EY CEO Outlook July 2023: 47% Optimistic, 17% No Change & 36% Less Optimistic, 54% Highlighted Significant Impact of Risks on Companies, 98% Planned for M&As in Next 12 Months
25th August 2023 | Hong Kong
EY has released the CEO Outlook July 2023, providing key insights into 1,200 CEOs from 21 countries outlook on expected financial performance in 2023 & 2024, planned economic scenario and risks, M&A strategies capital allocation strategies including to Artificial Intelligence (AI) and Sustainability. In the next 12 months (2023/2024) on companies’ financial performance, 47% of CEOs are optimistic, 17% no change, and 36% are less optimistic. 41% of CEOs have planned for a moderate & persistent downturn, 25% planned for a moderate & temporary downturn, and 18% planned for a severe & temporary downturn. More than 54% of CEOs highlighted the following risks have significant impact on their companies – 1) Geopolitical conflicts or trade tensions 2) Macroeconomic & market volatility 3) Regulatory risks 4) ESG & sustainability risks 5) Technology & digital disruption, including cyber risks. CEOs 4 Capital Allocation Strategies – Maintain cash reserve 29%, M&A 26%, Invests in organic growth 25%, Return capital to shareholders 20%. Portfolio Transformation (Eg. spinoffs, divest, acquisition) in next 12 months – Accelerate 21%, Maintain 42%, Pause 24%, Reduce 13%. How to Finance transformation – Improve performance 42%, New capital 24%, Refinance existing debt 20%, Sell non-core assets 14%. CEO Planned M&As in next 12 months – Yes 98%, No 2%. Type of M&As in next 12 months – Joint ventures or strategic alliance with 3rd parties 63%, M&A 59%, Divestments, spin-offs, IPOs 47%. Capital Allocation to Artificial Intelligence (AI) – Already invested 43%, Plan to invest in next 12 months 45%, Do not plan any significant capital investments 12%. Capital Allocation to Sustainability – Forefront of strategy or priority 38%, Same as other business priorities 34%, Less of a priority 24%. The EY CEO Outlook Pulse Survey 2023 was conducted in June & July 2023 with 1,200 CEOs from 21 countries. 60% of the companies have more than $1 billion revenue and 40% of companies with less than $1 billion revenue. (21 Countries: Brazil, Canada, Mexico, United States, Belgium, Luxembourg, Netherlands, France, Germany, Italy, Denmark, Finland, Norway, Sweden, United Kingdom, Australia, China, India, Japan, Singapore and South Korea). See below for key findings & summary | View EY CEO Outlook Report 2023 here.
“ 47% Optimistic, 17% No Change & 36% Less Optimistic, 54% Highlighted Significant Impact of Risks on Companies, 98% Planned for M&As in Next 12 Months “
EY CEO Outlook July 2023
Summary
- CEO Outlook on Financial Performance in next 12 months (2023 / 2024) – Optimistic 47%, No Change 17%, Less Optimistic 36%
- Global Economy CEO Planned Scenario 2023 July – Moderate & persistent downturn 41%, Moderate & temporary downturn 25%, Severe & temporary downturn 18%
- Geopolitical conflicts or trade tensions – Significant Impact 57%, Moderate Impact 25%, Minimal / No Impact 18%
- Macroeconomic & market volatility – Significant Impact 56%, Moderate Impact 25%, Minimal / No Impact 19%
- Regulatory risks – Significant Impact 54%, Moderate Impact 28%, Minimal / No Impact 18%
- ESG & sustainability risks – Significant Impact 56%, Moderate Impact 27%, Minimal / No Impact 17%
- Technology & digital disruption, including cyber risks – Significant Impact 57%, Moderate Impact 25%, Minimal / No Impact 18%
- 4 Capital Allocation Strategies – Maintain cash reserve 29%, M&A 26%, Invests in organic growth 25%, Return capital to shareholders 20%
- 6 Actions for Organic Growth or M&A – Improve technology capabilities & innovation, Improve or launch new products & services, Expand into new markets or regions, Integrate sustainability into core products & services, Add new skills or capabilities, Build ecosystems, alliances & partnerships
- Portfolio Transformation (Eg. spinoffs, divest, acquisition) in next 12 months – Accelerate 21%, Maintain 42%, Pause 24%, Reduce 13%
- How to Finance transformation – Improve performance 42%, New capital 24%, Refinance existing debt 20%, Sell non-core assets 14%
- CEO Planned M&As in next 12 months – Yes 98%, No 2%
- Type of M&As in next 12 months – Joint ventures or strategic alliance with 3rd parties 63%, M&A 59%, Divestments, spin-offs, IPOs 47%
- Capital Allocation to Artificial Intelligence (AI) – Already invested 43%, Plan to invest in next 12 months 45%, Do not plan any significant capital investments 12%
- Capital Allocation to Sustainability – Forefront of strategy or priority 38%, Same as other business priorities 34%, Less of a priority 24%
EY CEO Outlook July 2023
1) CEO Outlook
