Effective Business Leadership During Times of Crisis.

Thoughts on the CEE findings from the 26th Annual Global CEO Survey conducted by PwC.

In January, at the World Economic Forum held in Davos, "polycrisis" was an expression that was frequently mentioned. It's a term that captures the current situation faced by different organizations, governments, and societies worldwide. The Central and Eastern European regions are particularly vulnerable to the diverse problems arising from emergencies such as the war in Ukraine, political instability, rising levels of inflation, climate changes, and cybersecurity risks. The challenges faced by this region are even more complex than those faced by other parts of the world.

If we take a close look at the information presented in our 26th Annual Global CEO Survey, which obtained the opinions of over 4,400 business leaders from different countries and was first presented at the Davos summit, we might think that the multiple crises we are facing and the negative outlook they imply will shape the remainder of 2023. In our particular area, 74% of the CEOs (and 73% worldwide) share the belief that the global economy is likely to decelerate during the next year.

However, it may be unexpected, but Davos concluded positively as the IMF indicated that its economic predictions would be upgraded. Similarly, the results of our region's survey revealed a level of reasonable positivity.

CEOs from Central and Eastern Europe have shared their opinions on the state of global economic growth, and they're not feeling too optimistic. However, they do have confidence in their own companies and their ability to grow revenue. In fact, 46% of CEE business leaders are extremely confident in their revenue growth prospects over the next 12 months. Looking further ahead, even more CEOs (50%) feel this same level of confidence when considering a three-year period.

The positive outlook is based on the belief that sticking to the same old ways of doing business is no longer viable. This survey highlights that CEOs in our area understand this even more than those in other countries. 45% of them (compared to 40% globally) admit that if they continue their current practices, their businesses won't be profitable in ten years. Therefore, they acknowledge the necessity to make changes and transform their companies.

As a person, I find myself motivated by the resolute mindset of CEOs in taking advantage of moments of danger and change to transform their businesses. They instill me with courage and trust in their actions. These corporate leaders acknowledge the importance of being proactive in making transformational decisions and believe that taking the first step will give them an edge over their competitors. By doing so, they not only weather the storm but lead their organisations to a prosperous future.

As the CEO, I have the honor of conversing with colleagues and business partners. From these interactions, I've learned that leaders ought to be inquiring about ways to assist their organizations during difficult times and transform challenges into favorable circumstances.

After launching our CEO Survey, I have made a goal to come up with my three main recommendations for business leaders in our area. These suggestions are separated based on different time frames, and I will discuss them below.

CEOs are concerned about inflation being the biggest risk in the upcoming year, according to 55% of business leaders. Executives in our area are following similar trends as their global counterparts by taking measures to increase revenue and decrease expenses in order to face economic obstacles in the short term. However, one noteworthy strategy is that CEE executives have moved more quickly to raise prices, with 58% of CEOs indicating this compared to the 51% seen in their global peers.

It's easy to see why this is the case - inflation poses a bigger risk in our area. Stats released by Eurostat in December 2022 indicate that Spain (6.7%), France (7.1%), and Malta (7.2%) have the lowest annual inflation rates, while the highest are found in Central and Eastern Europe: Hungary (23.1%), Latvia (21.7%), Estonia, and Lithuania (both at 21.4%).

However, it is important to mention that top-level managers see inflation as a temporary issue. About 55% of them believe their businesses will be severely affected by inflation in the coming year, but that figure drops to 36% for the next five years.

CEOs need to find the right balance when it comes to raising prices for their customers. This is because customers are becoming more aware of prices and are more likely to look for alternatives if they feel they are being charged too much. According to a survey by PwC, 40% of consumers are willing to use comparison websites to find better deals and 37% are open to shopping at multiple retailers to find the best prices available.

It's reassuring to know that business leaders in Central and Eastern Europe (CEE) are not as inclined as their global counterparts to cut jobs due to inflation. 67% of them have no intention of doing so, compared to 60% worldwide. This indicates that clever CEOs understand that although inflation is currently challenging, it will soon be over, while the competition for acquiring talented individuals will persist in the long run. We'll get back to that topic shortly.

Due to the war situation in Ukraine and the increasing worry about fluctuations in world affairs, company leaders are reconsidering some of their business practices and how they view risk. In comparison to last year's study of the thoughts of company executives, cyber risks no longer hold the top spot on the list of concerns. However, looking towards the next five years, cyber risks are now grouped with inflation, the fluctuation of worldwide economies, and political conflicts as the most dangerous risks facing these top executives.

Despite the fact that CEOs in Central and Eastern Europe are increasing their spending on cybersecurity in reaction to political conflicts, they are not investing as much as their global peers are (34% compared to 48% globally). Moreover, 41% of senior executives in these regions claim that there has been an increase in cyber-attacks on their systems since 2020, as per the Global Digital Trust Insights Survey conducted by PwC annually.

In past years, we have emphasized the importance of focusing on cybersecurity, and it is encouraging to see that the message is starting to resonate. However, there is still a need for additional efforts. It is crucial for CEOs to understand that the consequences of cyber attacks extend beyond financial damages. Such incidents can result in customer loss and harm to the company's reputation.

Don't forget that being an early bird in cybersecurity can bring great benefits. Let's be honest, hackers and other harmful individuals can easily find targets. Therefore, cybersecurity is mainly about making yourself a more challenging target compared to others.

The top concern for business leaders in our area remains the possibility of not having enough workers with the necessary abilities. This issue is just one part of the ongoing competition for talented individuals across the globe, which is a topic I previously mentioned. CEOs have been discussing this matter in surveys for many years, and when asked about what will likely have the greatest impact on their industry's profits in the next decade, 64% of CEOs in the region answered that the shortage of skilled workers will affect them "significantly/very significantly". This percentage is considerably higher than the global rate of 52%.

In the present day, it is not enough to offer better salaries when seeking and keeping workers, particularly those who have rare or specialized abilities. Based on the 2022 Global Workforce Hopes and Fears Survey from PwC, employees who are weighing the idea of moving jobs also value satisfying employment and the chance to be themselves while working.

There are various methods through which CEOs can tackle the challenge of acquiring talent. Firstly, the existence of this problem across the region implies that there might be a more significant underlying issue. Therefore, it is essential to seek opportunities for collaboration with educational institutions to ensure that graduates are equipped with the required skills for the current job market. Additionally, CEOs should exert more effort into making their employees feel empowered and engaged within the company. As the popular saying goes, there are only two things that are certain in life: death and taxes. However, we can now add a third factor to that list, which is the continuous competition for hiring the most talented individuals in the job market.

In essence, even though the latest CEO Survey might appear downbeat initially, I perceive it as an opportunity for significant improvements. The knowledge and understanding that our survey brings forth can guide entrepreneurs to make bold moves to tackle a multitude of issues and succeed in the long run. The multiple challenges we face may seem overwhelming, but I remain confident that our community will emerge more robust than ever before.

I urge you to delve into the CEE outcomes of the 26th International CEO Survey and express your opinions.

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