Aussie CEOs rebound in confidence with record increases in optimism, cite cyber risks as top threat to business growth - PwC CEO Survey

• A PwC survey of more than 5,000 CEOs globally reveals record levels of optimism
• 70% of Australian CEOs predict economic growth will improve in 2021
• Confidence in companies’ own revenue growth rebounds
• Cyber has risen to become the top threat to growth
• Australian CEOs increasingly see climate change as serious threat

One year after COVID-19 was declared a pandemic, Australia’s CEO confidence has bounced back remarkably with 70% of local business leaders predicting that economic growth will improve in 2021, in contrast to only 11% last year anticipating an improvement for 2020. While increases in optimism are at record levels, a whopping 95% of Australian CEOs identified cyber risks as the top threat to business growth, up from 86% last year.

The figures come from PwC’s 24th Annual Global CEO Survey, which this year polled 5,050 CEOs in 100 countries and territories over January and February 2021. The survey also showed GDP and employment expectations to reach their pre-pandemic levels during 2021, with the majority of Australian CEOs expecting to increase headcount over the next three years. To achieve organisational competitiveness, Australian CEOs are placing their focus on workplace culture and behaviour.

PwC Australia’s CEO Tom Seymour said, “Last year we faced uncertainty and a shrinking economy due to an unprecedented global crisis. Australia has weathered the COVID-19 pandemic well compared to other parts of the world so it’s not surprising to see such a surge in optimism this year. For Australian businesses to move towards more positive outcomes post-pandemic, investment in growth and innovation is key, as well as working with governments to assist in shaping our growth agenda.

“While COVID-19 accelerated digitalisation and businesses adapted to this massive disruption caused by the pandemic, cyber risk has now been identified by Australian CEOs as a clear and present threat to growth. Cyber attacks are on the rise in Australia and the events of last year have demonstrated the importance of being prepared. Stepping up long-term investments into cybersecurity and privacy, and factoring cyber threats into risk management activities are critical to lowering exposure.”

Globally, the percentage of CEOs expressing confidence in growth is up from 22% in 2020 and 42% in 2019, representing the highest level of optimism since the survey started asking this question in 2012. Optimism among CEOs over global economic growth is also particularly strong in North America, Western Europe, and Asia Pacific with 86%, 76%, and 73% of CEOs, respectively, from these regions predicting improved global growth in the year ahead.

Revenue on the rise as CEO confidence increases

Seventy per cent of Australian CEOs said they anticipate an increase in profitability and 88% expect an increase in revenue growth over the next 12 months. Over the longer term, 92% of Australian CEOs expressed confidence for the next three-year period. Mergers and acquisitions surged to 63% in 2021, up from 34% last year, and the majority of Australian CEOs (84%) also point to organic growth as a driver of organisational progress in 2021.

PwC Australia’s Chief Economist Jeremy Thorpe said, “The unprecedented global crisis over the past 12 months sent a shockwave to the global economy. However, Australia’s CEOs are confident economic growth will improve and our recent community attitudes survey echoes this. Australians are feeling optimistic about the country’s prospects for growth, are happy about their immediate future and have been spending up big in the first couple of months this year.

“While the most recent two consecutive quarters of above 3% economic growth are remarkable, we cannot be complacent about the need for sustained above-average growth. The new debt burden taken on by Australian governments to support the community through the pandemic should not be a problem as long as we make sustained economic growth the priority so we grow out of debt. While things are looking up, we still have a lot of work to do,” said Thorpe.

Concerns keeping Australian CEOs awake at night

Most Australian CEOs that participated in this year’s survey cited cyber risks as the top threat to business growth - rising to 95% compared to 86% last year. As a result of the pandemic, Australian CEOs are tweaking their technology plans in 2021 and indicated they plan to increase long-term investments over the next three years in digital transformation (79%) and cybersecurity and data privacy (78%). Fewer were worried about speed of technology change (62%, down from 73%).

Nicola Nicol, Cybersecurity Partner at PwC Australia, said, “We’ve seen an uplift in cyber attacks and issues since the pandemic and it is encouraging to see that cybersecurity has a renewed focus among Australian CEOs. Cybersecurity is critical for business and economic growth - businesses have the opportunity to make capital investments in tech solutions and also create new meaningful jobs within cyber where there is a skills shortage.

