most crucial information assets and prioritized how they will protect them. They’re considering cybersecurity at the outset of business initiatives. They’re also evaluating responsibility and account-ability, with many installing an executive role or council charged with all aspects of cybersecurity.

They do recognize the potential damage a security breach could inflict, both financial and reputational; 68% of US CEOs said

How do we get to a place where cyberattacks are less of a threat to our network?

that a cyberattack would have a negative impact on their businesses. CEOs of global industries that deal in regulated data are most concerned about the negative impact of cyberattacks, such as banking (77%), power & utilities (73%), healthcare (71%) and communications (71%).

Some CEOs are beginning to view cyberse-curity as an integral part of their business strategy—one that can even bring advan-tage. Some 10% of US CEOs said a cyberat-tack could present an opportunity—not a threat—for their businesses. Only 4% of global CEOs felt the same way.

US CEOs anticipating cyberattacks more than global counterparts

How likely is a cyberattack or major disruption of the Internet?

32%

37%

31%

Likelyto occur

Unlikely to occur

Not sure

US CEOs

35%

44%Global CEOs

20%

Base: US: 167; Global: 1,330. Source: PwC, 16th Annual Global CEO Survey, 2013.

Cybersecurity


About the 2013 US CEO Survey

PwC conducted 167 interviews with US-based CEOs as a part of the 16th Annual PwC Global CEO Survey. In all, PwC conducted a total of 1,330 interviews with CEOs in 68 countries between 5 September and 4 December 2012. The interviews were spread across a range of industries, with further details by region and industry available on request.

The majority of interviews were conducted by telephone, with some country exceptions: Interviews were conducted face-to-face in Africa and the Philippines; postal surveys were used in Japan and Korea; and online surveys were completed in Australia, Iceland and Singapore. The US and Greece also used a mixed approach of telephone and online. In addition, members of our global CEO panel were invited to take part online, with 230 CEOs providing their views. All interviews were conducted in confidence and on an unattributable basis. In all, PwC conducted in-depth interviews with 33 CEOs from five continents over the fourth quarter of 2012. The Global CEO Survey can be found at http://www.pwc.com/ceosurvey.

For this report, PwC also conducted in-depth interviews with nine US-based CEOs. Their interviews are quoted in this report, and more extensive extracts can be found on our website at http://www.pwc.com/usceosurvey.

Note: Not all figures add up to 100%, due to rounding of percentages and to the exclusion of ‘neither/nor’ and ‘don’t know’ responses.

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http://www.pwc.com/ceosurvey

http://www.pwc.com/usceosurvey

To have a deeper discussion about the 2013 US CEO Survey findings, please contact:

Bob Moritz US Chairman and Senior Partner 1 646 471 8486 [email protected]

Rob GittingsUS Vice Chairman, Client Service1 646 471 [email protected]

Tom CrarenPartner, Global CEO Survey Advisory Board1 646 471 [email protected]


mailto:robert.moritz%40us.pwc.com?subject=US%20CEO%20Survey%202013

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mailto:tom.craren%40us.pwc.com?subject=US%20CEO%20Survey%202013

AdvisorsEd BoswellDavid BurgMichael ComptonTom CrarenPaul D’AlessandroMichael Hinchcliffe Ben McConnellEileen MullaneyKathy NielandScott OlsenJohn PotterMark Strom

Core editorial teamCristina AmpilNicholas BraudeEmily ChurchFrancisco Gomez Dee HildyJessical MelwaniAngela Pham Craig ScaliseElizabeth StrottDeepali SussmanPeter VigilChristine Wendin

Principal author and editorEmily Church

Project managementNatalie Kontra

CreativeTracy FulhamAdiba KhanAmy KunzSamantha PattersonTatiana PechenikIsabella Piestrzynska Tanya RebeloAdam West

Acknowledgements

PwC20

www.pwc.com/usceosurvey


© 2013 PricewaterhouseCoopers. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

http://www.pwc.com/usceosurvey


February 2013

Change is the only choice

Dealing with disruption 16th Annual Global CEO Survey summary: Key findings in the Asset Management industry

PwC – 16th Annual Global CEO Survey Key findings in the Asset Management industry 2

Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are resilient, able to cope with disruption and emerge stronger than before.

We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, in our 16th Annual Global CEO Survey, to find out how they’re creating organisations that can flourish under stress. Dealing with disruption shows that CEOs are focusing on a few carefully selected initiatives to stimulate organic growth; exploring new ways to attract and keep customers; and balancing efficiency with agility. And to succeed in these three goals, CEOs are recognising the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society.

This report is a summary of our key findings in the asset management sector, based on interviews with 108 asset management CEOs in 27 countries, as well as in-depth interviews with Larry Fink, CEO of BlackRock and Seymur Tari, CEO of Turkven Private Equity. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

“Asset management CEOs are adapting their businesses to a radically new post-credit crisis environment,” says Barry Benjamin, PwC’s Global Asset Management Leader. “A year ago, confidence in the global economy was extremely low. The immediate implications of revenue pressure, preparing for new regulations and evolving investor requirements absorbed every CEO’s full attention. 2013’s survey reveals that they’re less gloomy about the economy and are beginning to tackle the strategic implications of this new world.

“The survey tells us that, to varying degrees, they’re reshaping their businesses. Apart from the issues affecting asset management specifically, they’re preparing for the historic rise of emerging-market economies and transformational effects of digital technology – both issues we explore in our Project Blue analysis of trends reshaping financial services1. CEOs are reshuffling their businesses through mergers and alliances; they’re refining talent strategies and re-engineering operations. One thing is clear: They know that change is their only choice.”

Asset Management industry summary

1 For reports and analysis setting out our perspectives on the way ahead visit www.pwc.com/projectblue


IntroductionAsset management CEOs are getting less anxious about economic growth, but they’re not leaving their firms’ futures to chance. While they recognise that Western economies’ fiscal difficulties will take time to resolve, with huge amounts of cash sitting on the sidelines and more sustained economic growth in emerging markets, they sense opportunity.

According to BlackRock CEO, Larry Fink, great opportunity awaits those firms with the right investment propositions: “One of the great trends that have been muting the global economies can become a big opportunity for firms like BlackRock and that is the enormous amount of cash that’s sitting with corporations,” he says. “In the US it’s $1.7 trillion. But in terms of the amount of money that’s sitting in bank deposits and low duration bond funds, we’re talking multiple trillions of dollars.”

So, it’s not surprising that asset management CEOs think their businesses have better prospects than the global economy as a whole. But they recognise that in order to achieve this growth they must re-organise their businesses – in some cases radically – to meet clients’ evolving needs for complete investment solutions rather than stand-alone investment products.

Asset managers are looking to joint ventures, alliances and mergers as ways of broadening their capabilities and gaining access to new markets. In our experience, they’re looking particularly to do so in the

sought-after spheres of alternative investments and emerging markets such as China, India and Brazil.

Under pressure from mounting regulation and fee reductions, they’re re-engineering their organisations. By investing in technology and outsourcing to specialist service providers, they’re improving reporting, becoming more efficient and cutting overheads. But they’re no longer as focused on reducing headcount, especially among investment professionals, recognising that investment talent is always in short supply.

Finally, no 2013 survey of asset management CEOs’ outlook could ignore the increasing levels of regulation. CEOs view regulatory compliance as a major challenge, sapping confidence and adding to costs.

Finding new routes to growthAfter plumbing the depths last year, CEO anxiety about the global economy is lifting. 18% expect the global economy to improve in the next 12 months, with 51% believing it will stay the same. This compares with 44% of CEOs who voiced ‘extreme concern’ last year. While fiscal difficulties in Europe and the US aren’t expected to disappear overnight, CEOs anticipate a positive resolution is on the horizon.

When viewing their own businesses, 78% of CEOs anticipate growth in the next 12 months and 86% predict growth over three years, reflecting

the likely improvement in economic conditions. These confidence levels are similar to those in 2012’s survey, although significantly lower than in the 2011 survey, when all the CEOs surveyed expected their businesses would grow over three years.

The largest proportion of CEOs, 39%, sees organic growth in their domestic markets as offering greatest potential. But reflecting the strategic challenges they face, many are looking to deploy more fundamental measures such as mergers, joint ventures, strategic alliances or establishing new operations in foreign markets. 58% plan an acquisition, joint venture or strategic alliance in 2013 – by comparison only 32% and 49% of their banking and insurance peers respectively plan such radical courses of action. What’s more, 35% of asset management CEOs are also planning to divest businesses – showing how they’re shuffling their product capabilities to meet investors’ changing requirements.

In asset management, highly-skilled teams of portfolio managers make all the difference to investment performance. So large asset management firms buy or ally with specialist firms in areas such as alternative investments, as doing so is easier than building teams in-house. What’s more, asset managers seeking to access fast-growing emerging markets realise that acquisitions or alliances are the best way to do so.

Seymur Tari, CEO of Turkven Private Equity, illustrates the superior prospects of fast-growing emerging countries such as Turkey. “I think Turkey will do very well for the next

When viewing their own businesses, 78% of CEOs anticipate growth in the next 12 months and 86% predict growth over three years, reflecting the likely improvement in economic conditions.86%

78%


10 years at least,” he says. “Our ratio of household debt to GDP is 17%. Our ratio of public debt to GDP is 36%. That’s 53% combined. In many European countries and in the US that number is closer to 200%. So we have a very clean balance sheet. And that gives Turkey the latitude - if we wished to do so - to, say, borrow 5% of GDP every year for the next ten years to fuel growth, which would provide a huge stimulus for the economy.”

CEOs are looking to countries like Turkey for growth, whether through setting up local operations or attracting assets from local institutional investors such as sovereign wealth funds. They have highest hopes for the Middle East, India, Latin America and Southeast Asia. Reflecting its economic difficulties, Western Europe is the region which they expect least from.

Naturally, CEOs regard growth as their top investment priority for 2013. As a foundation to achieving this goal, they’re looking to invest in improving customer volumes, client service and operational effectiveness. A large number of CEOs also see the importance of investing in technology, acknowledging state-of-the-art technology’s role in attaining their other goals.

CEOs acknowledge the need to reshape their product offerings in order to meet changing customer needs. 36% of CEOs place mergers and alliances among their investment priorities for 2013, while 18% put innovation high on the agenda. In other words, CEOs know they need to reshape what they offer investors in a risk-averse, low-growth world where investors are asking for fresh ideas.

Battling the threats of austerity and regulationVolatile economic growth and government austerity policies remain the biggest economic and policy threats to growth, according to 81% and 77% of CEOs respectively.

But they’re almost equally worried about new regulations. 71% of CEOs named over-regulation as a threat. Many alternative managers will be regulated for the first time under Dodd-Frank in the US and AIFMD in Europe. And regulators are debating curbs on ‘shadow banking’ activities such as money market funds, while Basel III’s higher bank capital standards and OTC derivative controls are affecting investment strategies. Finally, if large asset managers are designated as systemically important financial institutions, they may also have to hold more capital.

Regarding potential business threats to growth, the greatest proportion of CEOs, 55%, considers the increasing tax burden as the biggest danger. But 46% also see shortage of portfolio management talent as an issue.

Reflecting the general disaffection with financial services following the credit crisis and serial scandals, 44% of CEOs voiced concern about lack of trust in the asset management industry. They’re reacting by designing products that reduce risk and protect their investors against uncertainty. Marketing and PR messaging, similarly, is reassuring and conservative.

Potentially damaging scenarios such as a slowdown in Chinese economic growth, US recession or Eurozone break-up are all events that CEOs believe would damage their firms’ prospects. Also high on the list is a cyber-attack or major disruption of the internet. Yet asset management CEOs don’t rate this as highly as their peers in insurance, suggesting that the sector may still be under-prepared for cyber threats. Some 62% of asset management CEOs stated it would have a negative effect, against 80% of insurance CEOs.

Fundamental change or incremental adjustment?Are we at the beginning of a radical inflection point for asset management? 66% of CEOs intend to make changes to their firms’ strategies over the coming 12 months. Whether they make far-reaching changes or just tweak strategies will depend on their answer to this question. While 10% of CEOs surveyed anticipate changing in ‘fundamental’ ways, 56% think they will only change ‘somewhat’.

Naturally growth and customer loyalty strategies are CEOs’ first priorities. But they see talent management as an increasingly important area for refining strategy; with 73% of those CEOs planning to change strategy anticipating doing so in this area. New models for remunerating investment professionals are emerging, just as the importance of culture and in-house talent development is increasing.


Reflecting the need to re-engineer their organisations in order to improve regulatory and client reporting while minimising risk, CEOs see improving their approaches to managing risk as a high priority. Both investors and regulators are demanding more transparency and rigorous management of all risks.

In terms of specific initiatives that CEOs have either implemented in the last 12 months, or plan to in the next 12 months, they regard cost reduction as the highest priority. But they’re also re-engineering their entire organisations, seeking to concentrate on core activities by outsourcing non-core activities to specialist service providers with scale. While 51% of CEOs are planning to hire more people in the coming year, they’re likely to be hiring for front-office jobs like portfolio management and sales; meanwhile, the back office remains under tight control.

Anticipating stakeholders’ needsThe client is king in asset management. At a time of fierce competition for new business, CEOs say their clients have more influence than any other stakeholder on their business strategies, with 90% stating this to be the case. But as the sector becomes more tightly regulated, government and regulators come a close second, with 84% of CEOs saying they’re influential.

Social media users are becoming a recognised stakeholder group. While asset management firms have been slow to adapt to the social networking phenomenon, 50% of CEOs now acknowledge its influence. Indeed, some 70% plan to strengthen engagement with social media users.

Echoing the emphasis on attracting and developing talent that runs through the report, CEOs plan to invest significantly in developing their workforces. 55% of CEOs plan to increase their investment in creating a skilled workforce over the next three years. But clearly the credit crisis taught CEOs lessons about the best way to remunerate their investment staff. 79% say pay and performance should be related to the risks taken.

CEOs have mixed views about the success of government in helping their industry. Just 41% of CEOs agreed that government has returned the financial sector to stability after the crisis. They appear sceptical about the effects of regulation, with only 13% of CEOs agreeing that government has reduced the regulatory burden. They’re similarly sceptical about governments’ success in helping to create a skilled workforce. Just 16% believe they’ve done so.

Conclusion – Adapting fast enoughThe asset management sector continues to grapple with volatile and unpredictable markets, unremitting regulatory changes that impose significant costs and new risks, together with investors demanding enhanced returns and greater transparency. Each of these factors creates its own set of challenges and increases business complexity.

So CEOs need to understand the potential implications of this complex set of changes taking place in their markets, among their stakeholders as well as in their own organisations. They have to change and adapt accordingly. Depending on their individual circumstances, some will have to make significant changes, while others might only adjust in subtle ways.

“If you don’t evolve and change you go backwards. It’s pure physics,” says BlackRock CEO, Larry Fink. He sums up the challenge facing asset management CEOs. Investors can’t simply leave their funds on deposit. At some point they’ll have to start investing actively once more. But they’re looking for new ideas and the firms that provide them will prosper.

“Investors can’t simply leave their funds on deposit. At some point they’ll have to start investing actively once more. But they’re looking for new ideas and the firms that provide them will prosper.”

Larry Fink, CEO of BlackRock


Contacts

Barry Benjamin Global Leader, Asset Management PwC (US) T: +1 410 659 3400 E: [email protected]

Claire Clark Global Asset Management, Senior Marketing Manager PwC (UK) T: +44 20 7212 4314 E: [email protected]

Download the main report, access the results and explore the CEO interviews from our 16th Annual Global CEO Survey online at www.pwc.com/ceosurvey.


This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

www.pwc.com/ceosurvey© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

Dealing with disruption: 16th Annual Global CEO Survey Key findings in the Asset Management industry


January 2013

PwC

Change is the only choice

Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are resilient, able to cope with disruption and emerge stronger than before. We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, in our 16th Annual Global CEO Survey, to find out how they’re creating organisations that can flourish under stress. Dealing with disruption shows that CEOs are focusing on a few carefully selected initiatives to stimulate organic growth; exploring new ways to attract and keep customers; and balancing efficiency with agility. And to succeed in these three goals, CEOs are recognising the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society. This report is a summary of our key findings in the Asset Management sector, based on interviews with 108 Asset Management CEOs in 109 countries, as well as in-depth interviews with Larry Fink, CEO of BlackRock, and Seymur Tari, CEO of Turkven Private Equity. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

16th Annual Global CEO Survey: Key findings in the Asset Management industry January 2013

2


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Introduction


3

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Introduction

Asset Management CEOs are less gloomy about the economic environment this year. They’re not so worried about threats like a break-up of the Eurozone or falling economic growth. So they’re beginning to prepare their businesses for a new post-credit crisis environment.

As they look forward to the future, they know their businesses need to adapt to investors’ evolving needs and to absorb the costs of regulation. In the next 12 months, 66% of Asset Management CEOs see a need for change. 36% of CEOs place mergers and alliances among their investment priorities for 2013, while 18% put innovation high on the agenda.

Asset Management CEOs are beginning to adapt their businesses for the new world that has emerged following the credit crisis. They’re reshuffling their businesses through mergers and alliances, they’re refining talent strategies and re-engineering operations.

Let’s take a look at how.


4

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Upbeat about prospects

78% of Asset Management CEOs are confident about the outlook for revenue growth over the coming year.


5

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Sector CEOs optimistic about their prospects

78% of Asset Management CEOs are confident they can raise the revenues their companies generate over the coming year.

And they’re even more positive about the long-term picture: 86% are confident of being able to boost revenues over the next three years.

Their responses reveal increasing optimism about the global economy:

18% of CEOs expect the economy to improve next year and 51% believe it will stay the same

By comparison, 44% voiced ‘extreme concern’ last year.


6

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Threats

Volatile economic growth and fiscal deficit remain the biggest economic and policy threats to growth, according to 81% and 77% of Asset Management CEOs respectively.


7

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Potential threats to growth

of Asset Management CEOs are concerned about over-regulation.

Of Asset Management CEOs named fiscal deficit and debt burden as a threat.

of Asset Management CEOs think volatile or uncertain economic growth would be the greatest threat.

71%

77%

81%


8

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But CEOs do not think macro economic and geopolitical threats especially likely... • Asset Management CEOs are not unduly concerned about macro economic threats,

although they think them more likely to occur than the survey’s total sample.

• Cyber-security stands out as an area where Asset Management CEOs are less concerned than their peers.

13

15

16

17

20

25

32

45

12

12

17

14

14

28

34

51

0% 10% 20% 30% 40% 50% 60%

Health crisis


A break-up of the Eurozone


Cyber-attack or major disruption of the internet


Recession in the US

China's GDP falling below 7.5% per annum

Asset management Total sample

Base: All respondents (Total sample, 1,330; Asset Management, 108)

Note: Respondents who stated ‘likely’ to occur.

Source: PwC 16th Annual Global CEO Survey 2013


9

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So how are CEOs preparing for change?

66% of Asset Management CEOs will change their firms’ strategies in the next 12 months.


10

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CEOs are changing the way they manage their organisations Q: Which, if any, of the following restructuring activities do you plan to initiate in the next 12 months?

11

15

16

26

28

31

47

70

16

19

24

26

30

30

55

67

0% 10% 20% 30% 40% 50% 60% 70% 80%



Insourced a previously outsourced business process or function






Asset management Total sample


11

Base: All respondents (Total sample, 1,330; Asset Management, 108)


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Anticipating stakeholders’ needs

The client is king for asset managers’ CEOs; but regulators are coming a close second.


12

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Stakeholders influencing business strategies The three most significant stakeholder groups

January 2013 16th Annual Global CEO Survey: Key findings in the Asset Management industry

13

of Asset Management CEOs regard competitors and peers as important stakeholders.

of Asset Management CEOs view government and regulators as significant stakeholders.

of Asset Management CEOs view customers and clients as influential.

83%

84%

89%

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Moving forwards

CEOs need to understand the potential implications of this complex set of changes taking place in their markets, among their stakeholders as well as in their own organisations.

They have to change and adapt accordingly.

Depending on their individual circumstances, some will have to make significant changes, while others might only adjust in subtle ways.


14

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Making change a continual occupation...

16th Annual Global CEO Survey: Key findings in the Asset Management industry

15

January 2013

“If you don’t evolve and change you go backwards. It’s pure physics.”