Outlook on Financial Performance in next 12 months
- Optimistic – 47%
- No Change – 17%
- Less Optimistic – 36%
Global Economy CEO Planned Scenario 2023 July vs January
- Severe & persistent downturn – 15% vs 9%
- Severe & temporary downturn – 18% vs 41%
- Moderate & persistent downturn – 41% vs 36%
- Moderate & temporary downturn – 25% vs 12%
- Do not anticipate a downturn – 1% (2%)
Domestic Economy CEO Planned Scenario 2023 July January:
- Severe & persistent downturn – 8% vs 22%
- Severe & temporary downturn – 23% vs 34%
- Moderate & persistent downturn – 30% vs 32%
- Moderate & temporary downturn – 37% vs 10%
- Do not anticipate a downturn – 2% vs 2%
Domestic economy refers to main (primary) country in which the company operates in
2) CEO Outlook on Risks
Geopolitical conflicts or trade tensions:
- Significant Impact – 57%
- Moderate Impact – 25%
- Minimal / No Impact – 18%
Macroeconomic & market volatility:
- Significant Impact – 56%
- Moderate Impact – 25%
- Minimal / No Impact – 19%
Regulatory risks:
- Significant Impact – 54%
- Moderate Impact – 28%
- Minimal / No Impact – 18%
ESG & sustainability risks:
- Significant Impact – 56%
- Moderate Impact – 27%
- Minimal / No Impact – 17%
Technology & digital disruption, including cyber risks:
- Significant Impact – 57%
- Moderate Impact – 25%
- Minimal / No Impact – 18%
3) CEO Capital Investment Strategy
Primary Focus of Capital Allocation Strategy in next 12 months:
- Maintain cash reserve for opportunities & challenges – 29%
- Pursuing M&A (mergers & acquisitions) – 26%
- Invest in organic growth – 25%
- Return capital to shareholders (dividends, share buybacks) – 20%
Focus on Organic Growth or M&A (Global vs APAC):
- Improve technology capabilities & innovation – 16% vs 13%
- Improve or launch new products & services – 15% vs 17%
- Expand into new markets or regions – 15% vs 18%
- Integrate sustainability into core products & services – 15% vs 16%
- Add new skills or capabilities – 14% vs 15%
- Build ecosystems, alliances & partnerships – 13% vs 14%
Portfolio Transformation (Eg. spinoffs, divest, acquisition) in next 12 months:
- Accelerate – 21%
- Maintain – 42%
- Pause – 24%
- Reduce – 13%
How to finance transformation:
- Improve performance – 42%
- New capital – 24%
- Refinance existing debt – 20%
- Sell non-core assets – 14%
4) CEO Planned M&As
M&As in next 12 months:
- Yes – 98%
- No – 2%
Type of M&As in next 12 months:
- Joint ventures or strategic alliance with 3rd parties – 63%
- M&A – 59%
- Divestments, spin-offs, IPOs – 47%
Using AI as part of M&A selection or due diligence:
- Significant use -27%
- Initial use / pilot – 44%
- No but exploring – 24%
- No plans – 5%
M&A ~ mergers & acquisition
5) Artificial Intelligence (AI)
Capital Allocation to Artificial Intelligence (AI):
- Already invested – 43%
- Plan to invest in next 12 months – 45%
- Do not plan any significant capital investments – 12%
Artificial Intelligence (AI) – Agree / Neutral / Disagree:
- AI is a force for good, business efficiency, positive outcomes for all (eg. innovations in health care treatments) – 65% / 25% / 10%
- Impact of AI replacing humans in the workforce counter-balanced by new roles & career opportunities – 66% / 23% / 11%
- Business community needs to focus more on ethical & impact (eg. privacy) implications of AI – 67% / 23% / 10%
- Do more to mitigate against using AI in harmful ways (eg. cyber attacks, deepfakes, disinformation) – 65% / 25% / 10%
- Not doing enough to manage the unintended consequences of AI (business community & society) – 64% / 24% / 12%
6) Sustainability
Capital Allocation to Sustainability:
- Forefront of strategy or priority – 38%
- Same as other business priorities – 34%
- Less of a priority – 24%
EY CEO Outlook Pulse Survey 2023 July
The EY CEO Outlook Pulse Survey aims to provide valuable insights on the main trends and developments impacting the world’s leading companies as well as business leaders’ expectations for future growth and long-term value creation. It is a regular pulse survey of CEOs from large companies around the world conducted by FT Longitude, the specialist research and content marketing division of the Financial Times Group. In June and July 2023, FT Longitude surveyed on behalf of the global EY organization a panel of 1,200 CEOs across Brazil, Canada, Mexico, United States, Belgium, Luxembourg, Netherlands, France, Germany, Italy, Denmark, Finland, Norway, Sweden, United Kingdom, Australia, China, India, Japan, Singapore and South Korea.
Surveyed companies’ annual global revenues were as follows:
- Greater than $5 billion: 30%
- $1 billion – $4.9 billion: 30%
- $500 million – $999.9 million: 20%
- less than $500 million: 20%
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