Hong Kong, 18 Aug 2016 - According to PwC's 19th Annual Global CEO Survey "Redefining risk in a changing world", 66% of CEOs believe there are more threats to business today than there were three years ago. However, a small group, comprising 14% of respondents, see more opportunities today and have taken bold steps to position their companies for growth. At the same time, they are turning their attention to understanding different stakeholders’ needs.
The survey results show people are worried about a challenging period of lower growth and low commodity prices in the coming five years. However, this small group of CEOs, who we call Opportunists, not only believe that there are more threats to business today, but are also "very confident" of their growth prospects. They are focused on the upside to risk. They have taken bolder actions compared with other CEOs to position their companies to grow in spite of the risks and challenges faced. For example, 70% of Opportunists said they are going to increase headcount, compared to 48% of all respondents. Moreover, Opportunists are more likely to be planning M&A activity within 2016.
Opportunists also feel they have a mandate from a broader set of stakeholders - not just investors. So they are less concerned about stock market volatility than the average CEO (38% vs 44%) and more likely to prioritize long-term over short-term profitability.
"Investors and other providers of capital remain critically important stakeholders. But other voices are multiplying in number and raising the volume with which they speak. Regulators and communities, to name just two other sets of stakeholders, have increasingly legitimate claims to a CEO's attention," says Jim Woods, PwC's Risk & Regulatory Services practice leader in the Asia Pacific region. "With the prevalence of social media and the resulting potential to rapidly put pressure on a company, customers have more influence on the bottom line today than ever before. Moreover, changes in the labour pool – in terms of working style, approach and skill sets - create greater volatility in the employee base, which CEOs must manage."
In light of these changes, smart businesses are turning their attention to understanding what each of those stakeholder groups want to know. Opportunists are more likely to be changing how they measure total success: by reporting more non-financial measures and engaging with stakeholders to increase the relevance of, and trust in, their company. They are taking systematic approaches to understanding what's important to each stakeholder group, and developing measures and reports that are very specific to those groups.
"A stakeholder mindset leads to performance gains in both financial and non-financial measures. Therefore, listening carefully to different customers is crucial to getting strategic risk decisions right," added Mr Woods. "Opportunists are responding by getting closer to stakeholders and building up their resilience. More resilient companies are better able to cope with change, so they can take bolder actions with more confidence in growth and - according to a majority of CEOs in our survey - with increased profitability in the future."
Stakeholder engagement leads to performance improvements by building enterprise resilience - the capacity to anticipate and react to change, not only to survive, but also to evolve. Stakeholder engagement also promotes a corporate strategy that creates a perception and reality of the relevance of the company. A clear understanding of stakeholder needs allows companies to understand, adjust and communicate their relevance to the market, in order to survive adverse developments and, if market-based, gain a competitive risk advantage over their competitors.