Larry Fink, CEO BlackRock, US

PwC

For more information, please contact:

Barry Benjamin

Global Leader, Asset Management T: +1 410 659 3400 E: [email protected]

Claire Clark

Global Asset Management, Senior Marketing Manager T: +44 20 7212 4314 E: [email protected]


16

January 2013 16th Annual Global CEO Survey: Key findings in the Asset Management industry

mailto:[email protected]




This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this

publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this

publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or

refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for

further details.

121203-144542-EA-OS

Dealing with disruption 16th Annual Global CEO Survey Key findings in the automotive industry


January 2013

PwC

Welcome

Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organizations that can thrive amidst disorder: organizations that are agile and adaptable, able to cope with disruption, and emerge stronger than before.

We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, in our 16th Annual Global CEO Survey, to find out how they’re creating resilient organizations that can flourish under stress. Dealing with disruption shows that CEOs are focusing on a few carefully selected initiatives to stimulate organic growth; exploring new ways to attract and keep customers; and balancing efficiency with agility. And to succeed in these three goals, CEOs are recognizing the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society.

This report is a summary of our key findings in the Automotive sector, based on interviews with 90 CEOs in 32 countries, as well as an in-depth interview with Yves Serra, President and Chief Executive Officer, Georg Fischer Ltd., Switzerland. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

2 January 2013 16th Annual Global CEO Survey – Key findings in the automotive industry

http://www.pwc.com/ceosurvey.

PwC

Contents

Page

Introduction 4


What worries CEOs the most 9

What CEOs are doing • Targeting pockets of opportunity 13

• Concentrating on the customer 16

• Improving operational effectiveness 20



PwC

Introduction


PwC

Introduction

Automotive CEOs are a lot like their peers across industries. They’re less confident this year and they’re worried about threats like economic volatility or lack of availability of key skills.

But there are some key differences too. For example, a lot more automotive CEOs see energy costs as a potential problem –72% are concerned, compared to just 52% of the total sample. And 71% of automotive CEOs are somewhat or extremely concerned about exchange rate volatility, compared with the overall average of just 54%.

That’s understandable in a global sector. This year we see strong signs of how the industry is changing. China’s importance is dramatic; so is the concern about getting the natural resources the industry will need.


PwC


30% of automotive CEOs are very confident they can raise the revenues their companies generate over the coming year.


PwC

Automotive CEOs’ confidence levels reflect turbulent times There have been many disruptions in the past decade. Far-reaching changes are happening and happening faster than before. Automotive CEOs tend to react more strongly to ups and downs. Only 30% are very confident of revenue growth over the next 12 months, compared to 36% of CEOs overall. But they’re still significantly more optimistic than during the depths of the crisis.

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Base: All respondents 2013 (Total sample, 1330, Automotive, 90); 2012 (Total Sample, 1258; Automotive, 104); 2011 (Total sample, 1,201; Automotive, 50); 2010 (Total sample, 1,198; Automotive, 50); 2009 (Total sample, 1,124; Automotive, 62); 2008 (Total sample, 1,150; Automotive, 59) Source: PwC 16th Annual Global CEO Survey 2013


PwC

And they’re not as hopeful looking farther out

While most CEOs are significantly more confident when looking forward 3 years, that’s not true for the automotive sector. Only 33% of automotive CEOs are very confident of 3 year growth, compared to 46% of the total sample.

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Base: All respondents (Total sample, 1330; Automotive, 90) Source: PwC 16th Annual Global CEO Survey 2013


PwC

What worries CEOs the most?

82% of automotive CEOs are concerned about volatile or uncertain economic growth.


PwC

Threats to growth are looming

71% say currency fluctuations are a concern.

71% also think government

responses to fiscal deficit and debt burden could hurt growth.

72% see them as a concern,

compared to 52% of the overall sample.

Exchange rate

volatility

Deficits and debt

Raw material

and energy

costs


PwC

Economic and policy threats could hurt prospects Most automotive CEOs are concerned about a range of macroeconomic factors, with uncertain growth and exchange rates heading the list. However, an increasing tax burden and potential threats to the supply chain stand out as a concern as well.

Q: How concerned are you, if at all, about each of the following threats to your growth prospects? Base: All respondents (Total sample, 1330; Automotive, 90) Note: Respondents who stated ‘extremely’ or ‘somewhat’ concerned Source: PwC 16th Annual Global CEO Survey 2013 concerned. Source: PwC 16th Annual Global CEO Survey 2013


PwC

So what are CEOs doing?


PwC

Targeting pockets of opportunity

32% of automotive CEOs say that China is one of their top 3 growth markets for the coming 12 months.


PwC

The top markets for growth this year reflect the industry’s changing global footprint

Still an automotive powerhouse

It’s tied with Brazil as this year’s #2 growth destination for automotive

CEOs.

Is growing strongly

23% of automotive CEOs say it will be a top growth market this year.

USA Brazil It’s the world’s biggest

automotive market and the top destination for growth.

32% of automotive CEOs say its one of their top markets

China


PwC

Manufacturing capacity and customers top the list of objectives in China Nearly two-thirds of automotive CEOs who are looking to China as a growth market intend to build manufacturing capacity there in the next 12 months. That’s far more than across our overall sample. Growing their customer base is critical too.

Q: Which of the following objectives do you hope to achieve in the next 12 months? Base: All respondents (Total sample, 1330; Automotive, 90) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


PwC


86% of automotive CEOs say that customers have a ‘significant’ influence on their strategy.


PwC

Automotive CEOs are focused on customers

86% say customers and clients have a significant impact on their strategy.

That’s much higher than the overall average.

87% of automotive CEOs are changing customer growth/retention/loyalty strategies.

That’s consistent with their peers across the overall sample.

43% see improving it as one of their top 3 investment priorities. And nearly as many are planning to invest in growing the customer base

too.

Customer Impact

Changing course

Better customer

service


PwC

Plan to strengthen engagement with customers

Automotive CEOs are looking to increase customer dialogue Just what are they doing? Our experience suggests that they’re: • Co-creating Reaching out on social media (here, too, many say they’re planning to strengthen engagement) • Developing a stronger digital presence • Enhancing customer service 92%


PwC

Developing the new technologies customers want

How to choose? Listen to the customer. Don’t place all your eggs in one basket.

40% of automotive CEOs say they nurture many strategic initiatives, allowing the strongest to succeed, rather than focusing on just a few key plans.

“We train our people to be close to our customers so as not to miss new trends, and cooperate with our customers to bring them solutions.” Yves Serra, President and Chief Executive Officer, Georg Fischer Ltd., Switzerland


PwC


46% of automotive CEOs say its one of their top 3 investment priorities. That puts it #1 on their list.


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Cost reduction remains a top priority But outsourcing is less popular than in the overall sample

Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Base: All respondents (Total sample, 1330; Automotive, 90) Source: PwC 16th Annual Global CEO Survey 2013


PwC

People are the key, whether you talk about customer service, innovation, or new markets

50% of automotive CEOs are concerned about the availability of

key skills.

80% of automotive CEOs say their companies use active succession planning and 79% are involving managers below board level in

decision-making.

63% of automotive CEOs say they’ll increase investment in creating and

fostering a skilled workforce and 47% will invest more in maintaining the

health of the workforce too.

The right skills

Developing leaders

Investing


PwC


64% of automotive CEOs are working harder to engage local communities.


PwC

Automotive CEOs are making their organizations more agile, more appealing and more profitable. But as we’ve argued in our main report, if they’re to succeed in these three goals, they’ll also have to repair the bridges between business and society. Like their peers, CEOs also recognize the important role that business can play in addressing societal challenges and improving national outcomes. Trust isn’t just an essential part of the customer relationship, it’s the glue that binds an organization and all its stakeholders together – and there are now many more stakeholders to consider. Thanks to the social media revolution, many of these stakeholders also have an unprecedented amount of clout.


PwC

Automotive CEOs are listening

Automotive CEOs tell us that a whole range of stakeholders are influencing their business strategies.

Q: How much influence do the following groups have on your strategy? Base: All respondents (Total sample, 1330; Automotive, 90) Source: PwC 16th Annual Global CEO Survey 2013


PwC

And they’re reaching out These CEOs are generally working harder to strengthen their engagement too.

Q: For those stakeholders with some or significant influence, to what extent are you strengthening your engagement program? Base: All respondents (Total sample, 420-1285; Sector, 21-88) Note: Respondents who answered ‘some’ or ‘significant ‘ influence to Q14a.’ For some categories sample sizes are small and should be viewed as indicative only. Source: PwC 16th Annual Global CEO Survey 2013 concerned. Source: PwC 16th Annual Global CEO Survey 2013


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Workforce priorities are at the top of CEO’s list of outcomes they’d like to achieve in their home countries

Q: How much does your company plan to increase its investment over the next 3 years to achieve the following outcomes in the country in which you are based? Base: All respondents (Total sample, 1330; Automotive, 90) Note: Respondents who stated ‘some increase’ or a ‘significant increase’ Source: PwC 16th Annual Global CEO Survey 2013


PwC

Most automotive CEOs are committed to reducing their company’s environmental footprint


Q: Please indicate to what extent your organization plans to focus on reducing environmental footprint over the next 12 months. Base: All respondents (Total sample, 1330; Automotive, 90) Source: PwC 16th Annual Global CEO Survey 2013

49% of sector CEOs say they’ll increase their focus on reducing their environmental footprint, and another 40% say they’ll continue maintaining their current emphasis.

No change:

40%

PwC


Or visit www.pwc.com/ceosurvey

Acknowledgements

PwC gratefully acknowledges the contribution to the 16th Annual Global CEO Survey: Key findings in the automotive industry provided by:

Yves Serra, President and Chief Executive Officer Georg Fischer Ltd., Switzerland

Rick Hanna Felix Kuhnert Tom McGuckin

Global Auto Leader T: +1 313 394 3450 E: [email protected]

European Auto Leader T: +49 711 25034 3309 E: [email protected]

Asia Pacific Auto Leader T: +86 21 2323 33588 E: [email protected]









121211-130640-EA-OS


February 2013

Coming through stronger

Dealing with disruption 16th Annual Global CEO Survey summary: Key findings in the Banking and Capital Markets industry

PwC – 16th Annual Global CEO Survey Key findings in the Banking and Capital Markets industry 2

Dealing with disruption

Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption and emerge stronger than before.

We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, in our 16th Annual Global CEO Survey, to find out how they’re creating resilient organisations that can flourish under stress. Dealing with disruption shows that CEOs are focusing on a few carefully selected initiatives to stimulate organic growth; exploring new ways to attract and keep customers; and balancing efficiency with agility. And to succeed in these three goals, CEOs are recognising the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society.

This report is a summary of our key findings in the banking and capital markets (BCM) sector, based on interviews with 149 industry leaders in 49 countries. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

‘Banking and capital markets organisations still face difficult challenges ahead. Organisations are facing a ‘new normal’, which includes the radical impact of new capital, liquidity and customer protection regulations. They will need to address the impact as part of their wider strategic rethink and re-orientation,’ said Robert Sullivan, Global Banking and Capital Markets Leader at PwC. ‘But many organisations are now beginning to put the crisis behind them and move onto the front foot competitively. What marks out the front runners has been the decisive way they have cleaned up their balance sheets, simplified and rationalised operations and adjusted to a tougher funding and regulatory environment. These organisations are also reshaping their strategies and operations for the rapidly changing competitive landscape, including the shift in global investment and growth and changes in customer understanding, engagement and expectations created by new technology1.

Businesses that have yet to take the necessary steps will increasingly find themselves on the back foot competitively. Many are still saddled with an excessive amount of bad debt and overly costly and complex operations. They are also reacting to events rather than seeking to anticipate and take advantage of the developments ahead. There is still time for them to respond. But they could find themselves struggling to sustain investment and market share if they fail to move soon.’

Banking and Capital Markets industry summary

1 PwC’s Project Blue framework explores the major trends that are reshaping the competitive environment for financial services businesses around the world and the markets and societies in which they operate (www.pwc.com/projectblue)


IntroductionBanking and capital markets CEOs are upbeat about their growth prospects. But they recognise that success will be hard won.

With funds for acquisition limited, organic growth in domestic markets is the primary focus for growth within many BCM businesses. This demands a closer focus on evolving customer expectations and renewed efforts to strengthen operational effectiveness. At a time when customer trust is strained, many BCM businesses are also focusing on how to re-engage with customers and employees as they seek to reinvigorate their ‘social mandate’.

Where BCM organisations are looking to expand beyond their domestic markets, China and the US are seen as offering the greatest growth potential. Many organisations are also stepping up investment in new technology as they seek to keep pace with a fast evolving marketplace and target unfolding pockets of opportunity.

Prospects for growthNearly 90% of BCM CEOs are anticipating increased revenues over the coming12 months and next three years. But turnovers are coming back from a generally low level in recent years and extreme pressure on risk-weighted assets (RWA) has reduced risk-taking and returns. Therefore, the expected revenue gains may not lead to a significant rebound in return on equity (RoE) in the near future. There is also a major challenge in ensuring organisations have the right people in

the right places to take full advantage of revenue growth opportunities.

The views of industry leaders on the prospects for the economy are still mixed, with 19% believing it will improve over the next 12 months and 26% deteriorate, though this is a much less pessimistic outlook than 2011 (52% anticipating decline).

Recession in the US has supplanted the break-up of the Eurozone as the most threatening economic scenario. Seventy per cent of BCM CEOs say that recession in the US would have a damaging impact on their business and 34% believe it is now likely, suggesting that confidence in policymakers’ ability to fix the fiscal cliff and debt ceiling is tentative at best. More than 60% say that a break-up in the Eurozone would have a negative impact, but only 19% believe it is now likely.

So what do BCM CEOs see as the main opportunities for growth? The number one priority for most industry leaders is building up their share of existing markets (see Figure 1). In keeping with this objective, nearly 90% are planning to change their strategies for managing customer growth, loyalty and retention (more than 30% are anticipating major changes). Building up the customer base and improving service are among the three chief investment priorities for the coming year. Martin Blessing, Chairman of the Board of Managing Directors, Commerzbank AG, Germany, said: ‘We believe that, especially in our home market, growth can mainly come from gaining market share against the competition. We believe the underlying growth trends will be slow. So we have to just be better than the competition in these markets, and that is also one of the reasons why we have to keep costs under control.’

Most industry leaders believe that the prospects for the economy are still mixed, with 19% believing it will improve over the next 12 months and 26% deteriorate26%

19%

Figure 1: Strategies for growth

Which one of these potential opportunities for business growth do you see as the main opportunity to grow your business in the next 12 months?

Global Banking All FS (1330) & Capital (351) Markets (149)

Organic growth in existing domestic 32% 44% 43% market

New product or service development 25% 26% 25%

Organic growth in existing foreign market 17% 13% 11%

New M&A/ joint ventures/strategic 17% 13% 14% alliances

New operation(s) in foreign markets 8% 4% 7%

Don’t know/Refused 1% 0% 0%

Source: 16th PwC Annual CEO Survey. Number of respondents to question in brackets.


Few CEOs see acquisition or alliances as the main route to growth, though nearly half are anticipating at least some increase in deal focus. Highlighting the cautious approach, Dr. Weihua Ma, President and Chief Executive Officer of China Merchants Bank Co. Ltd, said: ‘We have several things to consider on expansion. Firstly, since the international financial crisis has yet to be resolved, especially in Europe, we must continue to be cautious. Then there’s our bank: we have to use our limited capital sparingly. The next factor is experience: we must accumulate international experience in management and improve it. Internationalisation is necessary in today’s day and age, and banks should certainly serve outbound enterprises and citizens. In fact, we have already established a CMB branch in New

York – the first Chinese bank in that city since Foreign Bank Supervision Enhancement Act of 1991. And we have acquired Wing Lung Bank in Hong Kong. We need a process to digest and accumulate those initiatives, and, of course, we aim to seize further opportunities to develop ourselves.’

Regionally, BCM CEOs continue to see the strongest potential in Asia, Africa and Latin America (see Figure 2). But developed markets are also an important part of the picture. The proportion of industry leaders anticipating expansion of key operations in North America has increased since last year. In turn, the easing of Eurozone concerns is reflected in a more confident outlook for Western Europe, with more than half of BCM CEOs planning to step up operations, compared to less than 30% in last year’s survey.

How realistic are these expectations? The strong economic growth and low penetration of banking services in Asia, Africa and Latin America leave room for considerable further growth (see Figure 3). Patricio Supervielle, CEO of Grupo Supervielle, Argentina, said: ‘We are in an environment that has tremendous opportunity, so let’s make the most of it. Argentina has a very low penetration of financial services and it is here that we see both a challenge and an opportunity.’

To capitalise on the potential, emerging market banks are going to have to keep pace with the more complex needs of industry, more exacting customer expectations, the increase in regulatory scrutiny and demands for greater transparency.

Figure 2: Regions targeted for growth

In the next 12 months do you expect your key operations in these regions to decline, stay the same or grow? Respondents anticipating growth

Global Banking All FS (170-533) & Capital (36-125) Markets (15-42)

Latin America 81% 78% 82%

South-East Asia 81% 72% 79%

Africa 74% 88% 78%

South Asia 73% 75% 78%

Middle East 70% 76% 72%

East Asia 66% 71% 75%

North America 62% 57% 61%

Australasia 58% 47% 57%

CEE/Central Asia 57% 50% 51%

Western Europe 33% 55% 40%


“We have several things to consider on expansion. Firstly, since the international financial crisis has yet to be resolved, especially in Europe, we must continue to be cautious.”

Dr. Weihua Ma, President and Chief Executive Officer of China Merchants Bank Co.


A still largely untapped growth frontier is SME lending. In China, for example, some 90% of the country’s 40 million small businesses are reportedly unable to get bank loans2. New capital rules are going to create further challenges for SME lending, in developed as well as emerging markets, providing further impetus for the development of non-bank credit.

BCM organisations in the US are facing tighter scrutiny and regulation. But many have been able to relinquish the bulk of their troubled assets and are once again moving onto a growth footing. The immediate threat to EU banks has abated. But they may have further to go before they can put themselves on a surer long-term footing. PwC estimates that European banks hold around €2.5 trillion in unwanted loans portfolios3. At €800 billion, non-performing loans (NPLs) are only one part of the non-core assets. The bulk are loans that are performing, but are no longer central to the banks’ strategies4. Holding these assets ties up excess capital and inhibits banks’ capacity to target more profitable opportunities. Speeding up exit is therefore going to be a key priority.

Anders Nyren, President and Chief Executive Officer of Industrivärden AB, a Swedish private equity firm, said: ‘I think that one has to recognise that, first of all, in the US, we’re seeing an economy that is steadily improving. It’s not a stellar performance by any means; and it doesn’t represent a turnaround. But it’s an economy that’s growing and the growth is broad-based. South America – with Brazil being the most notable example – is

turning around, as well. Personally, I believe that China and India are also on the rebound. Africa continues to grow. All of which is to say that the global economy might not be in such a bad shape. However, we still are faced with the Euro crisis, which has not been resolved. The Euro crisis has two aspects. The first is related to the liquidity crisis, which has been addressed by European Central Bank actions. The second aspect has to do with the solvency crisis, which is far from having been solved.’

Figure 3: Room for growth

Levels of financialisation (i.e. the relative size of the financial sector to the economy) vary around the world

Source: World Bank; PwC analysis

Notes: 1Australia data if from 2009; Canada GDP and GDP per capita from 2010 but domestic credit from 2008;

Financialisation of G20 members, excluding the EU, 2010

Dom

estic

cre

dit

pro

vid

ed b

y b

anki

ng s

ecto

r, %

of G

DP

400

350

300

250

200

150

100

50

0

0 10,000 20,000

GDP per capita

30,000 40,000 50,000

GDP, US$ Millions:= 500

= 2,000

=5,000

Japan

United States

R2 = 0.36

Canada1

Australia1

GermanyFrance

Italy

South Korea

United Kingdom

Saudi ArabiaArgentina

RussiaTurkey

South AfricaChina

India

Indonesia

Mexico

Brazil

In China, for example, some 90% of the country’s 40 million small businesses are reportedly unable to get bank loans.90%

2 Bloomberg, 13.09.12

3 PwC media release, 04.01.13

4 De-leveraging non-core assets in a dynamic market: PwC European Debt Portfolio Conference 2012 Summary


China and the US top the list of national markets seen as most important to overall growth prospects (see Figure 4), though BCM CEOs see recession in the US and a dip in China’s growth below 7.5% as among the most likely and most threatening macroeconomic scenarios. Brazil is next up at 11%, a fall from 16% in 2011. Clearly Brazil’s rapid growth and future potential make it an attractive market. However, with new entrants facing high acquisition prices and entrenched competition from existing players, breaking into the market is proving increasingly difficult.

