Australia’s CEOs continued to face pressure generated by the ongoing COVID-19 pandemic and market conditions such as rising inflation, supply chain disruptions and the impending ‘Great Resignation’.
Despite concerns about the risks posed by cybersecurity threats, climate change, the evolving pandemic and its potential impacts, CEOs in Australia have underlying confidence in growth. Figures from PwC Australia’s 25th CEO Survey showed domestic business confidence was high with 88 per cent of CEOs surveyed expecting economic growth in Australia – compared to 76 per cent expecting global economic growth – and 98 per cent confident about their own company’s prospects for revenue growth over 2022.
While COVID-19’s health and economic challenges remain uncertain, CEOs of Australia’s biggest companies highlighted three additional threats that could damage their businesses’ reputations and impact sales – cybersecurity is still the leading risk to business growth, with CEOs in Australia significantly more concerned than their global peers, followed by ongoing COVID-19 issues and climate change, while skills shortages are also causing concern. The findings also suggested that CEOs and Boards have scope to further build trust and create measurable value by including environmental, social and governance (ESG) metrics into their long-term corporate strategies and CEO remuneration plans.
Business leaders are broadly optimistic about growth in 2022
Australia’s CEOs are positive about economic growth both globally and locally in 2022 despite the potential for ongoing turbulence resulting from the COVID-19 pandemic. Confidence in the global economy was higher than it was pre-COVID-19, with 76 per cent of CEOs in Australia expecting economic growth globally in 2022 compared to just 11 per cent when surveyed in the months before the pandemic. Even with the economic uncertainty, CEOs were less worried about the impact of macroeconomic volatility on business growth than they were about cyber, health (including COVID-19 and its impact on the labour market) and climate change risks.
In relation to growth markets, the percentage of CEOs surveyed who see opportunities to grow revenue in the New Zealand market has doubled since the prior year. Additionally, Australia is becoming more important to the Asia-Pacific region as a trade partner. While the US and China remain the top two regions (44% and 36%) according to CEOs in the Asia-Pacific, Australia has leapt from eighth place last year to third, increasing from 10 per cent to 18 per cent. For CEOs in China, 24 per cent of respondents saw Australia as a key growth market, just behind the United States with 29 per cent.
PwC Australia’s Chief Economist Jeremy Thorpe said, “The year ahead is set to be one of continued disruption. Current issues with supply chains didn’t happen at the start of the pandemic. What we’re seeing now as a result of a resurgence in the pandemic are broader supply chain issues. Although delays to supply chains will have the most impact in the first quarter of 2022, these could continue all year as some industries will take longer to recover.
“During the pandemic, businesses did what they needed to do and pivoted to digital but going forward, investment has been held back. What we need to see now is investment by business to ramp up. The positive economic outlook from CEOs is a good sign that despite the possibility of ongoing pandemic impacts, business leaders are looking ahead and seeing the opportunity to invest and grow.”
Cybersecurity should be seen as an investment in business growth
For the third year in a row, cybersecurity ranked as Australia’s top risk to business growth and outranked COVID-19. While the pandemic and related health risks were high on CEOs’ minds, they were still 16 percentage points more ‘very’ and ‘extremely’ concerned about cyber risks. Cybersecurity risk was also a key point of difference between Australia’s CEOs and global leaders, with local CEOs extremely or very concerned (71%) about cybersecurity than their global peers (50%). They are also more concerned that cyber risks could affect their ability to sell products and services (67% compared to 60% of their global peers).
Time to rethink how we see the climate crisis
Australia’s large corporations still have a way to go to improve their accountability around climate change and ESG outcomes more broadly. While 35 per cent of Australia’s CEOs said greenhouse gas (GHG) emissions targets were part of their company’s long-term strategy, only 14 per cent of these CEOs had GHG emissions targets in their personal bonus or remuneration plans. With only 35 per cent of survey respondents in Australia including climate-related targets in their long-term corporate strategy, there is scope for organisations to think differently about climate risk – and see it as an opportunity within the ESG spectrum for long-term value creation and sustained outcomes.
Less talk, more action
Findings from this year’s survey showed Australia’s CEOs are focused on near-term skills shortages. Two thirds were concerned about the impact of COVID-19 and health-related risks on attracting and retaining talent – which is more than their global counterparts. Meanwhile 44% said retaining employees who have been upskilled has increased as a challenge, (compared to 26% in the prior year’s CEO Survey), and nearly a quarter (24%) said one of the top three upskilling challenges was defining which skills to build. On the other hand, PwC Australia’s What Workers Want report showed almost half of Australia’s top executives have no plans to re-imagine their employee value proposition.
Australia’s CEOs are more optimistic about economic growth than their overseas counterparts, and overall, Australia’s CEOs are focused on top-line growth. Many workers are feeling burnt out after a tough couple of years and some employees have only ever worked for their current employer under pandemic circumstances. Any organisation that pushes an aggressive growth agenda with a burnt-out, lower-tenured workforce can expect to see higher staff turnover. To have a handle on talent management and succession planning, map high performers within an organisation and use it to design retention strategies, and invest more heavily in high-performing employees.