• 65% of respondents see AI as a force for driving business efficiency – but also fear unintended consequences
• 88% are integrating AI into capital allocation, almost half plan significant AI investments in the next year
• M&A to rebound into 2024 – 71% of CEOs using AI to strengthen deal strategies
CEOs globally are embracing opportunities created by AI, but also remain wary of unknown, unintended consequences, according to the findings of the latest EY CEO Outlook Pulse survey. Nearly two-thirds (65%) of CEOs agree that AI is a force for good; however, a near equal proportion say more work is needed to address social, ethical and security risks – from cyberattacks to disinformation and deepfakes.
The survey of 1,200 global CEOs, which provides insights on AI, capital allocation, investment, sustainability and transformation strategies, found that 66% of CEOs believe the impact of AI replacing humans in the workforce will be counterbalanced by new roles and career opportunities that the technology creates.
However, while CEOs embrace the potential upsides AI can bring for business and society, they are cognizant of the risks of the emerging technology. Two-thirds (67%) of CEOs said that the business community needs to focus on the ethical implications of AI, while almost the same proportion (64%) say businesses are not doing enough to manage the unintended consequences of the technology.
Despite these concerns, CEOs are adapting investment strategies to maximize the benefits that AI could bring to their businesses. A significant majority of CEOs (88%) are integrating AI into their capital allocation, of which, 43% are actively investing in the technology, while the other 45% said they are planning to make significant investments in AI in the next 12 months.
In Romania, 43% of the CEOs believe that AI is a force for good - driving business efficiency and therefore creating positive outcomes for all, such as innovations in healthcare treatments.
When they were asked about the impact of AI replacing humans in the workforce will be counter-balanced by the new roles and career opportunities that the technology creates, 40% somewhat agree with this statement.
Bogdan Ion, Country Managing Partner EY Romania & Moldova and Chief Operating Officer for EY South-East & Central Europe and Central Asia (CESA): "The confidence of business leaders in artificial intelligence is essential for the development of the field. This is a premise for adopting and implementing AI-based solutions within organizations to improve efficiency, optimize processes and drive innovation. The use of AI can bring significant benefits to companies. The ability of AI to process and analyze large amounts of data in real-time can lead to better-informed decisions and improved organizational performance. Nonetheless, the social and ethical implications of the widespread adoption of AI are critical, requiring responsible and equitable approaches to the use of artificial intelligence in business. Security is also a critical concern in the implementation of AI. The ability of AI systems to learn and adapt behaviors can expose organizations to potential vulnerabilities, which is why investment in cybersecurity becomes essential to protect companies' data and operations."
Economic instability remains; sustainability initiatives at a crossroads
Despite ongoing macroeconomic volatility, CEOs are cautiously more optimistic regarding a global economic downturn than at the start of 2023, as only 33% of CEOs expect a severe temporary or persistent downturn, compared to 50% in January. But CEOs remain split on whether they are more optimistic (47%) or less optimistic (36%) about the outlook for their own company’s financial performance than they were six months ago.
The harsh realities of today’s low-growth, high-inflation and rising interest rate environment has compelled many CEOs to focus more sharply on near-term performance, particularly at the expense of sustainability goals.
Today, just 38% of CEOs stated that they would prioritize sustainability issues when making capital allocations decisions. This is in contrast to the CEO Outlook of January 2022, when 83% of CEOs said that sustainability and ESG issues would be an important driver of growth in the near-to-mid-term.
Half of the Romanian CEOs (50%) believe that at global stage will be a moderate and persistent downturn, 26,7% think that the global economy will face a severe and temporary downturn, 16,7% tend to believe that there will be a moderate and temporary downturn and only 6,7% thinks the global economic system will be challenge by a severe and persistent downturn.
At the local level, the Romanian market will face a moderate and temporary downturn according to 36.7% of respondents. 30% believe that there will be a moderate and persistent downturn, 26.7% think that the challenge will mean a severe and temporary downturn and only 6.7% think that the local market in Romania will be affected in a severe and persistent way.
Geopolitical conflicts and trade tensions will affect business performance significantly according to 40% of Romanian respondents, while 23.3% believe it will have a very significant and moderate impact, and only 13.3% believe the impact will be minimal.
When asked how they see the next 12 months compared to the beginning of 2023 in terms of financial performance, half of the Romanian CEOs (50%) are now less optimistic than they were at the beginning of this year.