Having people with the required technical and cultural skills is going to be crucial to ensure success in new and emerging markets. It is notable that 81% see encouraging global mobility and international experience and 78% see programmes to encourage diversity among business leaders as important in developing their executive pipeline, though far fewer actually do this (50% and 58% respectively).

So what returns should BCM organisations be targeting? As most banks become increasingly nationally focused in the wake of government pressure, returns will be closely tied to the real local economy. Many may thus find that they have to settle for ‘utility’ RoEs of 10% or less.

Many may be concerned that such returns are not sufficient to attract the equity investment they need to meet new capital demands. Over time, however, deleveraging and reduced risk profiles could make this a reasonably attractive risk/reward ‘bet’

for many investors – better than most conventional utilities. The challenge is how to convey the shift to utility returns to investors who have become accustomed to seeing the sector as a growth stock.

Some capital markets focused banks will be able to sustain a genuinely global reach and higher returns. The question here is how many such institutions the market can accommodate.

Threats to growthBCM CEOs once again see the most significant threats to growth as over-regulation and uncertain and volatile growth. They have always faced regulatory change. But the

current upheaval and uncertainty that surrounds it are taking on an air of permanence. For many institutions, meeting the new capital and liquidity requirements is going to be a difficult enough challenge in itself. But they also face the dilemma of how to generate sufficient returns when both capital demands and the cost of capital are going up.

These challenges are leading to a rethink of what business is viable in this new landscape. The underlying considerations are how to further reduce RWA. A lot of the resulting reshaping is sensible. Many banks were over-leveraged and over-extended in the lead up to the crisis. As outlined earlier, it is also vital to eliminate the drag created by non-core

Figure 4: Countries targeted for growth

Which countries, excluding the country in which you are based, do you consider most important for your overall growth prospects over the next 12 months? Respondents targeted up to three countries.


China 31% 26% 23%

USA 23% 23% 24%

Brazil 15% 11% 11%

Germany 12% 7% 9%

India 10% 5% 6%

Russia 8% 5% 5%

Indonesia 7% 7% 6%

UK 6% 7% 9%

Canada 5% 3% 3%

Japan 5% 3% 4%



and non-performing business. The problem is that some banks are opting for short-term strategic remedies that could jeopardise their long-term commercial potential. A clear case in point is withdrawing from what might appear to be peripheral African, Asian and Latin American markets in an attempt to reduce RWA, but could be the fastest growing and most important for key clients in the future. In short, BCM organisations could run the risk of emerging from the crisis recapitalised, restructured, reformed − but out of step with the new business realities.

The need for a long-term view is heightened by the timescales of these changes. Business that might look profitable now might not be in a few years’ time. Institutions will need to look at the impact on prices and margins, and judge how best to target capital where it can secure the best return.

Further challenges centre on the variations in regulation around the world. For example the Independent Commission on Banking in the UK suggests ring-fencing the retail businesses and allows proprietary trading. In the EU as a whole, ‘The High-level Expert Group on reforming the structure of the EU banking sector’ (‘Liikanen Report’) puts forward proposals for the ring-fencing of trading and wholesale banking business, including proprietary trading. In the US, the Volker rules have directly prohibited proprietary trading. Global banks may face the complex juggling act of applying all three approaches at the same time if the current proposals are implemented.

The BCM organisations that are going to come through stronger are looking at the overall impact of the various new regulations, rather than just dealing with them in isolation. This will give them a clearer idea of the strategic implications for their business. It will also help them to avoid digging up the road more than once, as many of the requirements overlap.

Targeting pockets of opportunityTechnology is shaping customer expectations as they come to expect seamless round the clock interaction across all channels and the ease and intuition of the Amazon ‘experience’. Artem Konstandyan, CEO of Russia’s Promsvyazbank said: ‘The world is changing very swiftly in terms of technology and there is no option but to go with it. Similarly, the old business models can’t bear the test of time or meet new challenges and are being replaced with new business models and new ideas. The banking sector is no exception here. The client wants not just a financial product, but an efficient, convenient and handy product.’

The difficulties of keeping pace with these evolving demands are reflected in the fact that half of BCM CEOs are concerned about shifts in consumer spending and behaviour. In response, nearly three-quarters of BCM CEOs are planning to increase investment in technology and more than two-thirds develop their capacity for innovation. A key part of this will how to use all the payment, social media and other digital trails people leave. A lot of this ‘big data’ is unstructured, but new techniques allow it to be used

to sharpen customer profiling and hence offer more tailored and targeted products. The risk is that these advances would allow social media, telecommunication and other new entrants to come in, take control of the customer relationship and pick off the most profitable business. However, less than 30% of BCM CEOs are concerned about the threat from new entrants, which is interestingly much lower than insurers (42%).

Dr. Weihua Ma of China Merchants Bank Co. Ltd, said: ‘At present, our biggest challenge is around mobile payments. Rapid technological developments have taken us to mobile internet, information transmission and the intelligent terminal – and brought about new demand for financial services. We have to lead the field on this. And banks are facing more challenges in today’s age of big data and cloud computing. Mark Zuckerberg, for example, has created a new form of internet financing that allows users to strike a deal directly, without relying on a bank or an exchange. It sounds very idealistic, but it does make sense.’

It’s a matter of trustCustomer engagement The fallout from a number of recent scandals ranging from LIBOR to mortgage mis-selling have further dented the image of the industry – more than 50% of BCM CEOs see lack of trust in industry as a threat to growth. In response, nearly 90% are seeking to engage more closely with customers and more than 60% are working on a framework to support a culture of ethical behaviour.

“The world is changing very swiftly in terms of technology and there is no option but to go with it. Similarly, the old business models can’t bear the test of time or meet new challenges and are being replaced with new business models and new ideas. The banking sector is no exception here. The client wants not just a financial product, but an efficient, convenient and handy product.”

Artem Konstandyan, CEO of Promsvyazbank


Just as BCM organisations are actively cleaning up their balance sheets, the initial priority is going to be checking through the business for vulnerabilities and seeking to proactively resolve any issues.

The need for transparency and two-way dialogue is going to be a crucial part of winning back trust. Shikha Sharma, Managing Director and Chief Executive Officer, Axis Bank Limited, India, said: ‘And a lot more knowledge is being shared among consumers. This means that consumer experience spreads much faster today than it might have done in an era of less connection. The same thing applies to employees: they live in a connected world and communicate through numerous networks. So the word about change spreads much faster. And, of course, you are constantly under media scrutiny. There are many channels that you have to worry about.’ In this respect, it is interesting to note that BCM CEOs see stepping up engagement with users of social media (75%) as more important than traditional media (58%), reflecting new strategies for interaction and influence.

Employee engagement

It is also important to recognise that successfully re-engaging with customers is going to be extremely difficult without re-engaging with employees. The challenges are heightened by the significant changes in employer/employee relationships and compensation models. Many employers are moving to a different employee value proposition that is not just about being the best payers in the market.

Creating the right culture is equally critical, though many BCM organisations are finding it difficult to translate high level expectations in areas such as risk awareness or putting the customer first into discernible changes in how people think and behave in their everyday activities. They need to dig deeper into the operations of the business to make a difference. Culture will only deliver the ‘driving’ goals of the organisation if it is second nature – firmly built into the habits and routines of staff at all levels. Key steps include defining the right behaviours, as well as the reinforcing mechanisms such as changes in hiring practices, organisation design, development programmes, performance management and rewards.

Bringing together the imperatives of integrity, transparency and engagement, Sándor Csányi, CEO and Chairman of OTP Bank Nyrt., Hungary, said: ‘Clearly, the most important stakeholders are our clients because, quite simply, without them we would be out of business. In fact, the banking sector across the whole region has much work to do in terms of unfulfilled commitments to clients. Certain banking products have become overly complicated and less transparent for clients. I believe that the banking sector should return to its roots: we should clearly focus on our traditional role, raising funds and providing loans, instead of various “speculative” activities. Customers are unaware of the risks associated with many products offered by the banking sector. We should take transparency and fair play towards customers a lot more seriously.’

Government engagement

The need to rebuild trust and re-engage with customers forms part of the wider challenge of securing a ‘social mandate’. The relationship with government is a further element of this social mandate. Nearly all BCM CEOs say that governments and regulators influence their strategy and most are looking to step up engagement.

As governments play a much more active role in managing the economy than before the financial crisis, bank profitability is becoming more closely tied to the fortunes of the economy. It is therefore important to find ways to influence government policy (working alongside clients to highlight the impact) and seek to make sure that strategies anticipate and are aligned to government priorities and investment plans (e.g. infrastructure investment and project finance opportunities).

Patricio Supervielle of Grupo Supervielle, said: ‘The bank is a business, but we also feel responsible for contributing to the country’s economic development. We have a business, but if we do not comply with the objective of being agents of economic progress through offering credit, we are not fulfilling our fundamental role of distributing the savings in the economy.’

The potential benefits of a strong social mandate include a renewed licence to operate, innovate and pursue profitable opportunities. Personnel would be seen in society as equally deserving of rewards as people in other sectors. BCM organisations would also be in a stronger position to attract quality talent at a time when many of the brightest candidates are

it is interesting to note that BCM CEOs see stepping up engagement with users of social media (75%) as more important than traditional media (58%), reflecting new strategies for interaction and influence.

75%58%


looking for more meaning from their chosen careers.

Investor engagement

Nearly 80% of BCM CEOs are looking at ways to engage more closely with investors. This is going to be crucial at a time of major change within the industry. Many investors complain that a lack of transparency and effective communication is making it very difficult to comprehend the risks BCM organisations are running, how they’re being managed and the business models that underpin them. The result is a deficit of understanding and trust, which is eroding investment prospects within the sector.

New benchmarks for improved transparency are now emerging, including the recommendations set out by the Financial Stability Board’s Enhanced Disclosure Task Force. These emphasise the urgent need to look beyond narrow compliance to create a more open culture of communication. The task force is also keen to simplify and demystify complicated risk disclosures, and make them more consistent and comparable across the market. For example, RWA densities and conversion ratios could be more clearly defined and communicated.

Improving operational effectivenessWhen growth was surging, a huge amount of operational capabilities were bolted on in a hurry, creating convoluted, complex and overly expensive operating structures. This is now a good juncture to rationalise

and simplify these structures as BCM organisations look to cut costs, enhance efficiency and strengthen operational oversight. Improving operational effectiveness is a top three investment priority for 58% of BCM CEOs. More than 70% are planning to change their organisational structure and more than 60% are pursuing a cost reduction initiative over next 12 months.

The competitive benefits of operational simplification go beyond cost reduction to include greater agility, speedier decision making and an improved ability to capitalise on opportunities. Anders Nyren of Industrivärden AB said: ‘Given that the global economy and the global pace of life is getting faster in all aspects, one needs to become more agile and efficient about everything – including running a company.

It’s essential that you streamline operations and become leaner wherever you can so as to be able to react more quickly to changing market conditions.’

Attracting and retaining talentIndustry leaders continue to find this an intractable issue, with more than three-quarters planning to change their strategy for managing talent once again – more than 70% also anticipated a shift in the previous two annual surveys.

More than half of BCM CEOs see the limited availability of skills as a barrier to growth, though less than a quarter of BCM CEOs are planning to invest in filling talent gaps.

Figure 5: Forces shaping executive rewards

To what extent do you agree with the following statements about alignment of top executive performance with company and wider stakeholder needs?


Pay and performance should be 76% 75% 80% considered in relation to risks taken

We need to match pay conditions of 69% 68% 72% our peers in order to retain top talent

We are changing the way we set 34% 40% 37% executive pay in response to shareholder and public reaction

Performance-based pay models are not 34% 28% 32% working as intended

Executive incentive pay structures are 32% 32% 36% now too complex

Source: 16th PwC Annual CEO Survey. Number of respondents to question in brackets


Competition over pay is still intense, with nearly 70% of BCM CEOs believing that they need to match the rewards their peer organisations offer to retain top executive talent (see Figure 5). However, sustaining this compensation model will be difficult if returns continue to come under pressure. The need for a rethink is likely to be especially pressing among BCM organisations targeting lower risk and reward utility returns.

Three-quarters of BCM CEOs believe that risk should be factored into performance evaluation and pay. Forty per cent have changed the way they set executive pay in response to shareholder and public pressure. The challenge for BCM organisations is how to create a coherent compensation framework that can attract and retain talent, while reflecting risk considerations and leaving sufficient funds to meet investor expectations. The difficult nature of this balancing act is reflected in the fact that more than 30% of industry leaders believe that executive pay structures have become too complex.

Marking out the winners from the losersBanking is grappling with the severe stresses of a challenging economy, low interest rates, higher capital demands, technological developments, constraints on business (e.g. curbs on proprietary trading), non-core and non-performing assets and lower pay and hence less attractiveness to talent.

Piyush Gupta, Chief Executive Officer and Director, DBS Group, said: ‘The

level of external threats today is much higher than in the past. Over the last five, six, seven years, we’ve entered a new world – a new normal if you want to call it that. Regulations are changing faster, technology is changing faster, the social-political landscape is changing faster. And that means that going forward an organisation’s ability to respond speedily to events is going to be crucial.’

In our view, the organisations that are responding effectively and moving on to the front foot competitively are:

• Exiting underperforming businesses and assets

• Simplifying operations and identifying opportunities for competitive advantage

• Looking at regulation in the round to manage cost and strategic impact more effectively

• Improving customer transparency while sharpening customer targeting and cross-sale opportunities

• Taking advantage of changing technologies to improve customer service, lower costs and increase speed to market

While the current landscape is challenging, it also opens up opportunities. In times of dislocation and change, the gap between high and low performers widens. Many organisations will be unrecognisable by the end of the decade and the list of market leaders will be very different as smart and agile players leapfrog slower moving competitors.

“The level of external threats today is much higher than in the past. Over the last five, six, seven years, we’ve entered a new world – a new normal if you want to call it that.”

Piyush Gupta, Chief Executive Officer and Director, DBS Group



Contacts

Editorial

Robert Sullivan Global Leader, Banking and Capital Markets PwC (US) T: +1 646 471 8388 E: [email protected]

Etienne Boris Partner, Banking and Capital Markets PwC (France) T: +33 1 56 57 1029 E: [email protected]

Kevin Burrowes UK FS Leader PwC (UK) T: +44 (0) 20 7213 1395 E: [email protected]

Marketing

Áine Bryn Director, Global Financial Services Marketing PwC (UK) T: +44 (0) 20 7212 8839 E: [email protected]

Maya Bhatti Manager, Global Financial Services Marketing PwC (UK) T: +44 (0) 20 7213 2302 E: [email protected]


Dealing with disruption: 16th Annual Global CEO Survey Key findings in the Banking and Capital Markets industry


January 2013

PwC

Welcome



This report is a summary of our key findings in the Banking and Capital Markets (BCM) sector, based on survey responses from 149 industry leaders in 49 countries, along with in-depth interviews with CEOs from Axis Bank Limited, China Merchants Bank Co. Ltd, Commerzbank AG, Grupo Supervielle, Industrivärden AB, OTP Bank Nyrt and Promsvyazbank. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

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January 2013 16th Annual Global CEO Survey – Key findings in the Banking and Capital Markets industry

wlmailhtml:EE528D04-DEA4-448D-A20C-6B1C18E65B6Fmid:/00000343/www.pwc.com/ceosurvey

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Introduction

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Introduction

Banking and Capital Markets CEOs are upbeat about their growth prospects. But they recognise that success will be hard won.

With limited funds for acquisition and new market development, the key focus is going to be organic growth in domestic markets. That demands a closer focus on evolving customer expectations and renewed efforts to strengthen operational effectiveness.

At a time when customer trust is strained, many Banking and Capital Markets businesses are also focusing on how to re-engage with customers and reinvigorate their ‘social mandate’.

Let’s see how.

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45% of Banking and Capital Markets CEOs are very confident about their ability to raise revenues over the next 12 months. A further 42% are somewhat confident.

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“We believe that one challenge for our

organisation, and for banking in Europe, is the stability of the Eurozone and the development of the currency. A second challenge is regulation. Regulation will put significant pressure on banks and their profitability. And the third is the way in which customer behaviour and customer demand is changing. Customers have lost significant trust in the banking system, and they are also changing their behaviour in the way they interact with banks: there is less branch usage, but much more internet and online usage and we have to adapt to that.”

Martin Blessing, Chairman of the Board of Managing Directors,

Commerzbank AG,

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Threats to growth are looming

of Banking and Capital Markets CEOs see the shift in customer spending and behaviours as a threat to growth

of Banking and Capital Markets CEOs see lack of trust in the industry as a threat to growth

of Banking and Capital Markets CEOs see the limited availability of key skills as a threat to growth

50%

54%

54%

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The economy remains a concern

Banking and Capital Markets CEOs are very concerned about a wide range of threats to growth. Economic growth, regulation and capital market stability top the list. Those are all factors mostly out of CEOs’ control.

But sector CEOs aren’t waiting for governments to act. They’re working on making their own businesses more resilient and seeking out pockets of opportunity.

“As the economic growth rate in China slows, the demand for banking credit is sure to decline as well.”

Dr. Weihua Ma, President and Chief Executive Officer of China Merchants Bank Co. Ltd

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Battling for market share

Most Banking and Capital Markets CEOs are primarily targeting organic growth in their existing markets, domestic or foreign. A significant proportion is also looking ahead to new product and service development. Far fewer plan to enter new markets or embark on acquisitions or alliances as their main source of growth.

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Countries targeted for growth

China and the US top the list of markets seen as most important to overall growth prospects, though Banking and Capital Markets CEOs see recession in the US and a dip in China’s growth below 7.5% as among the most likely and most threatening macroeconomic scenarios.


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“Clearly, the most important stakeholders are our clients because, quite simply, without them we would be out of business.”

Sándor Csányi, CEO and Chairman of OTP Bank Nyrt., Hungary

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Getting closer to customers

of Banking and Capital Markets CEOs have made growing their customer base a top three investment priority

of Banking and Capital Markets CEOs anticipate changes to their strategies for customer growth, retention and loyalty

of Banking and Capital Markets CEOs are planning to strengthen customer engagement

71%

87%

89%

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Technology is reshaping the market

74% of Banking and Capital Markets CEOs are planning to increase investment in technology

65% of Banking and Capital Markets CEOs are planning to increase R&D and innovation capacity

Big data analysis offers significant opportunities to sharpen customer understanding and targeting. It could also open the door to social media, telecoms firms and other new competitors. But only 29% of Banking and Capital Markets CEOs are concerned about the threat from new entrants.

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Looking at regulation in the round

81% of Banking and Capital Markets CEOs see over-regulation as a threat to growth, a consistent theme over the years

But upheaval is part of the new normal. Smart firms are taking a comprehensive approach to expected changes rather than tackling each new regulation in isolation and developing strategy to respond to the long-term impact on returns and capital requirements.


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58% of Banking and Capital Markets CEOs have made investing in improving operational effectiveness a top three priority

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CEOs are changing how they manage their organisations

of Banking and Capital Markets CEOs are planning a new cost reduction initiative

of Banking and Capital Markets CEOs are planning changes to their organisational structure

of Banking and Capital Markets CEOs are increasing investment in technology

63%

72%

74%

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Contributing to economic development

“The bank is a business, but we also feel responsible for contributing to the country’s economic development. We have a business, but if we do not comply with the objective of being agents of economic progress through offering credit, we are not fulfilling our fundamental role of distributing the savings in the economy.”

Patricio Supervielle, Grupo Supervielle’s CEO and Banco

Supervielle’s Chairman, Argentina

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Getting leaner at Industrivärden AB

“Given that the global economy and the global pace of life are getting faster in all aspects, one needs to become more agile and efficient about everything – including running a company. It’s essential that you streamline operations and become leaner wherever you can so as to be able to respond more quickly to changing market conditions.”

Anders Nyren, President and Chief Executive Officer,

Industrivärden, Sweden

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Marking out the winners from the losers

Banking is grappling with the severe stresses of a challenging economy, low interest rates, higher capital demands, technological developments, constraints on business (e.g. curbs on proprietary trading), non-core and non-performing assets and lower pay and hence less attractiveness to talent.

