PwC have released their 21st annual CEO survey: The Anxious Optimist in the Corner Office. The survey found that despite record levels of short term optimism in the global economy, CEOs worldwide are increasingly concerned about broader, external, societal threats to their organisations. The key findings of the survey include the following.

Record levels of optimism about the global economy

• Optimism about global economy at record levels globally: The survey found that overall 57% of CEOs across every region surveyed (US, Canada, Latin America, Western Europe, Central and Eastern Europe, Africa, the Middle East and the Asia Pacific) believe that global economic growth will 'improve' over the next twelve months as compared with 29% in 2017.  The report comments that this is the highest ever level of optimism recorded.
• Overall, CEOs are more 'cautiously confident' in their own growth prospects (except in North America): Asked how confident they are about their organisation's prospects for revenue growth over the next 12 months, 42% of CEOs overall indicated responded that they 'very confident'.  The report comments that this reflects the fact that most of the world’s major economies are experiencing positive growth in contrast to the situation just a few years ago.
• North American CEOs are the most confident in their own growth prospects: The reported confidence level was significantly higher (53%) in North America than the global average.  The figure is also an increase an  on 2017 when 39% reported they were 'very confident'.  When asked what will drive the anticipated growth, almost all North American CEOs identified organic growth (94%), followed by new M&A (61%) and cost reduction (59%). The report writers comment that that North American CEOs’ reliance on mergers and acquisitions as compared with the rest of the world – 61% cited it as a growth driver, as compared with the next highest region, Western Europe at 45%, and a global average of 42% –  is notable. The report comments that the increase in overall confidence levels reflects both the Trump administration's 'probusiness agenda' (eg tax cuts and roll back of regulation) as well the domestic growth rate (3%).  The report adds that the last time North American CEOs were 'this exuberant' was in 2007, the year before the global financial crisis.
• The US remains the top spot for global investment due favourable investment conditions: CEOs identified the US as the top spot for global investment (46%), followed by China (33%) Germany (20%) UK (15%) and India (9%).  The report comments that 2018 is the first year in which India has moved into the top five (displacing Japan).  Australia is 11th behind Russia, Canada, Brazil, France and the top 5.

Top ten threats globally

CEO's were asked to consider a list of threats to their organisation's growth prospects and rank their level of concern. The list below, lists the top 10 threats based on the percentage of CEOs who responded that that they were 'extremely concerned'.

1. Over regulation (42%).  Over regulation remained the top ranked threat globally (as it has been since 2008). It also appears in the top five threats identified across every region surveyed.
2. Terrorism (41%).  This is a substantial increase on 2017, when terrorism was ranked 12th on the list of threats with only 20% of respondents indicating they were extremely concerned — it is now a top five 'extreme concern' in every region except Africa.
3. Geopolitical uncertainty (40%).  In 2017, this was the fifth ranked threat with 31% of respondents indicating they were extremely concerned about it.  The report comments that it is top five threat in every region except Asia-Pacific, where it ranks sixth.
4. Cyber threats (40%).  In 2017, cyber threats were ranked 10th in the list of threats with only 24% of respondents indicating they were 'extremely concerned about it.
5. Availability of key skills (38%).  In 2017, this threat was ranked fourth with 31% of CEOs indicating it was of 'extreme concern'.
6. Speed of technological change (38%).  The level of concern about this threat was unchanged from 2017.
7. Increasing tax burden 36%).  The level of concern about this threat was unchanged from 2017.
8. Populism (35%).Populism was not in the top 15 threats in 2017 indicating that there has been substantial increase in concern.
9. Climate change and environmental damage (31%).  Climate change was not in the top 15 threats in 2017.
10. Exchange rate volatility (29%).  In 2017, this was ranked third in the list of threats with 31% of CEOs indicating they were extremely concerned about it. 

Top Five Threats: Asia Pacific

Asia-Pacific CEOs identified the following as their areas of greatest concern.

1. Availability of key skills (52%)
2. Speed of technological change (51%)
3. Terrorism (48%)
4. Cyber threats (44%)
5. Over-regulation (42%) as their greatest worries.

Climate change and environmental damage was ranked 8th on the list. The report comments that overall, 'Asia-Pacific CEOs appear to be 'worried about everything – at least 20% are 'extremely concerned' about every threat on the list'.