In terms of prioritizing sustainability, the recorded answers for Romania were the same for those who prioritize sustainability initiatives and allocate a significant portion of their capital towards them - 30% and those who stated that sustainability initiatives are at the forefront of their capital allocation strategy and dedicate substantial resources to support them.
M&A to rebound into 2024
Dealmaking remains a priority for CEOs. Nearly all (98%) of CEOs expect to actively pursue a strategic transaction in the next 12 months (up from 89% in January 2023), with 59% looking to M&A, 47% looking to divest, and 63% looking to enter strategic alliances or joint ventures. The appetite to acquire is close to a record high but barriers to doing deals in the current market such as increasing regulation and a higher cost of capital will likely temper many of these plans.
Improving technology capabilities and innovation is a primary driver of M&A, with 16% of respondents stating that this is a primary investment goal. Furthermore, CEOs are incorporating AI in M&A strategies – leveraging these technologies in their deal sourcing and processing. Seventy-one percent are incorporating AI into the transaction process, either significantly or through pilot programs. Only a tiny cohort (5%) have no plans to use AI – and they risk being outmaneuvered by the competition.
In Romania, 56.7% said they would not stop an already planned investment in the next 6 months, while 43.3% would cancel plans for future investments in the next half year. 63.3% believe that due to the uncertainty created by the current political situation, there will be reconfigurations of supply chains in the next 6 months, while 36.7% said there will be no change.
Globally, companies tend to postpone investments already planned in the next 6 months (40%). 60% of the respondents believe that there will be no postponement of investment projects in Romania in the next 6 months. The percentage of investment postponements is similar to the global one, i.e., 40%.
From the M&A perspective, 90% of the respondents in Romania believe they will pursue these types of transactions in the following months, 83% believe there will be divestments / spin-offs / initial public offerings (IPOs) and joint ventures or strategic alliances with third parties.
A solid majority of the Romanian respondents – 76,7% - stated that they have already fully integrated AI-driven product/service changes into their capital allocation process and are actively investing in AI-driven innovation.
20% of the local respondents mentioned that they have not made significant capital investments to date but plan to do this in the next 12 months, while 3,3% answered that they do not plan any significant capital investment into AI-driven product/service innovation.
About EY Romania
EY is one of the world's leading professional services firms with 365,399 employees in more than 700 offices across 150 countries, and revenues of approx. $45,4 billion in the financial year that ended on 30 June 2022. Our network is the most integrated worldwide, and its resources help us provide our clients with services allowing them to take advantage of opportunities anywhere in the world.
With a presence in Romania ever since 1992, EY provides, through its more than 900 employees in Romania and the Republic of Moldova, integrated services in assurance, tax, strategy and transactions, and consulting to clients ranging from multinationals to local companies.
Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi, and Chisinau. In 2014, EY Romania joined the only global competition dedicated to entrepreneurship, EY Entrepreneur Of The Year. The winner of the national award represents Romania at the world final taking place every year in June, at Monte Carlo. The title of World Entrepreneur Of The Year is awarded in the world final. For more information, please visit: www.ey.com
About the EY 2023 CEO Outlook Pulse
The EY 2023 CEO Outlook Pulse Survey aims to provide valuable insights on the main trends and developments impacting the world’s leading companies as well as business leaders’ expectations for future growth and long-term value creation.
It is a regular pulse survey of CEOs from large companies around the world conducted by FT Longitude, the specialist research and content marketing division of the Financial Times Group.
In June and July 2023, FT Longitude surveyed on behalf of the global EY organization a panel of 1,200 CEOs across Brazil, Canada, Mexico, the United States, Belgium, Luxembourg, the Netherlands, France, Germany, Italy, Denmark, Finland, Norway, Sweden, the United Kingdom, Australia, China, India, Japan, Singapore, and South Korea. Respondents represented the following industries: advanced manufacturing and mobility; consumer products and retail; energy and resources; financial services; health sciences and wellness; and technology, media and telecoms.
Surveyed companies’ annual global revenues were as follows: less than US$500m (20%), US$500m–US$999.9m (20%), US$1b–US$4.9b (30%) and greater than US$5b (30%).
The CEO Imperative Series provides critical answers and actions to help CEOs reframe their organization’s future. For more insights in this series, visit ey.com/en_gl/ceo.
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