The organisations on the competitive front foot are:

Exiting underperforming businesses and assets Simplifying operations and identifying opportunities for competitive advantage Looking at regulation in the round to manage cost and strategic impact more effectively Improving customer transparency while sharpening customer targeting and cross-sale opportunities Taking advantage of changing technologies to improve customer service, lower costs and increase speed to market


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61% of Banking and Capital Markets CEOs are increasing their focus on ways to support a culture of ethical behaviour

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Robert Sullivan

Global Leader, Banking and Capital Markets T: +1 646 471 8388 E: [email protected]

Áine Bryn

Maya Bhatti

Global FS Marketing Director T: +44(0) 20 7212 8839 E: [email protected]

Global FS Marketing Manager T: +44 207 213 2302 E: [email protected]

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information

contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the

information contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequences

of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see

www.pwc.com/structure for further details.

121211-130640-EA-OS

Dealing with disruption 16th Annual Global CEO Survey

Key findings in the chemicals industry


February 2013

PwC

Welcome

Far-reaching changes are taking place and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable, even remote, have become the norm. For CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are agile and adaptable, as well as able to cope with disruption, can emerge stronger than before.

We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, in our 16th Annual Global CEO Survey, to find out how they’re creating resilient organisations that can flourish under stress. Dealing with disruption shows that CEOs are:

• focusing on a few carefully selected initiatives to stimulate organic growth; • exploring new ways to attract and keep customers; and • balancing efficiency with agility.

And to succeed in these three goals, CEOs are recognising the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society.

This report is a summary of our key findings in the chemicals sector, based on interviews with 77 CEOs in 27 countries, as well as an in-depth interview with Douglas D. Tough, Chairman and Chief Executive Officer of International Flavors & Fragrances, Inc.

To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

2 February 2013 16th Annual Global CEO Survey – Key findings in the chemicals industry



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Contents

Page

Introduction 4


What worries CEOs? 8

Strategies that CEOs are using 13

• Targeting pockets of opportunity and concentrating on the customer

14

• Improving operational effectiveness

21



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Introduction


PwC

Introduction

Chemicals CEOs are surprisingly confident about revenue growth this year, considering the range of threats – particularly macroeonomic ones – they see looming.

When we looked at the results of this year‘s 16th Annual Global CEO Survey for the chemicals sector, two major themes stood out:

1) Growth in China (and foreign markets more generally)

2) The importance of innovation and R&D

In both these areas, the results for chemicals CEOs far outdistanced the overall survey and were the strongest for any industry sector. Chemicals CEOs say their companies are committed to serving customers better, by going where they‘re going and developing the products they need.

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February 2013 16th Annual Global CEO Survey – Key findings in the chemicals industry

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94% of chemicals CEOs are confident they can increase the revenues that their companies generate over the next 3 years


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Chemicals CEOs are remarkably confident about the future

There have been many disruptions in the past decade, from the financial crisis of 2008/2009 to natural disasters such as hurricanes in the Gulf of Mexico. But most chemicals CEO’s expect to master future challenges of the new ‘stable instability.’ 81% are confident of generating higher revenues in the next 12 months, while an impressive 94% are confident of doing so over the next three years.

43

51

51

30

3

16 1

40% 20% 0% 20% 40% 60% 80% 100% 120%

3 years

12 months

Somewhat confident Very confidentNot very confident Not confident at all

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Over the next 3 years? Base: All respondents (Chemicals, 77 ) Note: Don’t know/refused excluded. Not confident at all for 3 years is 0%. Source: PwC 16th Annual Global CEO Survey 2013


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What worries CEOs?

84% of chemicals CEOs are concerned about volatile or uncertain economic growth


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There are some clouds on the horizon though

is causing anxiety.

61% of chemicals CEOs worry it could slow done growth, and 30%

are ‘extremely’ concerned

are going up.

75% of chemicals CEOs are concerned, far more than across the

total sample.

is the biggest worry.

84% of chemicals CEOs fear it could slow down growth

Exchange rate

volatility

Raw material

and energy costs

Economic volatility


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Macroeconomic worries dominate chemicals CEOs’ concerns

Nearly all of the top threats to growth are related to macroeconomic factors. Chemical sector CEOs see governments as having a major impact on growth prospects.

51

61

69

54

71

62

52

81

53

55

57

61

65

65

75

84

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Protectionist tendencies of national governments


Over-regulation




Energy and raw materials costs


Chemicals Total sample

Q: How concerned are you, if at all, about each of the following threats to your growth prospects? Base: All respondents (Total sample, 1330; Chemicals, 77) Note: Respondents who stated ‘extremely’ or ‘somewhat’ concerned. Only the top 8 threats for healthcare CEOs are listed.. List combines ‘economic and policy threats’ and ‘business threats’. Source: PwC 16th Annual Global CEO Survey 2013


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Chemicals CEOs don’t expect most major disruptions to happen

64

70

52

60

62

71

73

60

10

12

13

14

14

31

40

51

0% 20% 40% 60% 80%



Health crisis (e.g. Viral pandemic, food/water safety crisis)


Cyber-attack or major disruption of internet


Recession in the US

China’s GDP growth falling below 7.5% per annum

Chemicals CEOs who say scenario is 'likely to occur'Chemicals CEOs who say scenario would have a 'negative impact' were it to occur in the next 12 months

Q:How likely are the following scenarios to occur? How would your organisation cope with the following scenarios, if they happened within the next 12 months? Base: All respondents (Chemicals, 77) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013

…but if they do, there will be a big impact


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Facing natural resource threats

Chemicals CEOs are far more worried about the pending ‘resource crunch’ than CEOs across the overall sample, with 75% seeing energy and raw material costs as a concern (although some other sectors, like metals and automotive, also rate these costs as a serious threat).

More than a third think securing natural resources should be a government priority, and almost as many say they’ll increase their own investments in these areas.

52

75

0 20 40 60 80

CEOs who are concerned thatenergy and raw materials costs

could threaten growth


28

24

38

36

0 10 20 30 40

CEOS who say that securingnatural resources that are critical

to business should be agovernment priority

CEOs who say that they'll increaseinvestments to secure naturalresources that are critical to

business


Q. How concerned are you about the following potential business threats to your growth prospects? How much does your company plan to increase its investment over the next three years to achieve the following outcomes in the country in which you are based? Which three areas should be the Government’s priority today? Base: All respondents (Total sample, 1330; Chemicals, 77) Source: PwC 16th Annual Global CEO Survey 2013

%

%


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Strategies that CEOs are using

• Targeting pockets of opportunity and concentrating on the customer



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Targeting pockets of opportunity and concentrating on the customer

73% of chemicals CEOs say they’re focusing on a few carefully selected initiatives


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Chemicals CEOs are looking to foreign markets to drive growth

The chemicals sector is already global, and CEOs see organic growth in existing foreign markets as holding the most promise for growth this year. Deals and innovation follow close behind.

25 23 22 21 8 17 17 25 32 8 05

101520253035

Organic growth inexisting foreign

market

New M&A/ jointventures/ strategic

alliances

New product orservice development

Organic growth inexisting domestic

market

New operation(s) inforeign markets


Q: Which one of these do you see as the main opportunity to grow your business over the next 12 months? Base: All respondents (Total sample, 1330; Chemicals, 77) Source: PwC 16th Annual Global CEO Survey 2013

%


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Counting on growth in emerging markets with China leading the way – but the US is important too More than half of chemicals CEOs say China is one of the countries most important to their overall growth. That’s more than in any other sector. That’s twenty points higher than the overall average. Brazil, India and Russia make the top 5 too, with the US coming in second.

7

4

12

8

10

15

23

31

9

10

12

12

16

21

31

51

0% 10% 20% 30% 40% 50% 60%

Indonesia

Thailand

Germany

Russia

India

Brazil

USA

China


Q: Which countries, excluding the country in which you are based, do you consider most important for your overall growth prospects over the next 12 months? Base: All respondents (Total sample, 1330; Chemicals, 77) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


PwC

Why China? Customers, capacity and talent

Like peers across the sample, the #1 objective for chemicals CEOs in China is growing the customer base. But building manufacturing capacity and accessing local talent are important too. To serve local customers they’re looking to develop their internal service delivery capacity. The resource crunch is a factor here too, with 44% saying they’ll access raw materials or components.

12

19

29

24

33

43

30

73

15

21

41

44

44

59

64

79

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Access local sources of capital

Build R&D/innovation capacity or acquire intellectual property

Acquire local operation and customer base

Access raw material or components

Build internal service delivery capacity

Access local talent base

Build manufacturing capacity

Grow your customer base

Chemicals Total sampleQ: Which of the following objectives do you hope to achieve in the next 12 months?? Base: Respondents who identified China as one of t heir most important growth markets (Total sample, 414; Chemicals, 39) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


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60% of chemicals CEOs say R&D is a top investment priority over the next 12 months. That’s almost double the overall average, and significantly more than other innovation-driven sectors.

And 78% of chemicals CEOs say they’ll make changes to increase R&D and innovation capacity. Again, that’s more than across the overall sample.

60% 78%

R&D and innovation are a top priority

“The foundation of IFF’s strength, and the opportunity we have for winning in the marketplace, is technology and research and development. We spend 8% of our annual sales turnover of $3 billion on R&D.” Douglas D. Tough, Chairman and CEO

International Flavors & Fragrances, Inc.

Q: What are your top 3 investment priorities in the next 12 months? To what extent do you anticipate changes at your company over the next 12 months with regards to an increase in R&D and innovation capacity? Base: All respondents (Total sample, 1330; Chemicals, 77) Source: PwC 16th Annual Global CEO Survey 2013


PwC

Deals still a factor

More chemicals CEOs say they have completed a cross-border M&A over the past 12 months than across the total sample. And more say they‘re planning a cross-border M&A for the next 12 months (39% of chemicals CEOs vs. 26% overall) too. Our other research on chemical sector transactions suggests that deal values in 2012 have declined, although overall deal volume for the year looks to be up slightly.*

16

24

19

19

36

14

18

21

30

38

0% 10% 20% 30% 40% 50% 60% 70% 80%



Divested majority interest in a business or exited asignificant market




Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Base: All respondents (Total sample, 1330; Chemicals, 77) Note: Does not include all restructuring activities. Source: PwC 16th Annual Global CEO Survey 2013

*See our quarterly series on industry M&A, Chemical Compounds


http://www.pwc.com/us/en/industrial-products/publications/chemical-compounds.jhtml

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43% of chemicals CEOs say its one of their top investment priorities for the coming 12 months


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79% of chemicals CEOs say they cut costs last years. That’s in line with the results across our sample as a whole.

And 74% of chemicals CEOs say they’ll implement a cost-reduction initiative in the coming 12 months.

79% 74%

Cost-cutting is on the agenda

Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Do you plan to initiate in the coming 12 months? Note: those who listed ‘implemented a cost-reduction initiative” or plan to ‘implement a cost-reduction initiative” Base: All respondents (Total sample, 1330; Chemicals, 77) Source: PwC 16th Annual Global CEO Survey 2013


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Diversifying supply chains

This placeholder text (20pt Georgia regular) is intended to show the correct position and size of the real text used in this location. To ensure that you have the correct size, colour and location of the text, it is recommended that you select. Overtype this placeholder text.

The chemical industry has shown a strong commitment to supply chain security, with a number of voluntary initiatives in place.

One way CEOs tell us they’re taking action to head off the possibility of supply chain disruption is by spreading out the risk.

Nearly two-thirds of chemicals CEOs say their companies are diversifying their supply chains and working with more partners across varied geographies.

And many are working to strengthen engagement with supply chain partners too.

Chemicals CEOs are worried about supply chain disruption

42% 22

February 2013 16th Annual Global CEO Survey – Key findings in the chemicals industry

PwC


“That sustainability is important to our customers, and increasingly it’s become very important to our employees who want to see the company as a highly responsible, sustainable organisation. Beyond that, it’s just good business. The triple bottom line of environmental and consumer safety and profitability all come together, and reduced waste generates savings for the company.”

Douglas D. Tough, Chairman and CEO International Flavors & Fragrances, Inc.


PwC

Chemicals CEOs are working to build trust with customers, employees, and society

. Most chemicals CEOs say customers and clients influence strategy—and for 83% the influence is ‘significant’

81% of chemicals CEOs are encouraging global mobility and involving managers below board level in strategic decision-making

More chemicals CEOs say they’ll reduce their environmental footprint

and more are focusing on climate change too.

Listening to customers

Protecting the

environment Developing leaders


PwC

Chemicals CEOs are listening to a wide range of stakeholders Customers and clients stand out, but industry peers, employees and supply chain partners are influencing company strategy too.

26 30 40 58 74 78 81 83 90 97

0% 20% 40% 60% 80% 100% 120%

Non Governmental Organisations (NGOs)Users of social media

The mediaLocal communities

Providers of capital (e.g. creditors and investors)Government and regulatorsYour supply chain partners

Employees (including trade unions and work councils)Industry competitors and peers

Customers and clients

Chemicals

Q: How much influence do the following groups have on your strategy? Base: All respondents (Total sample, 1330; Chemicals, 77) Note: Respondents answering ‘some’ or ‘significant’ influence Source: PwC 16th Annual Global CEO Survey 2013 concerned. Source: PwC 16th Annual Global CEO Survey 2013


PwC

And they’re reaching out Chemicals CEOs who see stakeholder groups as influential are generally working harder to strengthen their engagement with them too.

55 55 55 63 67 67 73 74 79 88

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

The mediaIndustry competitors and peers

Non Governmental Organisations(NGOs)Government and regulators

Providers of capital (e.g. creditors and investors)Local communities

Employees (including trade unions and work councils)Users of social media

Your supply chain partnersCustomers and clients

Chemicals

Q: For those stakeholders with some or significant influence, to what extent are you strengthening your engagement program? Base: All respondents (Total sample, 420-1285; Chemicals, 20-85) Note: Respondents who answered ‘some’ or ‘significant ‘ influence to Q14a. Please note some categories reflect a small sample size.’ Source: PwC 16th Annual Global CEO Survey 2013 concerned. Source: PwC 16th Annual Global CEO Survey 2013


PwC

Chemicals CEOs are also putting programmes in place to develop their leadership pipeline

34

57

58

74

75

81

81

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Shadowing senior executives

Programmes to encourage diversity amongst businessleaders

Rotations to different functions/ challenges

Dedicated executive development programme

Active succession planning including identifying multiplesuccessors

Involving managers below board level in strategicdecision-making

Encouraging global mobility and international experience

Chemicals

Q: Do you deploy any of the following to develop your leadership pipeline? Base: All respondents (Chemicals, 77) Note: Respondents who stated yes. Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


PwC

And chemicals CEOs say they are committed to reducing their company’s environmental footprint

We will decrease our focus

significantly We will decrease our focus somewhat

No change in our focus

We will increase our focus somewhat

We will increase our focus

significantly

18%

Q: Please indicate to what extent your organisation plans to focus on reducing environmental footprint over the next 12 months? Base: All respondents (Total sample, 1330; Chemicals, 77) Source: PwC 16th Annual Global CEO Survey 2013

48%

23%

66% of chemicals CEOs say their company will increase its focus on reducing the environmental footprint this year.


PwC


PwC gratefully acknowledges the contribution to the 16th Annual Global CEO Survey: Key findings in the chemicals industry provided by: • Douglas D. Tough, Chairman

and Chief Executive Officer, International Flavors & Fragrances, Inc., US


Acknowledgements

Antoine Westerman Joy Winton Global Chemicals Leader T: +31 8879 23946 E: [email protected] Or visit www.pwc.com/ceosurvey

Global Chemicals Marketing T: +31 8879 23281 E: [email protected]






121211-130640-EA-OS

16th Annual GlobalCEO SurveyKey findings in theCommunications industry


January 2013

Welcome

Far-reaching changes are taking place, and they’re taking place faster than ever. In this new eraof ‘stable instability’, risks that once seemed improbable and even remote have become thenorm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The onlysolution is to build organisations that can thrive amidst disorder: organisations that are agileand adaptable, able to cope with disruption and emerge stronger than before.

We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, in our16th Annual Global CEO Survey, to find out how they’re creating resilient organisations that can

PwC

16th Annual Global CEO Survey, to find out how they’re creating resilient organisations that canflourish under stress. Dealing with disruption shows that CEOs are focusing on a fewcarefully selected initiatives to stimulate organic growth; exploring new ways to attract and keepcustomers; and balancing efficiency with agility. And to succeed in these three goals, CEOs arerecognising the role that trust plays, and that they’ll have to work hard to repair the bridgesbetween business and society.

This report is a summary of our key findings in the Communications sector, based on interviewswith 34 Communications CEOs in 34 countries, as well as in-depth interviews with Alex Arena,Group Managing Director of HKT Ltd, and Andrei Dubovskov, President and Chief ExecutiveOfficer of MTS. To see the full results of the 16th Annual Global Survey, please visitwww.pwc.com/ceosurvey.

2January 201316th Annual Global CEO Survey – Key findings in the Communications industry

Introduction

PwC 3January 201316th Annual Global CEO Survey – Key findings in the Communications industry

Introduction

Communications CEOs are a lot like their peers across industries. They’re less confidentthis year about the global economy and they’re worried about threats like the break-up ofthe Eurozone or trouble at home.

But there are some key differences too. For example, a lot more Communications CEOsare confident about their company’s prospect for revenue growth over the next 12 months– 88% are either somewhat or very confident compared to 81% of the global sample. And,Communications CEOs are ‘ahead of the pack’ when it comes to M&A – 53% of them

PwC

Communications CEOs are ‘ahead of the pack’ when it comes to M&A – 53% of thementered into a strategic alliance or joint venture in the last 12 months, compared with theoverall sample average of just 36%.

Communications CEOs are ready to move on the M&A front, all while maintaining afierce focus on customers – how to get them, and then how to keep them happy.



Revenue growth

PwC

of communications CEOs are veryconfident or somewhat confident aboutthe revenue growth their companies willgenerate over the coming year


Growth

“We are rebuilding the brand, retoolingthe staff in terms of skill sets; looking atthe products and services we have to

PwCJanuary 201316th Annual Global CEO Survey – Key findings in the Communications industry

6

the products and services we have tooffer. If we put the effort in now, there’sa good chance that as things improvewe’ll be in good shape to accelerateaway.”

Alex ArenaGroup Managing Director

HKT, Hong Kong

Concerns about the global economy

PwC

of communications CEOs are extremelyconcerned about uncertain or volatileeconomic growth.


Investment priorities

Q: What are your top investment priorities in the next 12 months?





8

Base: All respondents (Total sample, 1,330; Communications sector sample size: 34)

0% 10% 20% 30% 40% 50% 60%

R&D and innovation



New M&A / joint ventures / strategic alliances


Global sample

Communications sample

M&A is a top priority

53%29%

61%

PwC

of communications CEOsentered into a new strategicalliance or joint venture inthe last 12 months

Compared to just 36% of the globalsample.

of Communications CEOsview M&A as the mainopportunity to grow theirbusiness in the next 12months

Compared to 17% of the globalsample.

of Communications CEOsplan to initiate either adomestic or cross-borderM&A in the coming 12months

Global sample: 32% say they willinitiate a domestic M&A transaction

and 29% say they will initiate across-border M&A transaction

29%


Customer Focus

“We have had to learn who ourcustomers are, what their propensity to


10

customers are, what their propensity tospend is, what their likes and dislikesare. So we are changing all of ourcustomer relationship systems to betterunderstand and serve the customer.”


HKT, Hong Kong

Customer is King

Communications CEOs are intently focused on customers. Survey results show thatfocusing more on growth/retention/loyalty strategies are key priorities for the next 12months.

Q: To what extent do you anticipate changes at your company over the next 12 months with regards tocustomer growth /retention/ loyalty strategies?

51%

60%

PwC




47%44%

51%

31%

0%

10%

20%

30%

40%

50%

Some Change A Major Change

Communications sample

Global sample

Customer is King, continued

When Communications CEOs were asked what their top three investment priorities areover the next 12 months, two of the top three focus on customers: enhancing customerservice (47%) and growing the customer base (47%).

47% 47% 47%

40%

45%

50%

PwC




0%

5%

10%

15%

20%

25%

30%

35%

Enhancing customer service Growing your customer base New M&A / joint ventures / strategicalliances

The Future

“We’re forever reaching deeper intoconsumers’ homes. So we are developinginnovations around smart living andintegrating services within theconsumer’s home. We diversified fromtraditional telecoms into pay TV andentertainment, into music. Now we’rediversifying into health services at


13

diversifying into health services athome, into education services at homeand being the IT manager at home.These are the ways that we shore up ourrevenue and growth possibilities.”


