The survey also identified the key markets and factors that influenced the value creation of Pakistani businesses
KARACHI: Pakistani CEOs are more upbeat about the country's economic prospects than the global outlook, but they face headwinds from inflation, geopolitical tensions and climate change, a PwC survey showed.
The 27th Annual Global CEO Survey found that nearly half of the CEOs in Pakistan were confident about the domestic economy's performance in the next year, compared to less than two-fifths who had a positive view of the world economy.
However, the expected improvement in both the local and global economies was seen as modest, rather than significant, the survey said.
The survey, which interviewed 4,702 CEOs from 105 countries, including 62 from Pakistan, also showed that Pakistani CEOs were highly optimistic about their own companies' revenue growth in the short and medium term.
"95 percent of CEOs expressed confidence in their revenue growth in the next year, with 55 percent being very to extremely confident," the survey said. "Interestingly, when the time frame extends to three years, there is a slight decline in the overall confidence levels to 92 percent. However, over this longer period, the proportion of CEOs who are very to extremely confident increases to 63 percent."
The CEOs of listed companies in Pakistan showed slightly higher confidence than the average, with 57 percent and 62 percent being very to extremely confident in their revenue growth in the next year and the next three years respectively.
The survey also identified the key markets and factors that influenced the value creation of Pakistani businesses.
The United States, Saudi Arabia, the United Arab Emirates, China and the UK were the top five countries for their companies' revenue growth in the next year, according to the CEOs.
However, Pakistan itself did not feature in the top 10 countries seen as vital for revenue growth by the CEOs of the above-mentioned five countries.
"Interestingly, South Asian countries (India, Bangladesh, Sri Lanka) made to the list of top three important territories for their companies' revenue growth of only 11 percent of Pakistani CEOs," the survey revealed.
The survey also highlighted the corporate actions and threats that Pakistani CEOs faced in the current and future business environment.
"42 percent of CEOs believe that their companies will increase headcount, whereas 65 percent foresee a rise in the prices of their products and services within the next twelve months."
Inflation (55 percent) and macroeconomic volatility (47 percent) emerged as the key threats to their companies, reflecting the complexities of the current economic and political landscape. Moreover, 27 percent of CEOs identified geopolitical conflict as a profound threat.
Climate change, despite its potential for far-reaching impacts, was not perceived as an immediate significant threat by most of the CEOs. Only 24 percent viewed their companies to be highly or extremely exposed to the threat of climate change in the next year. It appeared that the ramifications of climate change on business operations were not yet seen as a pressing issue by CEOs.
"42 percent of CEOs believe that their company will not be economically viable a decade from now, if it continues the existing business model."
The survey showed that government regulation (77 percent) was the primary factor that had driven changes in the way their companies created, delivered and captured value over the past five years. This was followed by technological changes (43 percent) and changes in customer preferences (41 percent).
Interestingly, climate change did not feature among the top five factors, with only 19 percent of CEOs acknowledging its impact over the past five years.
As they looked to the future, CEOs anticipated a similar pattern of influences over the next three years, with one notable change - the recognition of climate change as a factor affecting business operations increased to 27 percent. Despite this increased recognition, climate change still did not make it to the top five factors impacting value creation in Pakistani businesses, indicating perhaps the need for increased awareness and action.
The survey also revealed that adoption of new technologies (47 percent) was the most impactful action for the way their companies created, delivered and captured value in the last five years. This showcased that integration of advanced technologies into business operations had enhanced the capabilities of their companies over the same time frame.
Furthermore, CEOs identified the development of new products and services (29 percent), followed by the implementation of novel pricing models (27 percent) as some other important actions that had contributed to the value creation to a large extent at least.
The survey also revealed that 84 percent of Pakistani CEOs had not made any major acquisition in the last three years, while 32 percent planned to make at least one acquisition in the next three years.
The survey also highlighted the obstacles and opportunities that Pakistani CEOs faced in transforming their businesses.
