Ever since Russia’s invasion of Ukraine, global CEOs have confronted a new world of extraordinary volatility and uncertainty, tackling issues like recession, cyberattacks and inflation—which has forced many to reassess their growth assumptions and put strategic plans on hold. In fact, new research from The Conference Board, nearly 8 in 10 now expect a recession in their primary region of operation within the next 12 to 18 months—or believe one is already underway.
At the same time, the war is acting as a change accelerator, speeding new thinking in areas with long-term ramifications—including cyber risk, supply chains, renewable energy, and crisis and contingency planning. An astounding 9 in 10 CEOs are now concerned about Russian retaliation through cyberattacks—an area in which many firms recognized their lack of preparedness before the war.
According to the firm’s newly released C-Suite Outlook Mid-Year—a special wartime update of an annual survey—Ukraine fallout is nearly universal across the world’s C-suites. Just 9 percent of surveyed leaders say the war will have “no material impact” on their business operations in the coming year—but even they are unlikely to escape the effect of surging energy and food prices. Indeed, respondents named its contributions to inflation among the war’s most damaging economic consequence.
“As the war compounds already serious inflationary pressures, the biggest communications challenge brands now face is addressing rising prices in a forthright and persuasive manner,” said Ivan Pollard, executive director, Marketing & Communications Center at The Conference Board, in a news release. “Trust in corporations has been built up through the long months of COVID-19, but that trust can be eroded if there is any sense of profiteering. Communicating the story to your customers is one to be handled carefully with honesty and transparency.”
Moreover, the mid-year survey reveals how the war has scrambled the landscape of priorities facing CEOs
In addition to cybersecurity soaring in salience, the unprecedented Western sanctions on Russia have elevated the importance of regulators and boards as key stakeholders, as well as raised the urgency of preparing for future economic conflict—especially with China.
“CEOs say rising US-China tensions are likely to have a major impact on business operations in the coming 12 months, ranking it among the top five impacts. This challenge is contributing to intense fears of a fundamental re-alignment of the global geopolitical landscape—the potential division of the world into competing Cold War–style economic blocs, pitting the US and its allies against China and its allies (including Russia),” said Lori Esposito Murray, president, Committee for Economic Development of The Conference Board, in the release. “Such a division is likely to have significant negative impact on global trade and economic growth, and business leaders are awakening to the need to prepare: Already, 60 percent of US CEOs expect an economic decoupling over the next 5-10 years.”
Insights from the report include:
Cybersecurity concerns skyrocket
- Widespread anxiety: 90 percent of CEOs are now concerned to some degree about Russian retaliation through cyberattacks. 44 percent are highly concerned.
- A big shift in sentiment: This marks a major change from our January 2022 CEO survey: at that point, just 16 percent of CEOs identified cybersecurity as a high-impact threat.
Inflation: CEOs say it’s the war’s most damaging economic consequence
- Energy price volatility & higher input costs are the war’s top economic impacts: CEOs cite inflation issues—volatility in energy prices and higher input costs—as the top two issues that will affect their business in the next 12 months.
- The war has worsened preexisting inflation fears: In our January 2022 survey, conducted before the war, CEOs already ranked inflation as a top threat impacting their companies.
- How CEOs are mitigating inflation’s impact—passing on costs tops the list: 51 percent cite passing higher input costs onto consumers or end-users—the most-cited tactic; cutting costs is a close runner-up at 47 percent.
Recession fears: most CEOs expect a recession
- 76 percent expect a recession or believe it’s already here: Among CEOs globally, 15 percent believe a recession is already underway. Another 61 percent expect a recession is forthcoming in their primary region of operation before the end of 2023—if not earlier.
Strengthening supply chains: the number-one action CEOs are taking due to this war
- Fixing stressed supply chains: The top action companies are taking in response to the war is fixing stressed supply chains.
- CEOs who are focused on making supply chains more resilient:
- 53 percent of CEOs globally
- 78 percent with operations in Russia
- 72 percent with operations in Ukraine
CEOs favor secondary sanctions, but many worry about the blowback
- Most CEOs want secondary sanctions: 62 percent favor secondary sanctions that would be imposed on countries that continue doing business in Russia.
- But the blowback concerns them: More than a third—35 percent—of CEOs globally say they are highly concerned about the economic consequences outweighing the benefits:
- Secondary sanctions would escalate the economic battleground and set the stage for a fractured economy.
Renewable energy: the war is motivating CEOs to accelerate renewable energy investments
- Faster progress: Among CEOs globally, 28 percent say they’re accelerating progress towards the use of renewable energy.
CEOs reshuffle which stakeholders to prioritize: the board and regulators increase in importance
- Customers, regulators, and the board top the list: When asked which stakeholders’ views are most important as they decide their response to the war in Ukraine, CEOs globally ranked customers first, regulators second, and boards third.
- Employees ranked lower: Employees have played a less important role in shaping the corporate response to Ukraine than in dealing with non-war related domestic social and political issues.
US-China tensions: CEOs say it will likely have a big impact on their business
- Many CEOs are concerned: Among CEOs globally, 38 percent say rising US-China tensions resulting from the war in Ukraine will likely have a major impact on business operations in the next 12 months.
- Serious concerns about competing economic blocs: Meanwhile, 83 percent fear the re-emergence of competing economic blocs, with 43 percent saying they are highly concerned.
CEOs see people and technology as key to long-term growth
- Digital transformation is critical: Among CEOs globally, 58 percent cite digital transformation as part of their investment plans—the top response.
- Labor shortages present a challenge: 57 percent are promoting hybrid work models to attract workers, while 43 percent are increasing automation.
“Reducing the use of the US dollar has been an objective of both Russia and China for over a decade, to help shield their currencies from US sanctions and assert global economic leadership,” said Sara Murray, managing director, international at The Conference Board, in the release. “But now, as Russia pursues an aggressive policy to circumvent mounting economic sanctions, they are actively working toward an alternative world order not dependent on the primacy of the US and the dollar. Despite this, CEOs show very little concern about a lessening importance of the US dollar—just 16 percent are highly concerned.”
“As CEOs and other C-suite executives focus on ensuring the long-term growth of their business amid this volatile global environment, addressing labor force challenges will be essential,” said Rebecca Ray, executive vice president, human capital at The Conference Board, in the release. “To do this, firms are doubling down on the hybrid work model, automation, and improving their recruiting processes and communication around business strategy.”
Between May 10 and 24, The Conference Board surveyed 750 CEOs and other C-suite executives, primarily based in North America, Latin America, Asia, and Europe. The results paint the fullest picture yet of the depth and breadth of the war’s impact on the perspectives, priorities, anxieties, and future plans of business leaders around the world.