HKT, Hong Kong

Potential opportunities for business growthOver the next 12 months

Communications CEOs single out ‘New M&A / joint ventures / strategic alliances’ as the most likely area to grow their businessover the next 12 months. This exceeds the global CEO Survey sample (from across all industries). The second most common wayoperators see a potential for growth is in new product or service development.

Q:Which of these do you see as the main opportunity to grow your business in the next 12 months?

Communications

18%

Global sample

New Product or Service Development


14

26%

18%15%

12%

29%17%

32% 17%

8%

New Product or Service Development

Organic growth in existing domesticmarketOrganic growth in existing foreignmarket


New M&A / joint ventures / strategicalliances

Base: All respondents (Total sample, 1,330; Communications sector sample size: 34))


25%

Risk


15

“We take disaster recovery not as a boxthat you tick, in terms of doing your riskassessments, but as a real risk.”


HKT, Hong Kong

Change


16

“If I look at the half-life of technologicalchange, it’s got shorter and shorter andwe have to run faster all the time toretain a competitive position.”


HKT, Hong Kong

Threats

“A significant portion of our investmentaims to ensure the stable operation ofour networks and backup facilities, andeliminate the potential threat of cyber


17

eliminate the potential threat of cyberattacks. We see cyber attack as acredible business threat, but do not treatit as a global one similar to an adverse,large scale economic challenge.”

Andrei DubovskovPresident & CEO

MTS, Russia



Acknowledgements

PwC gratefully acknowledges the contribution to the 16th Annual Global CEO Survey: Key findings in thecommunications industry provided by:

Andrei Dubovskov, President and Chief Executive Officer

Pierre-Alain Sur Sarah Franklin

T: +1 646 471 6973E: [email protected]

T: +1 415 498 5015E: [email protected]

PwC

MTS, Russia

Alex Arena, Group Managing Director

HKT Ltd, Hong Kong

To download the main report, access the results and explore the CEOinterviews from our 16th Annual Global CEO Survey online atwww.pwc.com/ceosurvey.


This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the informationcontained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of theinformation contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequencesof you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please seewww.pwc.com/structure for further details.

121211-130640-EA-OS

Dealing with Disruption 16th Annual Global CEO Survey

Key findings in the Healthcare industry


January 2013

PwC

Welcome

Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption, and emerge stronger than before.


This report is a summary of our key findings in the Healthcare sector, based on interviews with 90 CEOs in 27 countries, as well as an in-depth interviews with 2 CEOs. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

2 January 2013 16th Annual Global CEO Survey – Key findings in the healthcare industry


PwC

Contents

Page

Introduction 4







PwC

Introduction


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The healthcare industry is transforming

• As the healthcare industry adapts to new demands, businesses and governments will have to change the way they deliver and pay for care

• Although every healthcare market has unique characteristics, there are 3 key trends common to almost all healthcare economies, ushering in a new era of productivity

January 2013 16th Annual Global CEO Survey – Key findings in the healthcare industry 5

PwC

PwC sees 3 major trends driving the healthcare market:


1

• There is a rebalancing of the public and private sectors in the financing and delivery of care • Extend partnerships to create sustainable health communities

2

• The healthcare sector is industrialising • Disruptive technologies are transforming business models

3

• Healthcare is becoming a precision-based industry • Investing in preventive medicine can create long-term cost

savings

PwC

The trends were validated by the data

These 3 trends were validated in this year‘s 16th Annual Global CEO Survey, where we see Healthcare CEOs leveraging economic and technological resources to transform their business models. And many of these transformations are concentrated on the consumer:

• The vast majority of healthcare CEOs say customers have a „significant‘ influence on strategy

• Many also say social media users are influencing strategy

• In both cases, most of these healthcare CEOs are working to strengthen enagement with these stakeholders


PwC

The trends were validated by the data, con’t

Some of the other results also point to healthcare CEOs‘ focus on the consumerisation trend more indirectly.:

• Healthcare CEOs are much more likely to be looking at JVs and strategic alliances than peers in other sectors.

• More of them are increasing technology investments.

• In both cases, the reasons why are probably connected to efforts to reach out more to patients. And the sector‘s strong emphasis on cost reduction is also part of efforts to deliver better value.


PwC


49% of healthcare CEOs are very confident they can raise the revenues their companies generate over the next 3 years


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Healthcare CEOs confident of future success

The healthcare industry is going through a period of profound disruption, as healthcare CEOs everywhere are well aware. The way in which healthcare is financed and delivered is transforming. But most CEO’s expect to master the challenges. 77% are confident of generating higher revenues in the next 12 months, while 86% are confident of doing so over the next three years.

45

37

36

49

15

16

4

6

40% 20% 0% 20% 40% 60% 80% 100%

12 Months

3 Years

Somewhat confident Very confident Not very confident Not confident at all

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Over the next 3 years? Base: All respondents (Healthcare, 90) Source: PwC 16th Annual Global CEO Survey 2013


PwC

What worries CEOs?


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What governments do could have a big impact

is looming. 72% of healthcare CEOs are worried

it could threaten their prospects

is causing headaches.

74 % of healthcare CEOs are concerned, the same % as last year.

Are generating anxiety about how governments

will respond to them.

79% of healthcare CEOs fear they could slow down growth.

Economic uncertainty

Over-regulation

Debt and deficits


PwC

Economic worries top the list, but skills gaps follow close behind.

While economic threats stand out, skills and financing issues are concerns too.

39

62

61

58

81

69

71

52

53

54

62

72

74

79

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%






Over-regulation


Healthcare Total sample

Q: How concerned are you, if at all, about each of the following threats to your growth prospects? Base: All respondents (Total sample, 1330; Healthcare, 90) Note: Respondents who stated ‘extremely’ or ‘somewhat’ concerned. Only the top 8 threats for healthcare CEOs are listed.. List combines ‘economic and policy threats’ and ‘business threats’.. Source: PwC 16th Annual Global CEO Survey 2013


PwC



• Targeting pockets of opportunity

• Concentrating on the customer


PwC


72% of healthcare CEOs say they’re focusing on a few carefully selected initiatives


PwC

Healthcare CEOs are staying close to home

Healthcare CEOs are especially focused on organic growth in their existing domestic markets. Some are also looking to new product or services or deals to help rev up revenues.

32 25 17 8 17 42 24 20 10 2 0 5

10 15 20 25 30 35 40 45

Organic growth in existing domestic

market


New M&A/ joint ventures/ strategic

alliances


Organic growth in existing foreign

market

Total sample Healthcare

Q: Which one of these do you see as the main opportunity to grow your business over the next 12 months? Base: All respondents (Total sample, 1330; Healthcare, 90) Source: PwC 16th Annual Global CEO Survey 2013


%

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And looking for partnership opportunities

Nearly half of healthcare CEOs say they started a new strategic alliance or JV in the past 12 months. That’s far more than ended such an arrangement.

19

16

19

24

36

8

17

17

20

47

0% 10% 20% 30% 40% 50% 60% 70% 80%







Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Base: All respondents (Total sample, 1330; Healthcare, 90) Note: Don’t know/refused excluded.


PwC


78% of healthcare CEOs say that customers have a ‘significant’ influence on their strategy.


PwC

Healthcare CEOs are listening to customers and working to serve them better

84% are working harder to engage with customers

That’s nearly all of those who say they’re influencing strategy.

82% of CEOs are changing customer growth/ retention / loyalty strategies.

And one-third of healthcare CEOs are making major changes.

43% see improving it as one of their top 3 investment priorities. And even more – 50% --are planning

to invest in growing the customer base too.

Listening Changing

course

Better customer

service


PwC

And they’re getting social

This placeholder text (20pt Georgia regular) is intended to show the correct position and size of the real text used in this location. To ensure that you have the correct size, colour and location of the text, it is recommended that you select. Overtype this placeholder text.

Social media gives healthcare providers and payers a way to have a dialogue with customers that they haven’t had in the past. Many have started to take advantage of the opportunity to enhance relationships.

58% say social media users influence strategy – and 81% of these CEOs are working to strengthen their engagement. 20

January 2013 16th Annual Global CEO Survey – Key findings in the healthcare industry

PwC


56% of healthcare CEOs say its one of their top investment priorities.


PwC

Healthcare CEOs say cost-cutting continues to be a priority

Last year, 84% of healthcare CEOs told us they were planning to cut costs. And they followed through – the same number said they implemented cost reductions over the past 12 months. Outsourcing was very popular with healthcare CEOs too.

19

31

77

19

46

84

0% 10% 20% 30% 40% 50% 60% 70% 80%

“Insourced” a previously outsourced business process or function


Implemented a cross-reduction initiative


Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Base: All respondents (Total sample, 1330; Healthcare, 90) Note: Don’t know/refused excluded.


PwC

What about next year?

They’re keeping the pressure on .

16

31

70

14

37

80

0% 10% 20% 30% 40% 50% 60% 70% 80%



Implemented a cross-reduction initiative


Q: Which, if any, of the following restructuring activities do you plan to initiate in the coming 12 months? Base: All respondents (Total sample, 1330; Healthcare, 90) Note: Don’t know/refused excluded.


PwC


David Levy Global Health Industries Leader

T: +1 646 471 1070 E: [email protected]



Christine Walters Global Health Industries Marketing Director

T: +1 646 471 3359 E: [email protected]

PwC firms help organisations and individuals create the value they're looking for. We're a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.

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121211-130640-EA-OS

http://www.pwc.com/

Dealing with disruption 16th Annual Global CEO Survey Key findings in the industrial manufacturing industry


January 2013

PwC

Welcome Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption, and emerge stronger than before.


• focusing on a few carefully selected initiatives to stimulate organic growth, • exploring new ways to attract and keep customers and • balancing efficiency with agility. And to succeed in these three goals, CEOs are recognising the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society.

This report is a summary of our key findings in the industrial manufacturing sector, based on interviews with 173 CEOs in 39 countries, as well as in-depth interviews with:

• Mr. Pertti Korhonen, President and Chief Executive Officer, Outotec Oyj, Finland • Mr. Yves Serra, President and Chief Executive Officer, Georg Fischer Ltd.,

Switzerland


2 January 2013 16th Annual Global CEO Survey – Key findings in the industrial manufacturing industry


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Contents

Page

Introduction 4






Being a good corporate citizen 23


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Introduction


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Introduction Industrial manufacturing CEOs are a lot like their peers across industries. They’re somewhat less confident this year and they’re worried about a range of threats, particularly around the global economy.

But there are some key differences too, and these reflect the increasingly global nature of the sector:

• More industrial manufacturing CEOs see the cost of energy and raw materials as a potential problem – 73% are concerned, compared to just 52% of the total sample.

• And more industrial manufacturing CEOs (64%) are somewhat or extremely concerned about exchange rate volatility, compared with the overall average of 54%.

This year we also see strong signs of the shape of the industry’s future:

• China continues to play an important role to foster growth.

• Concerns about getting the natural resources that manufacturers will need are looming. In fact, 46% of industrial manufacturing CEOs say one of their key objectives in China this year is accessing raw materials or components—far more than across the overall sample.

• Developing the workforce and reducing the environmental footprint are top priorities

5

January 2013 16th Annual Global CEO Survey – Key findings in the industrial manufacturing industry

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only 28% of industrial manufacturing CEOs are very confident they can raise the revenues their companies generate over the next 12 months


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Industrial manufacturing CEOs outlook subdued

There have been many disruptions in the past decade. Far-reaching changes are happening and happening faster than before, so CEOs have a lot to cope with. And while the majority of industrial manufacturing CEOs expect to grow, their outlook is somewhat more cautious than peers across the total sample.

45

46

36

28

15

21

4

6

40% 20% 0% 20% 40% 60% 80% 100%

Total sample


Somewhat confident Very confidentNot very confident Not confident at all

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Over the next 3 years? Base: All respondents (Total sample, 1330; Industrial manufacturing, 173) Source: PwC 16th Annual Global CEO Survey 2013


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What worries CEOs?


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Threats to growth may be looming for industrial manufacturing CEOs

64% say currency fluctuations are a concern, compared to 54% overall.

66% think government responses to fiscal deficit and debt burden could

hurt growth.

73% see them as a concern,

compared to 52% of the overall sample.

Exchange rate

volatility

Deficits and debt

Raw material

and energy

costs


PwC

Threats to growth may be looming for industrial manufacturing CEOs

Economic worries dominate their ‘top 5’. But the second biggest concern is energy and raw materials costs. Industrial manufacturing CEOs are far more concerned than peers in other sectors.

62

54

71

52

81

63

64

66

73

79

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%






Industrial manufacturing Total sample

Q: How concerned are you, if at all, about each of the following threats to your growth prospects? Base: All respondents (Total sample, 1330; Industrial manufacturing, 173) Note: Respondents who stated ‘extremely’ or ‘somewhat’ concerned. Only the top 5 threats for industrial manufacturing CEOs are listed.. List combines ‘economic and policy threats’ and ‘business threats’. Source: PwC 16th Annual Global CEO Survey 2013


PwC

So CEOs are looking ahead

“To say we’re always well-prepared for changes may not be correct. We do our best to work through scenarios, opportunities and threats, and to prepare accordingly.”

Yves Serra, President and Chief Executive Officer Georg Fischer Ltd., Switzerland


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Most industrial manufacturing CEOs don’t expect the worst to happen

47

62

66

55

64

74

69

53

12

17

17

17

23

25

32

44

0% 10% 20% 30% 40% 50% 60% 70% 80%

Health crisis (e.g. Viral pandemic, food/water safetycrisis)


A natural disaster disrupting a majortrading/manufacturing hub


Military or trade tensions affecting access to naturalresources

Major social unrest in the country in which you arebased

Recession in the US


Industrial manufacturing CEOs who think scenario is 'likely to occur'Industrial manufacturing CEOs who state 'it would have a negative impact'

Q:How likely are the following scenarios to occur? How would your organisation cope with the following scenarios, if they happened within the next 12 months? Base: All respondents (Total sample, 1330; Industrial manufacturing, 173) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


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• Targeting pockets of opportunity • Concentrating on the customer • Improving operational effectiveness


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33% of industrial manufacturing CEOs say that China is one of their top 3 growth markets for the coming 12 months.


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Counting on growth in the BRICs – plus Indonesia – but the US and Germany make the list too

The US and Germany, both traditional manufacturing powerhouses, are still making sector CEOs list of top markets, but China leads, the rest of the BRICs make the top 6 and newcomer Indonesia shows up at number 7.

7

8

10

15

12

23

31

9

12

13

16

16

27

33

0% 5% 10% 15% 20% 25% 30% 35%

Indonesia

Russia

India

Brazil

Germany

USA

China

Industrial Manufacturing Total sample

Q: Which countries, excluding the country in which you are based, do you consider most important for your overall growth prospects over the next 12 months? Base: All respondents (Total sample, 1330; Industrial manufacturing, 173) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


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82% of industrial manufacturing CEOs say that customers have a ‘significant’ influence on their strategy.


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Industrial manufacturing CEOs are listening to customers and working to serve them better

82% say customers have a ‘significant’ influence on their business strategy

And of these CEOs, 88% say they plan to strengthen engagement too.

77% of CEOs are changing customer growth/ retention / loyalty strategies.

And 24% of industrial manufacturing CEOs are making

major changes.

34% see improving it as one of their top 3 investment priorities. And even more – 43% --are planning

to invest in growing the customer base too.

Listening Changing

course

Better customer

service


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Developing the new technologies customers want

R&D and innovation still a top priority Industrial manufacturing CEOs have a strong focus on innovation. 45% of them said R&D and innovation is one of their top 3 investment priorities over the next 12 months, compared to just 32% across the total sample.

And three-quarters of industrial manufacturing CEOs also say they’ll make changes to increase R&D and innovation capacity.

“We train our people to be close to our customers so as not to miss new trends, and cooperate with our customers to bring them solutions.” Yves Serra, President and Chief Executive Office, Georg Fischer Ltd., Switzerland


PwC


46% of industrial manufacturing CEOs say its one of their top investment priorities.


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Industrial manufacturing CEOs say cost-cutting continues to be a priority

Last year, 70% of industrial manufacturing CEOs told us they were planning to cut costs. Even more ended up trimming the fat this year. 82% said their companies have implemented a cost reduction initiative over the past 12 months. That continues a long-term trend in the sector.

19

31

77

17

26

82

0% 10% 20% 30% 40% 50% 60% 70% 80%




Industrial manufacturing Total sample

Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Base: All respondents (Total sample, 1330; Industrial manufacturing , 173) Note: Don’t know/refused excluded. Not all restructuring choices are listed.


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Orchestrating the supply chain

“One key point of our strategic advantage is the capability to ‘orchestrate’ the production and engineering value chain we create in partnership with other companies. That gives us the ability to scale up or scale down quickly and efficiently. We try to ensure our organizational structure is sufficiently fluid so that we can respond quickly to changes in demand. Working this way gives us a lot of flexibility - but at the same time, obliges us to ensure that all of our partners adhere to the high professional and ethical standards we set for ourselves.”

Pertti Korhonen, President and Chief Executive Officer Outotec Oyj, Finland


PwC

The majority of industrial manufacturing CEOs are increasing their investment in creating and fostering a skilled workforce. It’s their number #1 priority looking out over 3 years.

And keeping the workforce healthy ranks high on their list too. 60%

Addressing the coming skills gap


Q: How much does your company plan to increase its investment over the next 3 years to create and develop a skilled workforce in the country in which you are based? Base: All respondents (Total sample, 1330; Industrial manufacturing, 173) Note: 60% represents respondents who stated ‘some increase’ or a ‘significant increase’ and does not include respondents stating ‘a small increase’ Source: PwC 16th Annual Global CEO Survey 2013

PwC

Being a good corporate citizen

54% of industrial manufacturing CEOs say local communities influence their business strategies


PwC

Industrial manufacturing CEOs are making their organisations more agile, more appealing and more profitable. But as we’ve argued in our main report, if they’re to succeed in these three goals, they’ll also have to repair the bridges between business and society. Like their peers, CEOs also recognise the important role that business can play in addressing societal challenges and improving national outcomes. Trust isn’t just an essential part of the customer relationship, it’s the glue that binds an organisation and all its stakeholders together – and there are now many more stakeholders to consider.


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Industrial manufacturing CEOs are listening

Industrial manufacturing CEOs tell us that a whole range of stakeholders are influencing their business strategies.

76 60 57

46 12 23 21 16 11

4

20 31 35

44 37 43 49

43 35

14

3 9 8

4 40 35

35 44

53 82

80% 60% 40% 20% 0% 20% 40% 60% 80% 100%

Non Governmental Organisations (NGOs)The media

Users of social mediaLocal communities

Providers of capital (e.g. Creditors and investors)Government and regulators

Employees (including trade unions/ work councils)Your supply chain partners

Industry competitors and peersCustomers and clients

Little or no influence Some influence Have significant influence

Q: How much influence do the following groups have on your strategy? Base: All respondents (Total sample, 1330; Industrial manufacturing, 173) Source: PwC 16th Annual Global CEO Survey 2013


PwC

And they’re reaching out These CEOs are generally working harder to strengthen their engagement too.

48 60 60 60 62 65 65 78 84 88

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Non Governmental Organisations(NGOs)Government and regulators

Industry competitors and peersThe media

Users of social mediaLocal communities

Providers of capital (e.g. creditors and investors)Employees (including trade unions and work councils)

Your supply chain partnersCustomers and clients


Q: For those stakeholders with some or significant influence, to what extent are you strengthening your engagement program? Base: All respondents who answered ‘some’ or ‘significant ‘ influence (Total sample, 420-1285; Industrial manufacturing, 40-166) Source: PwC 16th Annual Global CEO Survey 2013


PwC

Most sector CEOs are committed to reducing their company’s environmental footprint too

36% will continue their focus on reducing their environmental footprint. And 55% will increase their efforts.