"53 percent of CEOs identified regulatory environment as a major barrier to their company’s transformation", followed by limited financial resources (21 percent) and supply chain instability (21 percent).
On the other hand, 60 percent of CEOs expressed that they routinely shifted at least 10 percent of their financial and human resources across different sectors of their businesses on an annual basis, indicating a high degree of agility and adaptability.
The survey also showed that 67 percent of CEOs considered decision-making meetings as having the most efficient use of time, while some of the CEOs believed that not more than 10 percent of the time spent in their companies on some of the activities or processes was efficient.
The survey found that 61 percent of CEOs disagreed with the idea that their company had widely adopted generative AI in the last twelve months, and 58 percent did not agree with the proposition that their company's technology strategy had been transformed due to the influence of generative AI, perhaps implying a potential gap between the advancements in AI technology and its practical implementation within these organisations. However, 42 percent of CEOs believed that generative AI would help in building trust with their stakeholders, and 51 percent of CEOs expected that the integration of generative AI would improve the quality of their company’s products and services, in the next twelve months. "This seems to highlight the transformative potential of AI in reshaping businesses and setting new benchmarks in product and service quality."
Assessing the impact of generative AI in the upcoming year, CEOs expect efficiencies to increase in their own time (58 percent) and their employees' time (57 percent), although most of these respondents expect a slight increase (i.e., 5 percent to 15 percent) in efficiency.
CEOs also believe that generative AI will result in little to no change in their company's headcount (58 percent) and revenue (55 percent).
Assessing the impact of generative AI in the upcoming year, CEOs expected efficiencies to increase in their own time (58 percent) and their employees' time (57 percent), although most of these respondents expected a slight increase (5 percent to 15 percent) in efficiency.
CEOs also believed that generative AI would result in little to no change in their company's headcount (58 percent) and revenue (55 percent).
When it came to the effect of generative AI on profitability, 52 percent of the responding CEOs expected a slight variation (little to no change, within the range of 5 percent decrease to a 5 percent increase).
Regarding potential risks, more than half of CEOs agreed that generative AI could escalate cybersecurity threats such as phishing attacks and data breaches within the forthcoming year.
However, CEOs did not anticipate a similar level of increase in risks associated with bias towards certain customer or employee groups (29 percent), the propagation of misinformation (47 percent), or legal liabilities and reputational risks (31 percent).
Looking ahead to a three-year horizon, 69 percent of CEOs agreed that generative AI would necessitate the development of new skills across most of their workforce, followed by 68% who agreed that generative AI would profoundly transform the way their company created, delivered, and captured value. Further, 63% of CEOs anticipated an increase in competitive intensity within their industry, driven by factors such as new entrants, products or pricing approaches. The survey also examined the climate actions and challenges of Pakistani businesses.
The survey showed that the strongest activity (completed, in-progress and planned) seemed to be in respect of improving energy efficiency as a staggering 93 percent of CEOs considered it the most significant climate action. Additionally, 82 percent of CEOs were expecting to innovate new products, services, or technologies that were climate friendly. Furthermore, 79 percent were engaging in selling products, services, or technologies that supported their customers’ efforts towards climate resilience. When CEOs were asked about certain factors that might be hindering their company’s ability to decarbonise its business model, 35 percent identified the lack of incentives or support from the government, followed by 29 percent who cited the high cost of decarbonisation, and 27 percent who mentioned the insufficient availability of green technologies or solutions.
The survey also revealed that 25 percent of CEOs pointed to lower returns on investment for climate-friendly initiatives as a deterrent to decarbonisation. Additionally, 61 percent reported that in the last twelve months, when evaluating climate-friendly investments, their company did not accept rates of return that were lower than for other investments. Moreover, 24 percent of CEOs also highlighted regulatory complexity, including frequent policy changes and inconsistent local requirements, as a major challenge to decarbonise their business model. 8 percent of CEOs indicated that they had no plans to decarbonise their business model.