The Middle East’s leading CEOs are confident the region is moving toward economic recovery, according to the PricewaterhouseCoopers 13th Annual Global CEO Survey.
More than 80 per cent of the Middle East-based CEOs who responded to the survey said they are confident of their prospects in the next 12 months (82 per cent), and 79 per cent are expecting a recovery in their national economies in the next two years. More than a third of Middle East respondents, 39 per cent, went on to say they believe their national economy has either already rebounded or will rebound by the middle of 2010.
The global recession has also led business leaders to rethink their approach to risk and CEOs now recognise the increasing importance of reshaping their strategies in order to address risk at a deeper level. One in five CEOs say their board of directors is ‘significantly more engaged’ in assessing strategic risk indicating a move beyond controls-based risk management to corporate strategy and financial management.
“The clear sentiment of the CEOs that responded from the Middle East is one of optimism,” commented Warwick Hunt, Middle East Managing Partner of PricewaterhouseCoopers. “Whilst the global economic slowdown has clearly had a negative impact on a number of business sectors, it is clear that signs of recovery are now emerging and with them a new economic paradigm.
“After years of unprecedented growth, businesses across the region are now refocusing on fundamentals with a greater emphasis on regulatory issues, understanding market risks and the implementation of long-term investment strategies.”
Over a third, 39 per cent, of Middle East CEOs agreed their governments have been effective in helping create a skilled workforce, there is emerging evidence of the ‘talent gap’ growing, a trend that is also present on a global scale. In the Middle East in particular, the mismatch between supply and demand is amongst the most pressing challenges to Arab businesses going forward. Just under three quarters of Middle East CEOs, 71 per cent, are planning to increase their focus and investment on managing employees through the changing economic environment.
A number of Middle East CEOs also urge caution against overconfidence, suggesting the path to the new paradigm may not always be smooth. Whilst many expressed support for efforts to strengthen regulatory processes, they warn over-regulation could threaten long-term growth.
Nevertheless, most believe the region is well-positioned to emerge with a stronger, more transparent, better regulated and more sustainable business environment.
"It is clear that the fears of a global economic meltdown have started to recede and CEOs in the Middle East are more upbeat about the future,” Mr. Hunt commented. “The economies of the Middle East are recovering at a faster pace than in other parts of the world and companies with the best prospects are those who managed through the recession while keeping an eye on the recovery ahead.
"Whilst the timing of the recovery will vary by geography and industry it is encouraging to see that CEOs in the Middle East have been quick to adapt to many of the challenges they have faced and are now in a strong position to take advantage of a global upturn,” Mr. Hunt concluded.
Published annually, the extensive report provides an important benchmark on the economic climate, both globally and regionally. Collating the responses of 1,198 global CEOs, the survey explored a variety of factors impacting on businesses in the post-crisis environment, including the measurement of procedures that organisations are taking in response to the downturn, how they view the post-crisis business environment and what changes have been implemented to adapt to the current economic challenges.
Key findings of the 13th Annual PwC Global CEO Survey:
Fears for the future
Protracted global recession remains the biggest overall concern of CEOs around the world (65 per cent), followed closely by fear of over-regulation (60 per cent). More CEOs are "extremely concerned" about over-regulation (27 per cent) than any other threat to business growth. Other high-ranking potential business threats included instability in capital markets, and exchange rate volatility. At the other end of the spectrum, CEOs in the Middle East were more concerned about business threats such as inflation, lack of available key skills in their markets and terrorism.
Love-hate relationship with regulators
CEOs were very clear about the threat of over-regulation. Over Two-thirds of CEOs disagreed with the notion that governments have reduced the overall regulatory burden. However, Middle East CEOs were less concerned than their global counterparts about over-regulation and were more likely to view government intervention as positive, and to agree that governments take adequate steps to improve their country’s infrastructure and access to health care at lower cost. They also saw their governments to be more effective in helping create a skilled workforce, and helping companies to secure access to natural resources such as raw materials, water and energy.
At the same time, CEOs were optimistic about governments’ efforts to address systemic risks such as another economic crisis – 65 per cent of CEOs agreed that regulatory cooperation will help successfully mitigate systemic risks.
Combating the effects of recession
To combat recession, nearly 90 per cent of all CEOs said their companies had initiated cost-cutting measures in the past 12 months, led by those in the US, Western Europe and the UK. And nearly 80 per cent overall said they would seek cost cuts over the next three years.
Risk management
Risk management took on greater importance among CEOs as a result of the recession. Forty-one per cent of CEOs plan to make major changes to their company’s approach to managing risk, and another 43 per cent report plans to make some change to their processes
Boards of Directors are becoming more engaged in key aspects of management; such as assessing strategic risk, monitoring financial health, and overseeing company strategy.
Climate change
More than 60 per cent of CEOs said their companies are preparing for the impact of climate change initiatives and believe those efforts will improve their company's reputation. The recession had little impact on the green momentum; 61 per cent of companies with climate change initiatives saw no effect of the recession on their strategies and 17 per cent raised such investments last year.