36% 45%

10%

Q: Please indicate to what extent your organisation plans to focus on reducing environmental footprint over the next 12 months. Base: All respondents (Total sample, 1330; industrial manufacturing, 173) Source: PwC 16th Annual Global CEO Survey 2013

“In tackling climate change, I think that we’re living through a pivotal decade. It’s critical that sustainability doesn't fall off the agenda.” Pertti Korhonen, President and CEO, Outotec Oyj, Finland


PwC



Acknowledgements

PwC gratefully acknowledges the contribution to the 16th Annual Global CEO Survey: Key findings in the industrial manufacturing industry provided by:

Pertti Korhonen, President and Chief Executive Officer, Outotec Oyj, Finland Yves Serra, President and Chief Executive Officer, Georg Fischer Ltd., Switzerland

Barry Misthal Global Industrial Manufacturing Leader

Stefan Raebsamen Switzerland Industrial Manufacturing Leader

Urmas Rania Finland Industrial Manufacturing Leader

Raymond Mingioni Global Industrial Manufacturing Marketing and Business Development

T: +41 58 792 8239 [email protected]



T: +1 267 330 1778 raymond.m.mingioni @us.pwc.com





121211-130640-EA-OS


February 2013

Coming to grips with market transformation

Dealing with disruption 16th Annual Global CEO Survey summary: Key findings in the Insurance industry

PwC – 16th Annual Global CEO Survey Key findings in the Insurance industry 2



This report is a summary of our key findings in the insurance sector, based on interviews with 92 insurance CEOs in 39 countries. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

While many insurance CEOs have fixed their sights on the immediate challenges of low interest rates, slowing demand in mature markets and the resulting pressure on share values, they can’t afford to ignore the transformational changes on the horizon. As our Future of Insurance project highlights1, the industry is facing significant challenges and opportunities: trajectories of growth in different parts of the world are diverging; customers are demanding more transparent and accessible products; technology is revolutionising risk analysis and customer profiling; and, the speed of change is putting existing business models at risk. There is also a heightened threat of new entrants picking off profitable business. The insurers that come out on top will focus keenly on the customer and have a superior capacity for innovation and reinvention. They’ll be able to anticipate change and how it affects them, as well as be nimble enough to quickly capitalise on emerging opportunities.

David Law Global Leader, Insurance PwC UK

Insurance industry summary

1 For reports and analysis setting out our perspectives on the way ahead including Insurance 2020: Turning change into opportunity and Life insurance 2020: Competing for a future visit www.pwc.com/insurance


IntroductionInsurers are upbeat about their prospects, with nearly 90% of the industry leaders in our latest CEO survey at least reasonably confident about revenue growth over both the next 12 months and next three years. This optimism is broadly in line with other financial services sectors’.

Specifically, customers are looking to insurers to help them manage a more complex and uncertain environment (e.g. climate change, geopolitical instability, etc.), protect increasing wealth (notably in emerging markets in Asia, Africa and Latin America), and fund longer retirements at a time when people are living longer and face potentially lower state welfare benefits. Innovative insurers will be at the forefront of helping businesses and society meet these demands. However, this commercial potential is also attracting more competition, both from within and without the financial services sector.

At the same time, we’re seeing the beginnings of a transformation in customer expectations of products and services, how insurers design, underwrite and sell them, and – considering the many key changes originating and developing outside the sector –even what we mean by insurance. Nearly 60% of industry leaders (58%) are concerned about the shift in consumer spending on insurance products and related behaviour, a significantly higher proportion than in banking (50%) and asset management (44%). Moreover, survey findings raise questions about whether or not insurers are

moving quickly enough to keep pace, with only 16% anticipating the fundamental strategic shifts that they may need to make.

Companies in the vanguard are increasing investment in customer service, new technology, and talent as they seek to reinforce customer acquisition and loyalty. They’re using the latest developments in customer analytics to understand and segment their customers and distributors more effectively. They’re also looking beyond the industry to scan for emerging threats and opportunities that may come under the radar. Reflecting how crucial technology is in providing insurers with the necessary insight and operational

agility, 86% of industry leaders plan to increase investment in technology over the next 12 months, more than any other commercial sector in our survey. (Communications is the only other sector in which more than 80% of CEOs plan to increase funding for technology.)

Cutting across all these competitive developments is a cultural shift, as insurers strive to rebuild public trust. 55% of insurance CEOs are concerned about lack of trust in the industry, a higher proportion than banks (54%) and asset managers (44%).

Figure 1: How are you changing your approach to managing your organisation?

To what extent do you anticipate your company’s strategy to change over the next 12 months?

n Global n Asset Management n Banking & Capital Markets n Insurance n All FS

Source: 16th PwC Annual CEO Survey

Change in fundamental ways

Somewhat change

No change

Don’t know/Refused

Insurers are upbeat about their prospects, with nearly 90% of the industry leaders in our latest CEO survey at least reasonably confident about revenue growth over both the next 12 months and next three years.

90%


Two-speed growthDespite most industry leaders’ optimism about revenue growth in the near term, most see the prospects for the overall economy as tentative at best, with only 15% of insurance CEOs believing that it will improve over the next twelve months. Nearly a quarter expect the economy to decline, though this is a much less pessimistic outlook than last year, when nearly half anticipated worse times ahead.

Recession in the US and falling growth in China are now seen as more likely and damaging scenarios than a break-up of the Eurozone, though the prospects for growth in Western Europe are still seen as limited compared to other regions (see Figure 2). Insurers’ confidence in the prospects for growth in Western Europe (35% anticipating an expansion of key operations) is significantly lower than banks (55%), but ahead of asset management (30%). Against this backdrop, familiar problems remain in developed markets, such as limited product differentiation and a low perception of value among clients, which tighten the squeeze on margins.

So, where will the anticipated revenue expansion come from? With growth slowing in mature markets, many CEOs see greater potential in the still largely under-penetrated emerging markets of South America, Asia, Africa and the Middle East (together, these regions form what PwC terms ‘SAAAME’). These markets have seen substantial segments of their population escape poverty and move into the middle class in recent years,

and Latin America currently tops the list of the regions CEOs are eyeing for growth. In an interview with the Financial Times in 2012, Martin Senn, CEO of Zurich Insurance Group, highlighted Latin America and Brazil in particular as a key focus for his group and noted that new members of the middle class, ‘Buy cars, they buy homes and they think about pension solutions, which creates good demand for insurance products.’2

Asia is also a strong focus for business expansion, with more than 80% of industry leaders targeting for expansion all regions other than Central Asia. However, the focus on the Middle East (50%), and to some extent Africa, has fallen significantly since last year and is much lower than in financial services overall.

The divergent speed of global growth creates challenges on both sides of

the developed market and SAAAME divide. Developing competitive scale in key SAAAME markets is proving challenging for many Western insurers, where they often face licensing and ownership restrictions. Even where the door is open, competition is intense and prices and margins are declining as companies struggle to build market share. As more and more trade goes between the SAAAME economies and misses the West altogether, there is also a risk that some Western insurers will find themselves left out of the loop.

To compound this, the move to new and unfamiliar markets is opening up insurers to risks about which they have virtually no data. The $12 billion losses from the Thai floods of 2011, prominently from supply chain and business interruption claims coming from other countries, were a wake-up call3. Accelerating urbanisation

Figure 2: Regions targeted for growth

In the next 12 months do you expect your key operations in these regions to decline, stay the same or grow?

Insurance (8-37) All FS (36-125)

Latin America 88 82

South-East Asia 84 79

Africa 67 78

South Asia 88 78

Middle East 50 72

East Asia 85 75

North America 61 61

Australasia 63 57

CEE/ Central Asia 63 51

Western Europe 35 40


2 Financial Times, 24.08.12 (link: http://video.ft.com/v/1801710600001/Zurich-emerges-unscathed)

3 Swiss Re Sigma ‘Natural catastrophes and man-made natural disasters in 2011’, 28.03.12


is also affecting risk profiles. Over the next 30 years, some 1.8 billion people are expected to move into cities, most of them in Asia and Africa, thereby increasing the world’s urban population to more than five billion people4. Emerging megacities are concentrating more and more risks in a small number of locations. In turn, this concentration is heightening the potential for major property losses.

To meet these challenges, sharper and deeper analytics and greater automation of routine underwriting will be critical in order to sustain margins in developed markets and releasing underwriting resources to manage the less familiar and rapidly evolving SAAAME market risks. Fortunately, there are opportunities to automate a considerable amount of mature market underwriting; the necessary data is there and the

technology is now coming on stream. When aligned with a re-allocation of talent within the organisation, greater automation within mature markets would have the particular advantage of allowing underwriters to concentrate on assessing and pricing risks in the less data rich markets.

Concentrating on the customerThe speed with which price comparison and instant access insurance via the internet has taken hold within many markets demonstrates how quickly the competitive landscape can change. Consumers have become accustomed to the choice and accessibility that online retailers offer, as well as the one-click interaction of mobile apps; they increasingly expect this

transparency and convenience from insurers. This search for an easy and intuitive user experience now goes beyond sales and includes other key areas of customer experience, such as claims handling. For example, there are apps that let policyholders send claims adjusters a photo when they are in an automobile accident or suffer damage to their home. This option enables policyholders to get their claim in train then and there.

Moreover, advances in customer profiling and risk analytics are opening the way for a new generation of fully customised ‘smart’ policies. Examples include the use of telematic sensors to gauge how carefully people drive and detect impending health risks. Further insights could come from analysing the payments, social media, and other digital trails that people leave. As a result, insurers would have greater certainty over their exposures, which would allow them to offer competitive rates yet sustain margins. In a mature and highly price sensitive market, such advances could give ‘smart’ companies a real edge.

Most CEOs are conscious of these developments and their potential to reshape the key competitive battlegrounds and business opportunities within the industry. Building the customer base and improving customer service are the top two priorities for investment (see Figure 3). As we noted earlier, nearly 60% of industry leaders are concerned about shifts in consumer spending and behaviour; in response, nearly 90% are planning to change their strategies for managing customer growth,

Figure 3: Investment priorities

What are your top 3 investment priorities over the next 12 months?

Insurance (92) All FS (351)

Growing your customer base 71 68

Improving operational effectiveness 52 53

Enhancing customer service 59 54

New M&A/ joint ventures/strategic alliances 26 26

R&D and innovation 14 16

Filling talent gaps 28 26

Implementing new technology 32 29

Manufacturing capacity 2 6

Securing raw materials or components 1 3

Other 5 4

Don’t know/refused 1 1


4 United Nations, Department of Economic and Social Affairs, Population Division, 2009 Revision

Over the next 30 years, some 1.8 billion people are expected to move into cities, most of them in Asia and Africa, thereby increasing the world’s urban population to more than five billion people. This concentration will heighten the potential for major property losses.

1.8bn


loyalty and retention (nearly 40% are anticipating major changes to these strategies), and almost nine in ten are planning to strengthen their social media engagement.

Just how customer-centric they can become will be the crucial differentiator in this evolving marketplace. Steve Kandarian, CEO of MetLife, has highlighted the difference between basic customer focus and realising its full potential. ‘Every company believes it is customer-centric – after all, if you weren’t selling products and services that customers wanted, you would go out of business. But there is a difference between successfully making a sale and being truly customer-centric,’ he says. ‘We need to look at MetLife through our customers’ eyes and ask what it’s like to do business with us. If we can give our customers truly outstanding experiences, I believe we can capture a lot of value through referrals and increased sales to existing customers that’s currently being left on the table.’5

These developments also herald an important departure in the nature of insurance as it moves from a reactive claims payer to preventative risk manager. Previous analytical advances have already allowed insurers to move from hindsight to insight and hence improve their understanding of profitability drivers and segmentation. The next wave of big data and predictive modelling will allow insurers to move from insight to foresight, where they can tailor interactions and pricing at a customer level and use real-time data for decision making.

“We will see financial service providers use ‘big data’ analytics to design products that adapt to the changing needs of the household as they move through different life stages,” says Dr Anand Rao, principal overseeing innovation in analytics within the insurance advisory practice at PwC US. “Advice will be tailored based on age, making it simpler for consumers and advisors, while automation and analytics reduce the complexity of insurance products.”

Crucially, these advances also could allow a major web, social network or other new entrant to move into the market. The market reach and customer profiling edge they would have is considerable. Most established players face the impediment of expensive and unwieldy legacy systems, but new entrants could develop automated underwriting and customer relationship management capabilities from scratch. This would allow them to undercut established players, while offering the fast and responsive coverage people want. In turn, cloud computing would allow them to develop a service model built around cheap and flexible just-in-time virtual outsourcing.

The central role of technologyAs evidenced by the increasingly vital role it plays in customer-centricity, technology is at the heart of the competitive developments within the sector, sharpening risk understanding and customer profiling on the one side and opening the door to new entrants on the other. Insurers are leading

5 ‘Meet Steve Kandarian’ on www.metlife.com

“Every company believes it is customer-centric – after all, if you weren’t selling products and services that customers wanted, you would go out of business. But there is a difference between successfully making a sale and being truly customer-centric”

Steve Kandarian, CEO of MetLife


the way in funding, with 86% of industry leaders planning to increase investment in technology.

Surprisingly, however, most CEOs say they aren’t concerned about the speed of technological change or the threat from new entrants (see Figure 4). Moreover, few insurers are comfortable with using new data sources and analytical techniques to shape decision making. A key element of this is greater empowerment and organisation-wide involvement in decision making, but only around 40% of industry leaders encourage staff at all levels to get involved in strategic decision, and instead use a centralised and hierarchical approach.

Underlying all of this is an apparent preference for incremental change over radical innovation. Only 15% are planning a major step up in investment in innovation. There is a danger that insurers could be caught flat footed if they don’t quicken the pace of innovation and development.

Rethinking talent managementA fast-evolving marketplace will demand new types of skills, new ways of working, and a fresh approach to organisational design. Accordingly, insurance CEOs see the availability of talent as the biggest threat to their growth prospects although it is surprising that less than 30% see filling talent gaps as a key investment priority.

Around three-quarters of industry leaders are planning to change the way they manage talent and organise their businesses. Encouraging mobility is likely to be a key aspect of this shift as insurers reach into new and potentially unfamiliar markets – more than half are looking at ways to give future executives more international experience and promote greater diversity in the leadership pipeline.

Competition over pay is still strong, with nearly three-quarters of industry leaders believing that they need to match the rewards their peer organisations offer to retain top talent. However, sustaining this compensation model will be difficult as returns continue to come under pressure and tax demands in many markets increase (nearly 60% are concerned about the increasing tax burden).

More than 80% of insurance CEOs believe that risk should be factored into performance evaluation and pay. Around a third have changed the way they set executive pay in response to shareholder and public pressure. The challenge for insurers is how to create a coherent compensation framework that can attract and retain talent, while reflecting risk considerations and leaving sufficient funds to meet investor expectations. The fact that nearly 40% of industry leaders believe that executive pay structures have become too complex reflects the difficulty of this balancing act.

Figure 4: Barriers to growth

How concerned are you about the following potential business threats to your growth prospects?

Insurance (92) All FS (351)

Increasing tax burden 57 58

Availability of key skills 64 56

Energy and raw materials costs 17 30

Shift in consumer spending and behaviours 58 50

Speed of technological change 43 42

New market entrants 42 34

Inability to finance growth 39 45

Lack of trust in your industry 55 52

Supply chain disruption 18 20

Inadequacy of basic infrastructure 34 36

Inability to protect Intellectual Property 34 31 and customer data



Creating a winning culture Ongoing success is likely to require a cultural shift as insurers seek to rebuild public trust, meet more exacting customer expectations, and stave off potential threats from both other financial services companies and new market entrants. At the heart of this shift is an environment that encourages people to embrace innovation, engage more closely with customers, and provide them with more effective risk solutions.

Because they recognise that it is a key pillar for a secure and successful future, many insurers are already taking steps to change institutional culture, notably by seeking to engage more closely with customers. Because they recognise that a lack of trust in the industry is a threat to growth, over 60% of survey respondents are looking at how to strengthen their culture of ethical behaviour. This includes defining the right behaviours, as well as reinforcing mechanisms such as changes in hiring practices, organisational design, development programs, performance management, and rewards. However, many insurers are finding it difficult to translate these objectives into discernible changes in how people think and behave in their everyday activities. Culture will only deliver the organisation’s key strategic goals (e.g. innovation, integrity or sharp customer focus) if it is second nature and firmly part of the habits and routines of staff at all levels.

It’s a question of trustThe need to rebuild trust and re-engage with customers forms part of the wider challenge of securing a social mandate, of which the relationship with government is an element. Nearly all insurance CEOs say that governments and regulators influence their strategy, though it’s noticeable that fewer of them (76%) are looking to engage more closely with government than they are with customers, supply chain partners, or users of social media.

For insurers, the potential benefits of a strong social mandate include a closer working partnership with government and society in the development of effective retirement and health care solutions. At a time when all FS businesses face considerable scrutiny, strengthening the social mandate could give insurers greater freedom in how they operate, innovate and pursue profitable opportunities. This also could put insurers in a stronger position to attract quality talent at a time when many of the brightest candidates are looking for more meaning from their chosen careers.

Figure 5: How are you changing the way you view and interact with stakeholders?

For those stakeholders with some or significant influence, to what extent are you strengthening your engagement programme?

Insurance (25-91) All FS (90-342)

Customers and clients 90 89

Your supply chain partners 80 71

Users of social media 87 80

Employees (including trade unions 64 72 and work councils)

Providers of capital (e.g. creditors 63 75 and investors)

Government and regulators 76 74

Local communities 61 67

The media 64 59

Industry competitors and peers 63 63

Non Governmental Organisations (NGOs) 57 54


Over three-fifths of survey respondents are looking at how to strengthen their culture of ethical behaviour. 62%


Conclusion: Separating winners and losersThis time of relentless and often disorientating change is creating threats for some businesses, opportunities for others, and a combination of both for many.

The speed at which insurers are able to anticipate and adapt to change, rather than simply reacting to events, will be a key differentiator in the transformation ahead. To stay in the game, they will need to think and act at the same rate as technology and customer expectations evolve. They will need to know how competitors are making better use of new sources of data and analytical techniques in order to engage more closely with customers and price more keenly, as well as if new competitors are even going to come from inside the industry.

In addition, the ability to enhance trust and satisfaction by putting themselves in their customers’ shoes will be crucial. This will need to take place alongside smarter targeting and sharper product design, as well as the customer understanding that underpin them. Insurers that can realise their potential will be able to offer more responsive policies for less and increase market share while maintaining profitability. Businesses that fail to respond could find themselves priced out of the market, falling short of customer expectations, and under threat from aggressive new entrants. Experience in other industries, ranging from music to travel to electronics, shows how quickly change can occur and how devastating it can be. Insurers cannot afford to believe they are immune from transformational trends.

Insurers that can realise their potential will be able to offer more responsive policies for less and increase market share while maintaining profitability. Businesses that fail to respond could find themselves priced out of the market, falling short of customer expectations, and under threat from aggressive new entrants.


Contacts

David Law Global Leader, Insurance PwC (UK) T: +44 7710 173 556 E: [email protected]

Anand Rao Insurance Advisory Principal PwC (US) T: +1 617 530 7923 E: [email protected]

Claire Clark Global Insurance, Senior Marketing Manager PwC (UK) T: +44 20 7212 4314 E: [email protected]

Eric Trowbridge Insurance, Senior Marketing Manager PwC (US) T: +1 410 296 3446 E: [email protected]


Dealing with disruption: 16th Annual Global CEO Survey Key findings in the Insurance industry


January 2013

PwC

Welcome

Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of “stable instability,” risks that once seemed improbable and even remote have become the norm and for CEOs across the world, “expect the unexpected” has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption and emerge stronger than before.


This report is a summary of our key findings in the Insurance sector, based on survey responses from 92 industry leaders in 39 countries. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey.

January 2013 16th Annual Global CEO Survey – Key findings in the Insurance industry

2

PwC

Introduction

3


PwC

Introduction

Insurance CEOs are upbeat about their companies’ prospects – nearly 90% are very or somewhat confident about revenue growth.

With people living longer and more wealth to protect globally, insurers certainly have considerable opportunities for growth. But this is also an industry facing accelerating changes in customer expectations, customer profiling, product design and distribution.

The survey findings raise questions about whether insurers are moving quickly enough to keep pace, with only 16% anticipating the fundamental strategic shifts that are likely to be necessary.


4

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39% of Insurance CEOs are very confident about their ability to increase revenue over the next 12 months, and a further 49% are somewhat confident.

5


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6


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CEO concerns: Top three economic and policy threats to growth


7

of Insurance CEOs are concerned about the lack of stability in capital markets.

of Insurance CEOs are concerned about over-regulation.

of Insurance CEOs are concerned about uncertain or volatile growth.