Top Five Threats: North America

North American CEOs identified the following as their areas of greatest concern.

• Cyber threats (53%)
• Overregulation (50%)
• Geopolitical uncertainty (44%)
• Terrorism (43%)
• Speed of technological change (34%).

The report writers comments that for the first time, over-regulation is displaced as the top threat in North America, where 'extreme concern' about terrorism has more than doubled. Climate change and environmental damage do not appear on the list.

Increasingly concern with external rather than direct business risks? The report comments that fact that a number threats — for example, the threat of 'potential ethical scandals', the 'Future of the Eurozone', activist investors, rising employee benefit and pension costs, access to affordable capital, volatile energy costs and their own ability to respond to a crisis — are not ranked as topmost concerns, taken in conjunction with the overall findings above, suggests that 'CEOs across the world are increasingly anxious about broader societal threats such as geopolitical uncertainty, terrorism and climate change, rather than direct business risks such as changing consumer behaviour or new market entrants'.

Other findings

Benefits of globalisation? CEOs expressed mixed views on the possible benefits of globalisation.

• 63% of CEOs indicated that globalisation had had a positive impact on enabling universal connectivity 'to a large extent', and 32% indicated it had some so to some extent.
• 87% of CEOs indicated that globalisation had helped with universal access to infrastructure and basic services either to some extent (57%) or to a large extent (30%).
• 82% of CEOs indicated that globalisation had helped managing geopolitical risks to some extent (56%) or to a to large extent 26%.
• When asked if globalisation has helped ‘close the gap between the rich and the poor’, 59% of CEOs indicated that it had helped to some, or a large extent, but 39% of CEOs responded ‘not at all’.
• When asked about the impact of globalisation on 'averting climate change and resource scarcity' 67% of CEOs said it had helped to some or a large extent.  However, there was a significant proportion (30%) whoresponded 'not at all'.
• Asia-Pacific CEOs are the most optimistic about globalisation’s ability to help close the wealth gap and avert climate change.  70% of Asia Pacific CEOs indicated that globalisation has helped to some or a large extent (as compared with 59% overall), and 77% of Asia Pacific CEOs indicated globalisation would help avert climate change and resource scarcity as compared with 67% of CEOs globally.

An increasingly 'fractured' world? Moving away from a 'singular and seamless global marketplace': Echoing the theme of the World Economic Forum this year, CEOs were asked to consider a list of opposing political, economic and trade trends and to nominate the direction in which they think the world is moving. The top five trends were:

1. Multiple beliefs and value systems
2. Multiple rules of law and liberties
3. Regional trading blocs
4. Nationalism and devolved nations
5. Measuring prosperity through multifaceted metrics

PwC Chair's comments: Realigning global economic growth with social progress

• Commenting on the misalignment between global economic growth and social progress, the PwC chair suggests CEOs can play a role in addressing the divide through: adopting new measures of success/prosperity that go beyond purely financial measures eg customer satisfaction; fostering a beneficial role for new technology (in particular artificial intelligence) in society; working cooperatively with government and the community to educate future (and help ensure they're equipped with relevant, technological skills); and committing to a social purpose beyond purely financial growth.
• The PwC Chair concludes that: 'These trends all highlight the heightened expectations of the societies and communities in which businesses operate. That’s why every business needs a clear purpose – one that goes beyond financial goals to incorporate a broader set of shared values and behavioural expectations. Purpose defines ‘who’ a business is and why it exists; values and behaviours define a culture. These act as vital guideposts and benchmarks for every important decision. From environmental footprints to social impacts to investor demands, businesses are scrutinised by an ever-wider array of stakeholders. If they fall short in any respect.'

[Note: This sentiment appears to echo to some extent, the views of BlackRock's Larry Fink in 2018 annual letter to CEOs. See: Governance News 20/01/2018]

About the survey: PwC conducted 1,293 interviews with CEOs, from a range of industries, in 85 countries. The lower threshold for all companies included in the top 10 countries (by GDP) was 500 employees or revenues of more than US$50 million. The threshold for companies included in the next 20 countries was more than 100 employees or revenues of more than $10 million.