CEO Monthly Issue 1 2018

20 CEO MONTHLY / ISSUE 1 2018 and training workers in the fields that will matter in a technology- enabled job market. It also means encouraging and creating opportunities for the workforce to retrain and learn new skills throughout their careers. As the interest in apprenticeships and internships shows, lifelong training relevant to a business or industry is critical.” The digital and automation transition is particularly acute in the Financial Services sector. Almost a quarter (24%) of Banking & Capital Markets and Insurance CEOs plan workforce reductions, with 28% of Banking & Capital Markets jobs likely to be lost to a large extent due to technology and automation. Threats to growth: CEOs fear wider societal threats they can’t control Despite the optimism in the global economy, anxiety is rising on a much broader range of business, social and economic threats. CEOs are ‘extremely concerned’ about geopolitical uncertainty (40%), cyber threats (40%), terrorism (41%), availability of key skills (38%) and populism (35%). These threats outpace familiar concerns about business growth prospects such as exchange rate volatility (29%) and changing consumer behaviour (26%). Underlining the shift, extreme concern about terrorism doubled (2018: 41% vs 2017: 20%) and terrorism enters the top 10 threats to growth. The threat of over-regulation remains the top concern for CEOs (42% extremely concerned), and over a third (36%) remain concerned about an increasing tax burden. Key skills availability is the top concern for CEOs in China (2018: 64% extremely concerned vs. 2017: 52%). In the US (63%) and the UK (39%), cyber has become the top threat for CEOs displacing over-regulation. And in Germany, cyber jumped from being the fifth threat in 2017 to third place (28%) this year. A year after the Paris Agreement was signed by over 190 nations, which saw countries commit to voluntary action on climate change and low carbon investment, CEOs’ concern about the threat of climate change and environmental damage to growth prospects has now doubled to 31% of CEOs (2017: 15%). High-profile extreme weather events and the US withdrawal from the Paris Agreement have significantly raised the profile of business action on climate risk, regulation and resilience. In China, over half (54%) of business leaders are extremely concerned about climate change and environmental damage as a threat to business growth, equal with their levels of concern about geopolitical uncertainty and protectionism. “The higher level of concern is being driven by larger societal and geopolitical shifts rather than the dynamics of business leaders’ own markets,” comments Bob Moritz, Global Chairman, PwC. “It’s clear their mid to long-term confidence in revenue growth is tempered by threats the business world is not used to tackling directly itself.” Trust and leadership: CEOs divided over whether future economic growth will benefit the many or the few Echoing the theme of the World Economic Forum this year, CEOs acknowledge that we live in a fractured world. They are divided over whether future economic growth will benefit the many or the few. They see the world moving towards new, multifaceted metrics to measure future prosperity. Bob added further insight into these developments and the issues he believes are concerning CEOs around the world. “The higher levels of CEO concern about broader societal threats underlines how companies are navigating an increasingly fractured world. CEOs across every region and country that we spoke to recognise that the old ways of measuring growth and profit won’t work alone for the future. Particularly in the context of the Sustainable Development Goals, we’re likely to see more work developing and defining metrics that capture and communicate an organisation’s purpose in a way that is relevant to businesses’ stakeholders in the coming years.” Examining the key challenges to trust for businesses, CEOs admit that delivering results in shorter periods of time (60%) is the main challenge. However, following this, there is a significant shift with the majority reporting higher levels of pressure to hold individual leaders to account (59%), including for misconduct. Over a third report more pressure from employees and customers to take political and social stances (38%) in public. In the Banking and Capital Market (65%), Healthcare (65%) and Technology sectors (59%), the profile of leadership accountability was higher than average. So too were expectations in the US (70%), Brazil (67%), and the UK (63%). High-profile debates on diversity, immigration, social inclusion and pay equity have raised employees’ expectations of leadership to engage in political and social issues, particularly in the US (51%), China (41%) and the UK (38%). CEO Optimism Booms Despite Increasing Anxiety Over Threats to Growth g