75%

87%

92%

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CEO concerns: Top three business threats to growth

of Insurance CEOs see the increasing tax burden as a threat to growth.

of Insurance CEOs see the shift in customer spending and behaviours as a threat to growth.

of Insurance CEOs see the limited availability of key skills as a threat to growth.

57% 58%

64%

8


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The economy remains a concern

Insurance CEOs are very concerned about a wide range of threats to growth. Economic growth, regulation and capital market stability top the list. These are all factors mostly out of CEOs’ control.

However, they aren’t waiting for governments to act. They’re working on making their own businesses more resilient and seeking out pockets of opportunity.

9


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10


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Battling for market share

Most Insurance CEOs are primarily targeting organic growth in their existing markets, domestic or foreign. A significant proportion is also looking ahead to new product and service development. Far fewer plan to enter new markets or embark on acquisitions or alliances as their main source of growth.


11

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89% of Insurance CEOs are changing their strategies for customer growth, loyalty and retention.

12


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Getting closer to customers

of Insurance CEOs have made improving customer service one of their top three investment priorities.

of Insurance CEOs have made growing the customer base one of their top three investment priorities.

of Insurance CEOs are planning to strengthen customer engagement.

59%

71%

90%

13


PwC

Technology is reshaping the market

86% of Insurance CEOs are planning to increase investment in technology.

63% of Insurance CEOs are planning to increase R&D and innovation capacity.

Big data and other new analytical developments offer significant opportunities to enhance customer profiling, targeting and the tailoring of products. But they could also open the door to social media, telecoms firms and other new competitors. More than 40% of Insurance CEOs are concerned about the threat from new market entrants.


14

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Evolving interactions

87% of Insurance CEOs are planning to step up engagement with users of social media, more than traditional media (64%).

15


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16


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Government influence is a key factor

95% of Insurance CEOs say that governments and regulators influence their strategy, almost as many as customers (99%), though far fewer are looking to engage more closely with government (76%).


17

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Winning back trust

55% of Insurance CEOs see lack of trust in the industry as a threat to growth.

62% of Insurance CEOs are increasing their focus on ways to support a culture of ethical behaviour.


18

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19


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CEOs are changing the way they manage their organisations

of Insurance CEOs have made improving operational effectiveness one of their top three investment priorities.

of Insurance CEOs are planning a new cost reduction initiative.

of Insurance CEOs are planning changes to their organisational structure.

52%

72%

73%

20


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Competition for talent mounting

of Insurance CEOs see the limited availability of key skills as a threat to growth.

of Insurance CEOs say they need to match pay of peers to retain top talent.

of Insurance CEOs are planning to change their strategies for managing talent.

64%

74%

21


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On the front foot

The Insurance industry is facing a major changes as growth trajectories in different parts of the world diverge, customers demand more transparent and accessible products, technology revolutionises risk analysis, customer profiling and the speed of change puts existing business models at risk, and new entrants look to pick off the most profitable business.

The insurers that will come out on top will be more customer-centric and have a superior capacity for innovation and reinvention. They’ll be able to anticipate change and how it affects them, as well as be nimble enough to quickly capitalise on emerging opportunities.


22

PwC


David Law Anand Rao

Global Leader, Insurance T: +44 7710 173 556 E: [email protected]

Insurance Advisory Principal T: +1 617 530 7923 E: [email protected]

Claire Clark Eric Trowbridge

Global Insurance, Senior Marketing Manager T: +44 20 7212 4314 E: [email protected]

U.S. Insurance, Senior Marketing Manager T: +1 410 296 3446 E: [email protected]


23








This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information

contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the

information contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequences

of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see

www.pwc.com/structure for further details.

121211-130640-EA-OS

Dealing with disruption 16th Annual Global CEO Survey Key findings in the metals industry


February 2013

PwC

Welcome Far-reaching changes are taking place, and they’re taking place faster than ever. In this new era of ‘stable instability’, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, ‘expect the unexpected’ has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption, and emerge stronger than before.


• focusing on a few carefully selected initiatives to stimulate organic growth, • exploring new ways to attract and keep customers and • balancing efficiency with agility.

And to succeed in these three goals, CEOs are recognising the role that trust plays, and that they’ll have to work hard to repair the bridges between business and society.

This report is a summary of our key findings in the metals industry, based on interviews with 43 sector CEOs in 23 countries.

James A. Forbes, Global Metals Leader

T: +1 (905) 972 – 4105 [email protected]


2 February 2013 16th Annual Global CEO Survey – Key findings in the metals industry


PwC

Contents

Page

Introduction 4


What worries CEOs? 9

What are CEOs doing? • Targeting pockets of opportunity 14





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Introduction


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Introduction

Metals CEOs are a lot like their peers across industries. They’re less confident this year and they’re worried about a range of threats, particularly around the economic situation. Cost-cutting and operational efficiency are high on the agenda.

There are some key differences too. These reflect the global and energy-intensive nature of the sector:

• More metals CEOs (67%) are somewhat or extremely concerned about exchange rate volatility, compared with the overall average of 54%.

• And more metals CEOs see the cost of energy and raw materials as a potential problem – 84% are concerned, compared to just 52% of the total sample.

This year we also see strong signs of the shape of the industry’s future:

• China continues to be critical to growth – 37% say it will be a top market in the coming 12 months.

• Concerns about access to natural resources are looming. More than two-fifths of metals CEOs think securing natural resources should be a government priority, and almost as many say they’ll increase their own investments in these areas.

• Most metals CEOs say supply chain partners influence their business strategy, and they’re strengthening efforts to engage them. They’re also diversifying the supply chain and working with more partners across more geographies.

• Developing the workforce and reducing the environmental footprint are top priorities.

5

February 2013 16th Annual Global CEO Survey – Key findings in the metals industry

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only 14% of metals CEOs are very confident they can raise the revenues their companies generate over the next 12 months


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Metals CEOs less confident this year

There have been many disruptions in the past decade. Far-reaching changes are happening and happening faster than before, so CEOs have a lot to cope with. This year just 14% of metals CEOs are very confident they can raise the revenues their companies generate over the coming year. That continues last year’s drop in confidence levels.

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Base: All respondents 2013 (Total Sample, 1330; Metals, 43), 2012 (Total Sample, 1258; Metals, 40), 2011 (Total sample, 1,201; Metals, 37), 2010 (Total sample, 1,198; Metals, 33), 2009 (Total sample, 1,124; Metals, 26), 2008 (Total sample, 1,150; Metals, 25) Source: PwC 16th Annual Global CEO Survey 2013

46%

4%

30%

46%

33%

14%

50%

21%

31%

48% 40%

36%

2008 2009 2010 2011 2012 2013

Metals Total sample


PwC

Metals CEOs see tough times further ahead too

And while the majority of metals CEOs still expect to grow looking further forward over the next three years, their outlook is still somewhat more cautious than peers across the total sample.

44

49

46

33

8

14

1

2

40% 20% 0% 20% 40% 60% 80% 100%

Total sample

Metals

Somewhat confident Very confident Not very confident Not confident at all

Q: How confident are you about your company’s prospects for revenue growth over the next 3 years? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013


PwC

What worries CEOs?


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Threats to growth are looming for metals CEOs

67% of metals CEOs say currency fluctuations are a concern, compared to 54% overall.

81% of metals CEOs think it could

hurt growth. That’s a concern shared by peers across the sample.

84% of metals CEOs see them as a concern, compared to 52% of the

overall sample.

Exchange rate

volatility

Economic uncertainty

Energy and raw material

costs


PwC

Threats to growth are looming for metals CEOs

Economic worries dominate the list of worries that keep metals CEOs awake at night. But their single biggest concern is energy and raw materials costs. 84% think they could threaten growth --- 28 points higher than across the total sample.

69

61

62

54

71

81

52

63

63

63

67

72

81

84

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Over-regulation







Metals Total sample

Q: How concerned are you, if at all, about each of the following threats to your growth prospects? Base: All respondents (Total sample, 1330; Metals, 43) Note: Respondents who stated ‘extremely’ or ‘somewhat’ concerned. Only the top 7 threats for metals CEOs are listed. List combines ‘economic and policy threats’ and ‘business threats’. Source: PwC 16th Annual Global CEO Survey 2013


PwC

Natural resource threats stand out

Metals CEOs are far more worried about the pending ‘resource crunch’ than CEOs across the overall sample, with 82% seeing energy and raw material costs as a concern (although some other sectors also rate these costs as a serious threat).

52

84

0 20 40 60 80 100

CEOs who are concerned that energy and raw materials costs

could threaten growth

Metals Total sample

28

24

44

37

0 10 20 30 40 50

CEOS who say that securing natural resources that are critical

to business should be a government priority

CEOs who say that they'll increase investments to secure natural resources that are critical to

business

Metals Total sample

Q. How concerned are you about the following potential business threats to your growth prospects? How much does your company plan to increase its investment over the next three years to achieve the following outcomes in the country in which you are based? Which three areas should be the Government’s priority today? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013

% %


More than two-fifths of metals CEOs think securing natural resources should be a government priority, and almost as many say they’ll increase their own investments in these areas.

PwC

Most major disruptions don’t look likely to metals CEOs – but they would have a big impact

63

51

63

70

63

65

84

70

9

12

16

16

16

28

33

53

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%







Recession in the US


Metals CEOs who say the scenario is 'likely to occur'

Metals CEOs who say 'it would have a negative impact'

Q:How likely are the following scenarios to occur? How would your organisation cope with the following scenarios, if they happened within the next 12 months? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


PwC


• Targeting pockets of opportunity • Concentrating on the customer • Improving operational effectiveness


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37% of metals CEOs say that China is one of their top 3 growth markets for the coming 12 months.


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Capital investment, China and transactions are bright spots

70% say they’ll make changes to increase capital investment this year

That compares to 64% across the sample overall.

37% say it’s one of their top growth markets.

That’s no surprise, with China now the world’s #1 steelmaker

72% say there will be changes at their company over the next 12 months with regards to M&A, joint ventures or strategic alliances.

And 37% say transactions will be a top investment priority.

Investing China

Deals


PwC

Metals CEOs are still investing in key areas

Improving operational effectiveness can help cut the cost base, its not surprising it heads up the list of investment priorities for the next 12 months. But growing the customer base, manufacturing capacity and deals make the list for many CEOs too.

32

33

19

51

49

30

37

37

47

56

0% 10% 20% 30% 40% 50% 60%

R&D and innovation





Metals Total sample

Q: What are your top 3 investment priorities over the next 12 months? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013 Source: PwC 16th Annual Global CEO Survey 2013


PwC


79% of metals CEOs say that customers have a ‘significant’ influence on their strategy.


PwC

Metals CEOs are investing in customers – but are they focusing enough on customer service? This placeholder text (20pt Georgia regular) is intended to show the correct position and size of the real text used in this location. To ensure that you have the correct size, colour and location of the text, it is recommended that you select. Overtype this placeholder text.

Growing the customer base is second on the list of investment priorities for the next 12 months, right after operational effectiveness.

But surprisingly, relatively few – just 21% -- say that enhancing customer service is a top investment priority this year.

of metals CEOs say growing the customer base is a top investment priority this year

47% 19

February 2013 16th Annual Global CEO Survey – Key findings in the metals industry

PwC

Metals CEOs are changing course when it comes to customer growth, retention and loyalty

19%

56%

26% 81% of metals CEOs are changing customer growth/ retention / loyalty strategies over the next 12 months And 26% say they’ll make ‘major’ changes

Q: Please indicate to what extent your organisation plans to focus on workforce diversity and inclusion over the next 12 months? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013

A major change

Some change

No change


PwC


56% of metals CEOs say its one of their top investment priorities.


PwC

Metals CEOs are making cost-cutting a priority

19

28

79

0% 10% 20% 30% 40% 50% 60% 70% 80%




Metals

Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Which, if any, do you plan to initiate in the coming 12 months? Base: All respondents (Metals, 43) Note: Does not list all restructuring activities.

Past 12 months:

Coming 12 months:

14

21

74

0% 10% 20% 30% 40% 50% 60% 70% 80%

“Insource” a previously outsourced business process or function



Metals


PwC

Metals CEOs are cutting more staff than peers across the sample

Around 42% of metals CEOs say their companies cut staffing numbers in the past 12 months; that’s significantly more than across the total sample.

Q: What happened to headcount in your company globally over the past 12 months? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013

11

21

7

12

7

9

21

12

12

2

15

12

40% 30% 20% 10% 0% 10% 20% 30% 40% 50% 60%

Total sample

Metals

Decreased by less than 5% Decreased by 5-8% Decreased by more than 8% Increased by less than 5% Increased by 5-8% Increased by more than 8%


Stayed the same

30

25

PwC

And the trend looks set to continue next year

More cuts look likely next year. Some of them will be deep -- 14% of metals CEOs say their companies will decrease headcount by more than 8% in the coming 12 months.

Q: What do you expect to happen to headcount in your company globally in the coming 12 months? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013

14

16

5

2

4

14

22

14

12

2

11

12

40% 30% 20% 10% 0% 10% 20% 30% 40% 50%

Total sample

Metals

Decrease by less than 5% Decrease by 5-8% Decrease by more than 8% Increase by less than 5% Increase by 5-8% Increase by more than 8%


Stayed the same

33

28

PwC

Despite short-term headcount headaches, skills are still a big issue for the industry’s future. More than three-quarters of metals CEOs are increasing their investment in creating and fostering a skilled workforce. It’s their number #1 investment priority looking out over 3 years.

And keeping the workforce healthy ranks high on their list too.

A decrease or no increase in investment

A small inrease in investment

Some increase in investment

A significant increase in investment

Don't know/refused

77%

Addressing the coming skills gap

Q: How much does your company plan to increase its investment over the next 3 years to create and develop a skilled workforce in the country in which you are based? Base: All respondents (Total sample, 1330; Metals, 43) Note:77 % represents respondents who stated ‘a small increase’ , some increase’ or a ‘significant increase.‘ Source: PwC 16th Annual Global CEO Survey 2013


PwC

How secure is the metals supply chain?

Only about a third of metals CEOs (35%) are worried about supply chain disruptions. That may be because sector CEOs are working closely with partners and diversifying their supply chains.

A full 86% of metals CEOs say that supply chain partners are influencing their business strategy. Of those CEOs, most also plan to increase their efforts to engage across the value chain.

And 58% of metals CEOs say they’re diversifying their supply chain and working with more partners across geographies.

50

76

58

86

0 20 40 60 80 100

CEOs who say they're diversifying their supply chain and working

with more partners across more varied geographies

CEOs who say supply chain partners are influencing their

business strategy

Metals Total sample

Q. How much influence do the following stakeholders have upon your business strategy (supply chain partners)? Which of the following statements most accurately describes the approach you take to managing your organisation? Base: All respondents (Total sample, 1330; Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013

%


PwC


84% of metals CEOs say employees influence their business strategy.


PwC

Metals CEOs are listening to a wide range of stakeholders Customers and clients stand out, but supply chain partners, employees and industry peers are influencing company strategy too.

21

26

35

67

77

79

84

84

86

98

0% 20% 40% 60% 80% 100% 120%

Non Governmental Organisations(NGOs) Users of social media

The media Local communities

Providers of capital (e.g. creditors and investors) Government and regulators

Industry competitors and peers Employees (including trade unions and work councils)

Your supply chain partners Customers and clients

Metals

Q: How much influence do the following groups have on your strategy? Base: All respondents (Total sample, 1330; Metals, 43) Note: Respondents answering ‘some’ or ‘significant’ influence Source: PwC 16th Annual Global CEO Survey 2013 concerned. Source: PwC 16th Annual Global CEO Survey 2013


PwC

Most metals CEOs are committed to reducing their company’s environmental footprint

63% of metals CEOs will increase efforts to reduce their company’s environmental footprint—19% significantly. And 33% will continue their curent focus.

5%

33%

44%

19%

Q: Please indicate to what extent your organisation plans to focus on reducing environmental footprint over the next 12 months. Base: All respondents (Metals, 43) Source: PwC 16th Annual Global CEO Survey 2013


PwC

And many are increasing their focus on good corporate citizenship more generally too That includes working to improve workforce and inclusion and develop or enhance a framework to support a culture of ethical behaviour.

33

31

41

35

37

56

50

48

14

33

37

47

49

51

53

63

0% 10% 20% 30% 40% 50% 60% 70%

Board level diversity

Volunteering/ community work

Non-financial reporting (incl corporate responsibility reporting)

Philanthropy or social enterprise initiatives

Approach to tax planning and tax contribution

Framework to support a culture of ethical behaviour

Workforce diversity and inclusion


Metals Total sample

Q: To what extent does your organisation plan to focus on the following priorities ? Base: All respondents (Total sample, 1330; Metals, 43) Note: Respondents answering they will increase their focus ‘somewhat’ or ‘significantly’ Source: PwC 16th Annual Global CEO Survey 2013 concerned. Source: PwC 16th Annual Global CEO Survey 2013


PwC

Our metals respondents came from 23 countries all over the world

Canada, Mexico, US

Austria, Cyprus, France, Germany, Italy, Poland, Romania, Spain, Sweden

Argentina, Brazil

Australia

China, India, Japan, Korea, Malaysia, Vietnam Nigeria, Other

middle east


PwC



James A. Forbes Global Metals Leader

Joy Winton Global Metals Marketing and Business Development

T: +1 (905) 972 - 4105 [email protected]







121211-130640-EA-OS

Dealing with Disruption:16th Annual GlobalCEO SurveyKey findings in theTechnology industry


January 2013

Welcome

Far-reaching changes are taking place, and they’re taking place faster than ever. In thisnew era of ‘stable instability’, risks that once seemed improbable and even remote havebecome the norm and for CEOs across the world, ‘expect the unexpected’ has become themantra. The only solution is to build organizations that can thrive amidst disorder:organizations that are agile and adaptable, able to cope with disruption and emergestronger than before.

We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, inour 16th Annual Global CEO Survey, to find out how they’re creating resilient

PwC

our 16th Annual Global CEO Survey, to find out how they’re creating resilientorganizations that can flourish under stress. Dealing with disruption shows that CEOsare focusing on a few carefully selected initiatives to stimulate organic growth; exploringnew ways to attract and keep customers; and balancing efficiency with agility. And tosucceed in these three goals, CEOs are recognizing the role that trust plays, and thatthey’ll have to work hard to repair the bridges between business and society.

This report is a summary of our key findings in the technology sector, based on interviewswith 154 technology CEOs in 38 countries, as well as an in-depth interview with StephenA. Elop, CEO of Nokia. To see the full results of the 16th Annual Global Survey, pleasevisit www.pwc.com/ceosurvey.

2January 201316th Annual Global CEO Survey – Key findings in the technology industry

Technology sector sample demographics

29%

16%

8%

10%

Revenue

32%39%

Geography

37%

8%

8%

5%

15%

Subsector

PwC

36%

$0 to $100M

$101 to $999M

$1 to $10B

Over $10B

Not stated

29%

Americas

Europe

Africa, Asia, Middle East, Australia

January 201316th Annual Global CEO Survey – Key findings in the technology industry3

26%

8%

Computers & Networking

Software/Information Technology

Semiconductor

Electronics Manufacturing/Distributors

Internet

Other

Contents

Page

Introduction 5

CEO confidence 7


How are CEOs responding?

PwC

• Customer focus 15

• Prioritising innovation 18

• Global expansion 20


Introduction

PwC 5January 201316th Annual Global CEO Survey – Key findings in the technology industry

Introduction

Technology CEOs are a lot like their peers across industries. They’re slightly less confidentthis year about the economic outlook.

But there are some key differences too. Competition and industry disruption are more of aconcern due to the fast speed of technological change. At the same time, 58% oftechnology CEOs (an increase of 6% from the prior year) are concerned about governmentover-regulation.

PwC

over-regulation.

Technology CEOs are actively engaged in multiple actions to better prepare theirorganisations to deal with these challenges. They’re focused on customer growth,innovation and new products and services.




PwC

of technology CEOs are confident theycan raise revenues over the coming year,compared to the total sample at 81%.

Even more technology CEOs (96%) areoptimistic about increasing revenue overthe next three years, compared to thetotal sample at 90%.


Employment growth

In line with their peers across industries, 44% of Technology CEOs expect to increaseheadcount, and just 16% expect to decrease headcount in contrast to 23% across allindustries.

30

35

40

Q: What do you expect to happen to headcount in your company globally over the next 12 months?

