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Business leadership during complicated times
PWC'S most recent annual global CEO survey found that CEO confidence in the growth of the global economy over the next 12 months fell by 10 points to just 27 per cent from last year's 37 per cent.
Overall, the results underlined a gloomy outlook for the global economy over the coming year.
After a volatile start to the year, two thirds of CEOs now see more threats facing their business today than there were three years ago with the top three threats being overregulation (79 per cent), geopolitical uncertainty (74 per cent), and exchange rate volatility (73 per cent).
These factors have varying effects in different places, but together they are increasing the level of uncertainty about the global economy.
WHAT ARE ASEAN CEOS SAYING?
Zooming in on Asean, the survey showed that only 38 per cent of Asean CEOs are very confident of their company's growth in the next 12 months, a significant drop of nine percentage points compared to last year, but still three percentage points higher than the global average. In addition, almost 20 per cent of Asean CEOs surveyed think that the global economy will decline.
Eighty per cent of CEOs in the region see more threats facing their businesses today than three years ago.
CEOs may be concerned about slightly different issues across the globe, but one thing is certain - the complexity and risk of doing business is increasing.
The latest poll of private sector economists by the Monetary Authority of Singapore (MAS) showed a more downbeat outlook on the Singapore economy for 2016, with GDP (gross domestic product) growth forecast to be 1.9 per cent, down from the 2.2 per cent projected three months ago. As an open economy, Singapore can be considered to be the bellwether for the global economy.
As businesses look forward to the year ahead filled with uncertainty - it is important that CEOs pay attention to business transformation planning.
The majority of Asean CEOs have indicated plans to restructure their businesses, with 64 per cent of them planning to implement a cost-reduction initiative over the next 12 months, as well as to enter into a new strategic alliance or joint venture.
CEOs are looking at strategically strengthening and protecting the positions of their businesses in today's complex yet competitive marketplace. They need to plan ahead, prepare and position their business for growth. They want speed and some level of certainty with minimised risks and business disruptions.
Instead of embarking on a purely defensive strategy of cost containment, businesses may also want to strategically review their value chain and business models, to take into account the longer term and fundamental impact of digitisation and other mega trends.
History is dotted with many examples of successful businesses that fell by the wayside for not moving ahead with the times.
Smaller companies may consolidate while larger companies may refocus on their core businesses.
Companies which are doing well may build up a war chest for strategic acquisitions, through the sale of non-core assets, capital fund raising or securing additional credit lines, as opportunities not previously available in the market may become available in times of volatility.
At the other end of the spectrum, companies whose cashflows are adversely impacted or which are over-reliant on debt may be actively looking at some form of restructuring to sustain their business.
DIVERSITY IN JOBS AND SKILLS
According to the survey, Asean CEOs' concerns about the availability of key skills remain high at 72 per cent.
Several sectors have particularly high levels of concern, topped by entertainment and media, and technology, while sectors more traditionally aligned with 'STEM' skills such as manufacturing, pharmaceuticals and life sciences, also feature highly.
Nearly half of Asean CEOs say they are changing how they develop their pipeline of leaders (49 per cent), suggesting business leaders' recognition of the wider skills required as the next generation of CEOs will need to tackle a more complex environment encompassing technology, wider threats, and expectations of stakeholders for their organisations.
Perhaps reflecting CEOs' views on rising stakeholder expectations and business trust issues, 41 per cent said they were focusing more on workplace culture and behaviours.
In a separate survey, it was found that 95 per cent of Asean CEOs who implemented a diversity and inclusiveness strategy said that it had improved their bottom line.
The survey underlines technology's force in business for change and for better customer and stakeholder understanding.
Nine out of 10 CEOs surveyed said that they are changing how they use technology to assess customer and wider stakeholder expectations, and how they deliver against them.
The most significant levels of change were reported in sectors with traditionally high customer service expectations including banking and capital markets (90 per cent), insurance (95 per cent), hospitality and leisure (94 per cent) and health care (93 per cent). These are all major industries in Singapore's economy, and businesses from these industries will all likely see technological advances transform customer expectations of their businesses over the next five years.
Data and analytical tools, and CRM (customer relationship management) systems are seen as having high returns for customer and stakeholder engagement. Internally however, technology and data analytics still have untapped potential. In talent management, only 4 per cent report using predictive workforce analytics, and 16 per cent use it to focus on productivity.
Concerns about the speed of technological change as a threat to growth prospects is being felt most acutely in the banking and capital markets sector, 20 per cent higher than the global average of 61 per cent, followed by entertainment and media, and technology sectors - mirrored in CEOs' concerns about skills in these sectors.
TRUST AND PURPOSE IN BUSINESS
This year's survey examined how CEOs are preparing to respond to changing customer and wider stakeholder expectations of business. 59 per cent of CEOs in Asean say businesses need to do more to communicate their purpose and values. Trust is certainly a concern, as Asean CEOs consider changing stakeholder needs. More than half are concerned about the lack of trust in business, compared with 37 per cent just three years ago.
But there are barriers to responding to changing expectations. Many Asean CEOs (45 per cent) say additional cost is stopping them from taking action to respond to greater expectations. Unclear or inconsistent standards and regulations, cited by 42 per cent of Asean CEOs, is also a significant barrier.
To stay ahead of the curve, businesses will have to start acting to respond to these anticipated changes. Many Singapore companies are already doing more in the area of corporate social responsibility and environmental awareness, but as expectations change, they should be careful to demonstrate that they are "walking the talk" or risk being called out.
This also has an implication on recruitment - a separate survey found that millennials ranked "corporate values that match my own" as a top 10 factor when considering employment. This means that as the war for talent intensifies, companies that encompass values that resonate with millennials are more likely to be attractive as employers.
So the saying goes "May you live in interesting times" and whether you believe it to be a curse or a blessing, these are indeed times of change, challenge and opportunity.
Reshaping businesses to be fit for future purposes is not going to happen quickly or easily, but the forces that make this transformation necessary are already in place and businesses need to keep pace or risk becoming irrelevant.
- The writer is PwC Singapore's executive chairman.