New Zealand CEOs Balance Immediate Concerns With The Need For Transformation

Auckland, 22 February 2023 – PwC’s latest CEO Survey results find that immediate challenges such as inflation and macroeconomic volatility are dominating the agenda for local business leaders while they also look to transform their businesses to ensure long-term growth.

These findings have emerged from PwC’s 26th Annual Global CEO Survey which polled 4,410 CEOs in 105 countries including 142 CEOs from New Zealand. The survey was carried out in October and November 2022 - before the recent climate-related events brought new challenges for local business leaders and communities.

The results reveal that 79% of CEOs in this country think global economic growth will decline in the next 12 months compared to last year when 64% thought it would improve. This increasing sense of pessimism is shared by global CEOs of which 73% believe global economic growth will decline.

The results show similar sentiment for New Zealand’s economic growth with 76% of local business leaders believing it will also decline in the next 12 months.

Mark Averill, CEO and Senior Partner at PwC New Zealand says:

“This year our survey results show increased pessimism from local business leaders about growth. Given the challenges of the last few years, including higher interest rates and inflation, these findings are perhaps not surprising. The survey was carried out before the devastating Auckland floods and Cyclone Gabrielle. I expect the impact of these events will play out in the results for next year’s survey.

“While the survey results show CEOs are looking to drive profitability in the face of multiple headwinds, we cannot lose sight of longer-term issues. We must maintain momentum and think about how we can best transform our businesses to thrive and remain prosperous into the future. This dual imperative is a complex balancing act for CEOs but one that we need to grapple with for organisations to remain viable in the years to come.”

Inflation and macroeconomic volatility are key concerns

The impact of the economic downturn is on the minds of New Zealand CEOs. The survey results show 38% feel extremely or highly exposed to inflation in the next 12 months followed by macroeconomic volatility at 26%. These concerns remain similar across a five year horizon where CEOs feel they will still be highly or extremely exposed to macroeconomic volatility (23%) and inflation (25%).

Again, these findings show a marked contrast to last year’s results where local business leaders rated health risks as their top concern followed by cyber risks.

“When the survey was carried out late last year, interest rates and inflation were rising and there was widespread talk of a recession. The results clearly illustrate how much of a concern these issues are for CEOs. And, the recent weather-related events will likely create further challenges in the economic outlook,” says Averill.

Transformation is key for long-term success

Alongside some of the immediate challenges, CEOs are also aware of the need to invest in technology to transform their businesses for the long-term. This seems particularly pertinent for New Zealand business leaders as the percentage of CEOs are investing in automating processes and systems in the next 12 months is higher than for their international counterparts (84% of New Zealand CEOs compared to 76% globally and 71% in Asia Pacific).

This trend continues when it comes to deploying technology such as the cloud, AI and others. We find that 76% of local CEOs are looking to deploy this technology in contrast to 69% of global CEOs and 67% in Asia Pacific.

Averill notes, “Investing in technology will play a vital role in helping organisations deal with some of the challenges they currently face and deliver long-term value. The pace of change only continues to increase so business leaders need to think about what interventions they can make now and into the future to remain successful.”

Investing in talent

To further drive long-term transformation, CEOs are investing in their people. Eighty-six percent of local business leaders say they are investing in upskilling their workforce in priority areas in the next 12 months. At the same time, 92% say they are developing leadership and talent to drive the productivity of their workforce.

Managing climate risk is critical

The survey results show that CEOs expect some degree of impact from climate change in the next 12 months. This is mostly in their cost profiles where over 50% expect a moderate, large or very large impact followed by supply chains (33%) and physical assets (12%).

Averill concludes, “The recent climate-related events in this country illustrate just how important it is for businesses to manage their climate risk. It is no longer a choice but a necessity and needs to be high on the agenda of business leaders.”

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