PwC

3 2 11 35 12 13 194

514 28 22 12 11

0

5

10

15

20

25

30

Decreased bymore than 8%

Decreased by5-8%

Decreased byless than 5%

Stayed thesame

Increased byless than 5%

Increased by5-8%

Increased bymore than 8%

Technology Total sample

Base: All respondents (Total sample, 1,330; Sector, 154)




“The global economic outlook for 2013 and for the next three yearsseems very uncertain to me. Countries would seem to fall into twocategories. The first category concerns mature markets. The US hasan advantage over Europe in that the US economy seems more flexibleand more able to regenerate and kick-start itself. Europe, however, hasa more rigid structure. The second category concerns new economies,


a more rigid structure. The second category concerns new economies,which have brighter prospects.”

Jean-Pascal Tricoire, President and CEOSchneider Electric SA, France

Technology CEOs continue to battle withpolitical threats against growth...

62%

87%

58%

PwC

2012 Technology: 60%2013 Total Sample: 71%

are concerned aboutgovernment

response to fiscaldeficit & debt

burden


are concerned aboutover-regulation


58%

are concerned aboutprotectionisttendencies ofnational government


45%

...and economic threats against growth

59%

87%

PwC

are concerned aboutlack of stability in

capital markets

2012Technology: 58%2013 Total Sample: 61%

are concerned aboutvolatile economic

growth


59%


are concerned aboutexchange rate

volatility

2012Technology: 57%2013 Total Sample: 54%

52%

Business threats against growth

Disruptions caused by technological changes, new market entrants and shifting consumerspending and behaviour top the list of market threats to growth.

40

42

62

58

48

57

58

64

New market entrants

Speed of technological change



Q: How concerned, if at all, are you about:

PwC

37

35

35

52

34

39

49

40

28

31

38

39

40

46

47

0% 10% 20% 30% 40% 50% 60% 70%

Lack of trust

Inadequacy of basic infrastructure

Security of supply chain

Energy & raw materials costs

IP and customer data protection


Shift in consumer spending and behaviours

Technology Total sampleBase: All respondents (Total sample, 1,330; Sector, 154)

Note: Respondents who stated ‘extremely’ or ‘somewhat’


concerned.



So what are technology CEOs doing?


Change of strategy

PwC

of technology CEOs expect to changecompany strategy over the coming year,compared to the total sample at 68%.


Customer growth and investing in R&D andinnovation remain top priorities

38

49

32

51

36

38

48

61



R&D and Innovation


Q: What are your top 3 investment priorities for 2013?

PwC

9

19

26

27

33

38

3

11

25

30

31

0% 10% 20% 30% 40% 50% 60% 70%

Securing raw materials or components



Filling talent gaps

New M&A/joint ventures/strategic alliances


Technology Total Sample




Changes ahead for technologycompanies

PwC

of technology CEOs anticipate changesin their customer growth, retention, andloyalty strategies.


Increasing engagement and social mediaIn line with CEOs from other industries, 90% of technology CEOs are focused on strength-ening relationships with customers and clients by increasing engagement. In pursuit of newcustomers, 84% of technology CEOs are enhancing their focus on social media.

Q: To what extent are you strengthening your engagement program with the following stakeholders?

77

78

89

80

84

90

Employees (including trade unions & work council)

Users of social media

Customer and clients

PwC


Note: This question was asked only to those who stated the above stakeholders have influence their strategy. Respondents who stated ‘some change’ or ‘major change’ areshown above


’ concerned.

Source: PwC 16th Annual Global CEO Survey 2013 17January 201316th Annual Global CEO Survey – Key findings in the technology industry

64

68

67

63

78

77

63

65

66

67

76

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

The media

Providers of capital

Government regulators

Industry competitors and peers

Supply chain partners


Focusing on developing new products or services

New entrants are more of a concern fortechnology CEOs than the total sample.

“On a micro level, the biggest threat for us is always the next disruption around thecorner. Clearly we’re trying to disrupt our competitors, and they’re trying to disrupt us.So we are constantly assessing, preparing and trying to out innovate--but that’s thenature of our competitive and exciting industry.”

Stephen A. Elop of Nokia Corporation

40%Growth Opportunity: New products and

services

PwC

technology CEOs than the total sample.Thus, they are focused on constantlyfinding ways to differentiate their productsby providing unique customer experiences.

New products or services are viewed as themain opportunity for growth by 37% oftechnology CEOs versus 25% of the broadersample of all CEOs.


39% 37%28% 25%0%

10%

20%

30%

2012 2013


Q: Which one of these potential opportunities for business growth do you see as the main opportunity to grow your business in the next 12 months?



concerned.



We have one of the most geographically balanced business bases in thesector. In uncertain times like these, this balanced geographicaldiversification enables us to keep the company’s performance on aneven keel and take advantage of growth avenues, wherever they may be.


even keel and take advantage of growth avenues, wherever they may be.

Jean-Pascal Tricoire, President and CEOSchneider Electric SA, France

Global operations expansionTechnology CEOs continue to view Latin America as the key region for expanding theiroperations, followed by South-East Asia and North America.

74

62

83

81

68

70

76

83

Africa

North America

South-East Asia

Latin America

Q: In 2013 do you expect your key operations in these regions to decline, stay the same or grow?

PwC

33

58

57

77

70

80

74

37

38

46

63

63

64

68

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Western Europe

Australia

Central and Eastern Europe/Central Asia

East Asia

Middle East

South Asia

Africa



Note: Respondents who stated ‘grow’’ co


ncerned.


January 201316th Annual Global CEO Survey – Key findings in the technology industry

China still in the lead when it comes to newrevenue opportunities

20

25

30

35

Q: Which countries, excluding the country in which you are based, do you consider most important foryour overall growth prospects in 2013?

PwC

31 23 15 12 10 8 7 6 5 527 25 19 10 14 8 6 6 4 50

5

10

15

20

China US Brazil Germany India Russia Indonesia UK Canada Japan





What’s next

Deciding which processes and capabilities need to be global, regional and local isn’t just about takingadvantage of growth opportunities; it’s also about developing the flexibility to survive disruptions,wherever they may surface. That’s not an easy balance to strike. We’ve distilled five key questionsfrom the feedback CEOs have given us in this year’s CEO Survey:

• Organizations are increasingly aware that opportunities in growth markets are highly nuanced. Howdo you evaluate the opportunities offered in these diverse and diverging markets, both newer andmore established?

• How can you use digital channels to better communicate with your customers, co-create products,capture customer insights, increase loyalty and measure your impact in all of these areas?

PwC 22

capture customer insights, increase loyalty and measure your impact in all of these areas?

• How can you innovate more effectively and efficiently – and focus more on the customer in yourinnovation strategy and processes?

• To take advantage of new opportunities before competitors do, how can you create the right degree offlexibility in your organizational structure and processes, which allows you to quickly deployresources across your organization to where they’re most needed?

• How can you create networks of formal and informal trusted relationships which go beyondcontractual terms to target a shared vision, set of values and objectives?

16th Annual Global CEO Survey – Key findings in the technology industry January 2013


Rod Dring – Australia Werner Ballhaus – Germany Yury Pukha – Russia

T: 61 2 8266 7865E: [email protected]



Estela Vieira – Brazil Sanjay Dhawan– India Greg Unsworth – Singapore



T: 65 6236 3738E: [email protected]

Raman ChitkaraGlobal Technology LeaderT: 1 408 817 3746E: [email protected]

PwC 23

Christopher Dulny– Canada Kenji Katsura– Japan Douglas Mahony – UAE



T: 97 1 43043151E: [email protected]

JianBin Gao – China Hoonsoo Yoon – Korea Jass Sarai – UK



T: 44 0 1895 52 2206E: [email protected]

Xavier Cauchois – France Ilja Linnemeijer– The Netherlands Tom Archer– US

T: 33 1 5657 10 33E: [email protected]



Acknowledgements

PwC gratefully acknowledges the contribution to the 16th Annual Global CEO Survey: Key findings in the technologyindustry provided by:

Stephen A. Elop, President and Chief Executive Officer

Nokia Corporation, Finland

Jean-Pascal Tricoire, President and Chief Executive Officer

Schneider Electric SA, France

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the informationcontained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of theinformation contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequencesof you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please seewww.pwc.com/structure for further details.

121211-130640-EA-OS

Download the main report, access the results and explore the CEOinterviews from our 16th Annual Global CEO Survey online atwww.pwc.com/ceosurvey.

Dealing with disruption 16th Annual Global CEO Survey

Key findings in the trans-portation & logistics industry


February 2013

PwC

Contents

Page Introduction 3

The disruptive decade • CEOs confidence levels

5

What worries CEOs • Macroeconomic threats • Infrastructure gaps

8

Targeting pockets of opportunity • Glimmers of hope in Africa and SE Asia • Partnership opportunities

11

Concentrating on the customer 14

Improving operational effectiveness • Reducing costs, outsourcing • Re-thinking risk

18

Engaging with people • Workforce development • Building diversity and an ethical culture

22

2 February 2013 16th Annual Global CEO Survey – Key findings in the transportation & logistics industry

PwC

Introduction


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Introduction

• 16th Annual Global CEO Survey polled 1,330 CEOs in 68 countries – 109 transportation & logistics CEOs in 43 countries – 33 face-to-face interviews including 2 from the transportation & logistics industry

• Far-reaching changes are leading to a new ‘stable instability’

• The only solution is to build organisations that can thrive amidst disorder

• How are transportation & logistics CEOs in particular dealing with disruption?

− Looking to growth regions like Southeast Asia and Africa

− Improving operational efficiency, for example by cutting costs and outsourcing

− Rethinking their risk strategies

• Key investment priorities: growing the customer base and improving customer service; developing the workforce

• To see the full results, please visit www.pwc.com/ceosurvey.


PwC


of transportation & logistics CEOs are very confident they can raise the revenues their companies generate over the next 12 months

only 24%


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T&L CEOs confidence levels reflect turbulent times

Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? Base: All respondents 2013 (Total sample, 1330, Transportation & logistics, 109); 2012 (Total Sample, 1258; Transportation & logistics, 98); 2011 (Total sample, 1,201; Transportation & logistics, 60); 2010 (Total sample, 1,198; Transportation & logistics, 67); 2009 (Total sample, 1,124; Transportation & logistics, 67); 2008 (Total sample, 1,150; Transportation & logistics, 50) Source: PwC 16th Annual Global CEO Survey 2013

44% 25% 31%

60%

36%

24%

50%

21%

31%

48% 40%

36%

0%

10%

20%

30%

40%

50%

60%

70%

2008 2009 2010 2011 2012 2013

Transportation & logistics Total sample


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…but if it does, there will be a big impact

Most transportation and logistics CEOs don’t expect the worst to happen

57

57

57

58

60

74

70

53

16

23

16

11

24

21

33

40

0% 10% 20% 30% 40% 50% 60% 70% 80%







Recession in the US


Transportation & logistics CEOs who think scenario is 'likely to occur'Transportation & logistics CEOs who state 'it would have a negative impact'

Q:How likely are the following scenarios to occur? How would your organisation cope with the following scenarios, if they happened within the next 12 months? Base: All respondents (Total sample, 1330; Transportation & logistics, 109) Source: PwC 16th Annual Global CEO Survey 2013


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What worries CEOs?

“As far as the global economy is concerned, the threat is the start of economic stagnation, which, in turn, could encourage protectionism across the various economic blocks. The solution to stagnation is not protectionism. Instead, the solution lies in structural changes that will unlock productivity and growth potential.”

Dr. John Coustas, President & CEO, Danaos Corporation, Greece


PwC

Macroeconomic worries are top of mind for T&L CEOs

50 52 53 54 58 61 69 72 73 76

0% 10% 20% 30% 40% 50% 60% 70% 80%

Shift in consumer spending and behavioursAvailability of key skillsExchange rate volatility

Protectionist tendencies of national governmentsIncreasing tax burden

Energy and raw materials costsLack of stability in capital markets

Over-regulationGovernment response to fiscal deficit and debt burden


Transportation & logistics

Q: How concerned are you, if at all, about each of the following threats to your growth prospects? Base: All respondents (Transportation & logistics, 109) Note: Respondents who stated ‘extremely’ or ‘somewhat’ concerned. Only the top 10 threats for transportation & logistics CEOs are listed. List combines ‘economic and policy threats’ and ‘business threats’. Source: PwC 16th Annual Global CEO Survey 2013: PwC 16th Annual Global CEO Survey 2013

…but energy costs and skills issues are concerns too


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44% of T&L CEOs say they’re concerned that inadequacy of infrastruc-ture could hurt growth

44% 62%

Infrastructure gaps are looming too, and T&L CEOs want governments to take action

Q: What are your top 3 investment priorities in the next 12 months? To what extent do you anticipate changes at your company over the next 12 months with regards to an increase in R&D and innovation capacity? Base: All respondents (Total sample, 1330; Transportation & logistics, 109) Source: PwC 16th Annual Global CEO Survey 2013

37%

62% think it should be one of the government’s top 3 priorities

And 37% are increasing their own investments in addressing infrastructure gaps


PwC


“We see it as really important to capture the market in Southeast Asia with its 600 million population base. It has a geographical landscape which is very conducive to air travel as land transportation is virtually non-existent. It also has one of the highest growing GDPs in the world, with a median population age of about 27 to 28 years, and it has one of the highest growth rates in terms of middle income earners.”

Aireen Omar, CEO, AirAsia Berhad, Malaysia


PwC

…but glimmers of hope in South-east Asia and Africa

Sector CEOs are less optimistic about regional growth

33

57

66

62

73

70

58

81

74

81

17

38

47

48

50

53

57

69

80

85

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Western EuropeCEE/ Central Asia

East AsiaNorth America

South AsiaMiddle EastAustralasia

Latin AmericaAfrica

South-East Asia


Q: In the next 12 months do you expect your key operations in these regions to decline, stay the same or grow? Base: All respondents (Total sample, 170-533; Sector, 14-48). Note some regions have small sample sizes so data should be viewed as indicative only. Note: Respondents who expect operations to grow Source: PwC 16th Annual Global CEO Survey 2013


PwC

Partnering is getting more important

Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months Base: All respondents (Total sample, 1330; Transportation & logistics, 77) Note: Respondents who named “Enter into a new strategic alliance or joint venture” Source: PwC 16th Annual Global CEO Survey 2013

24% say they’ve entered into a new joint venture or strategic alliance already

And 47% are planning on joining forces this year

Past 12 months: Coming 12 months:

24% 47%


PwC


“Naturally, our customers (we call them our guests) are a big influence on us. They’re going to buy our product so we need to be able to understand them, to get the right kind of feedback, to be able to customise our service to their needs. So they are the key.”



PwC

Listening to customers

of transportation & logistics CEOs say customers have a ‘significant’ impact on their strategy.

80%


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So they’re changing course to serve customers better and win their loyalty

Q: To what extent do you anticipate changes at your company over the next 12 months with regards to customer growth /retention/loyalty strategies? Do you anticipate no change, some change or a major change? Base: All respondents (Total sample, 1330; Transportation & logistics, 109) Source: PwC 16th Annual Global CEO Survey 2013

A major change

18%

57%

25%

Some change No change

82% 82% of transportation & logistics CEOs are changing customer growth/retention/loyalty strategies — and 25% say they’ll make ‘major’ changes


PwC

And customers top the list of investment priorities too

27

26

33

38

51

49

28

28

30

52

57

57

0% 10% 20% 30% 40% 50% 60% 70% 80%

Filling talent gaps







Q: What are your top 3 investment priorities over the next 12 months? Base: All respondents (Total sample, 1330; Transportation & logistics, 109) Note: Only top 6 choices listed. Source: PwC 16th Annual Global CEO Survey 2013


PwC


57% of transportation & logistics CEOs say its one of their top investment priorities.


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Transportation & logistics CEOs are making cost-cutting a priority

20

37

82

0% 10% 20% 30% 40% 50% 60% 70% 80%





Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? Which, if any, do you plan to initiate in the coming 12 months? Base: All respondents (Total sample, 1330; Transportation & logistics, 109) Note: Does not list all restructuring activities. Source: PwC 16th Annual Global CEO Survey 2013

Past 12 months

Coming 12 months

17

27

69

0% 10% 20% 30% 40% 50% 60% 70% 80%

“Insource” a previously outsourced business process or function





PwC

Rethinking risk

Q: Which of the following statements most accurately describes the approach you take to managing your organisation? Base: All respondents (Total sample, 1330; Transportation & logistics, 109) Note: Don’t know/refused excluded. Source: PwC 16th Annual Global CEO Survey 2013

With 59% of transportation & logistics CEOs saying they’ll change their approach to managing risk in the next 12 months, this picture may look different next year.

Most transportation & logistics CEOs currently say accountability for risk management is centralised.

Strategies are evenly split between predicting high impact scenarios and preparing for the consequences of them should they occur.

71

29

0 50 100

Accountability for riskmanagement is

centralised

Accountability for riskmanagement is

decentralised

49

47

0 50

We primarily allocate riskmanagement resources topredicting high-impact risk

events

We primarily allocate riskmanagement resources toour ability to recover fromthe consequences should

a risk event occur


PwC

Underestimating cyber threats?

34

42

26

31

0 10 20 30 40 50

Inability to protect IntellectualProperty and customer data

Speed oftechnological change


Q: How concerned are you, if at all, about each of the following threats to your growth prospects? Base: All respondents (Transportation & logistics, 109) Note: Respondents who stated ‘extremely’ or ‘somewhat’ concerned. Source: PwC 16th Annual Global CEO Survey 2013

Transportation & logistics CEOs are less worried than peers across the sample about their ability to protect IP and customer data. They’re also not as concerned that the speed of technological change could pose a risk to growth.

And only 11% of sector CEOs think a cyber attack or major disruptions of the internet is likely; 38% just aren‘t sure. But 58% say such an event would have a negative impact on their business.


PwC

Engaging with people

“Trust is a key word here: you trust that you have employed the best people to help you with your expansion plan. When you have that trust and you delegate as much as you can, you give employees the freedom to be creative and reward them for it. That is extremely motivating for anyone who wants to build a career.”



PwC

It all starts with motivated, engaged employees

of transportation & logistics CEOs are making changes to how they manage their people

77%


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Investing in the future workforce

Q: How much does your company plan to increase its investment over the next 3 years to create and develop a skilled workforce in the country in which you are based? Base: All respondents (Total sample, 1330; transportation & logistics, 109) Note: 57% represents respondents who stated ‘some increase’ or a ‘significant increase’ and does not include respondents stating ‘a small increase’ Source: PwC 16th Annual Global CEO Survey 2013

57% The majority of transportation & logistics CEOs are increasing their investment in creating and fostering a skilled workforce. It’s their number #1 priority looking out over 3 years. And keeping the workforce healthy ranks second on their list.


PwC

Transportation & logistics CEOs say they’re working hard to develop their leadership pipeline

33

58

61

68

69

72

79

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Shadowing senior executives

Encouraging global mobility and internationalexperience

Rotations to different functions/ challenges

Programmes to encourage diversity amongst businessleaders

Active succession planning including identifyingmultiple successors

Dedicated executive development programme

Involving managers below board level in strategicdecision-making


Q: Do you deploy any of the following to develop your leadership pipeline? Base: All respondents (Transportation & logistics, 109) Note: Respondents who stated yes. Source: PwC 16th Annual Global CEO Survey 2013


PwC

Most transportation & logistics CEOs are focusing on workforce diversity and inclusion

47% 40%

10%

Q: Please indicate to what extent your organisation plans to focus on workforce diversity and inclusion over the next 12 months? Base: All respondents (Total sample, 1330; Transportation & logistics, 109) Note: Don’t know/refused excluded . Source: PwC 16th Annual Global CEO Survey 2013

Decrease focus No change Increase focus

40% will continue their focus on workforce diversity and inclusion, and

47% will increase their efforts over the next 12 months.


PwC


PwC gratefully acknowledges the contribution to the 16th Annual Global CEO Survey: Key findings in the transportation & logistics industry provided by: • Dr. John Coustas, President &

CEO, Danaos Corporation, Greece

• Aireen Omar, CEO, AirAsia Berhad, Malaysia


Acknowledgements

Klaus-Dieter Ruske Peter Kauschke Global Industry Leader Tel. +49 211 981 2877 [email protected] Or visit www.pwc.com/ceosurvey

Global Industry Marketing/BD Director Tel. +49 211 981 2167 [email protected]




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