“Yet when it came down to measurement and reporting, only about a quarter of Australian CEOs on average said their organisation needs to do more to measure and report on cybersecurity and data privacy. A key step for businesses is being able to articulate cyber risk in a way that is meaningful to executives, directors and investors. It is more vital than ever to be able to interpret data, quantify cyber risk and explain how this relates back to specific business outcomes,” said Nicol.

While cyber risks topped the greatest threat to business growth, 84% of Australian CEOs also indicated over-regulation as the second largest hindrance to growth. The highest increases seen this year compared to last year around disruption to business growth included trade conflicts which rose to 77% (up from 66%), protectionism which soared to 70% (up from 51%), and tax policy uncertainty which saw a significant jump to 58% (up from 35%).

Other concerns recognised though not as high on the priority list for Australian CEOs included availability of key skills which dropped to 68% (down from 78%), lack of trust in business which plunged to only 44% (down from 63%), declining health and wellbeing of your workforce fell to 48% (down from 53%), and readiness to respond to a crisis slightly lowered to 49% (down from 52%). In contrast, global figures around trust, workforce health and crisis response all saw increases.

Australian CEOs place more focus on workplace culture

To make an impact on organisational competitiveness, 53% of Australian CEOs pointed to workplace culture and behaviour as the most important aspect of their workforce strategy, compared to only 32% globally. Focuses on health and wellbeing (37%) and skills and adaptability (34%) fared higher than overseas counterparts, while only 16% of Australian CEOs said developing leaders for tomorrow and diversity and inclusion was a priority.

Headcount in the last 12 months during the pandemic had changed with 48% of Australian CEOs revealing it had actually increased. Over the next 12 months, 60% expect headcount to rise, while over the next three years, 71% have predicted a boost in headcount locally. Globally, only half the number of CEOs (24%) said headcount had increased in the last 12 months compared to Australia and 44% and 67%, respectively, anticipated an increase in new hires.

Risk management a lower priority for Australian CEOs

Sentiments showed Australian CEOs are less likely than their global counterparts to prioritise risk management this year. In particular, 29% are collaborating with supply chain partners to collectively manage risks (compared to 44% globally), 27% are preparing for systemic risk and low probability, high-impact events (compared to 46% globally), and 26% are digitising their organisation's risk management function (compared to 47% globally).

With cyber risks identified as the biggest threat to business growth, 77% of Australian CEOs have factored this as a top priority into their strategic risk management activities, compared to only 59% globally. Other threats Australian CEOs have considered as part of their risk management strategy include speed of technological change (53%), availability of key skills (53%), and climate change and environmental damage (49%).

ESG issues rising up executive agendas

The survey revealed an increasing number of Australian CEOs seeing climate change as a serious threat to their organisation’s growth prospects - increasing from 65% in 2020 to 70% in 2021 - and this is being factored into their strategic risk management activities. As a result of COVID-19, 62% of Australian CEOs have planned to change their long-term investments in sustainability and Environmental, Social and Governance (ESG) initiatives over the next three years.

Measurement and reporting of ESG performance is more important than ever, however Australian CEOs are falling short compared to their global peers. Only 29% locally versus 39% globally think they should do more to measure their environmental impact and 27% locally versus 43% globally think they should report on this impact. Furthermore, 38% of Australian CEOs said reducing climate change and environmental damage should be a government priority, whereas 41% believe business should deliver.

PwC Australia’s Chief Operating Officer Liza Maimone said, “Companies that understand their organisation’s material issues from the perspective of their key stakeholders, and commit to a ‘shared value’ with linked economic and environmental and social gains are much more attractive for long-term investors, debt providers and asset owners. Naturally then, Australian CEOs are increasingly factoring ESG elements into their core strategic planning.

“Investors and other stakeholder groups are becoming more vocal about wanting to see clear accountability to ensure targets are defined, reported on and achieved. We live in an age where investor demand for information about a company’s commitment to ESG is growing and there’s never been a more important time for companies to set and articulate their ESG priorities to stakeholders,” said Maimone.

To view the survey insights for Australia or to download a copy of the PwC Global CEO Survey, click here.