24th Annual CEO Survey,
Central and Eastern Europe
Conducted in January and February of 2021, PwC’s 24th CEO Survey explores the views of chief executives around the world, on how they are reinventing their companies to mitigate global disruptions, such as the impact of COVID-19, and ensuring sustainable growth. Here are the views of CEOs across Central and Eastern Europe.
1. Introduction
As the world begins to turn the corner on the COVID-19 pandemic, CEOs around the globe are expressing record levels of optimism, and business leaders in Central and Eastern Europe are no exception. But while they’re more positive than they’ve been in the past, they’re also less optimistic than their peers in every other region of the world. They perceive a different threat picture, and they’re more cautious to introduce changes in response to those threats.
2. CEO Confidence
One year after the WHO declared COVID-19 a pandemic, 76% of global CEOs believe global economic growth will improve in 2021. That’s nearly 20 percentage points greater than the previous record high for optimism, over all the years we have been asking this question.
In Central and Eastern Europe (CEE), optimism is also the order of the day, with 64% of CEOs expecting an improvement in growth – a record high and more than double last year’s 24% rate.
In our region, as in others around the globe, the pandemic has reordered CEOs’ assessments of the threats facing their businesses: health crises are the top danger they see. Central and eastern European economies saw similar effects from the virus as elsewhere in Europe and North America, being hit by several waves of infection, and governments responding with lockdowns and travel restrictions, to varying degrees of effectiveness.
Still, on the whole we seem to be turning the corner in the fight against the virus, and that has fed into CEOs’ current positive assessments of the prospects for the world’s economy. But while that optimism stands out compared to the region’s historical figures, against the global backdrop it also stands out for a different reason: we’re the least optimistic of the seven regions included in the survey. Why?
From where they sit, CEOs in Central and Eastern Europe see a different set of threats to their business than do their peers around the world, outpacing the global rating for “extreme concern” on three factors: geopolitics, exchange rate volatility and the future of the Eurozone.
CEE executives are roughly in line with their global peers when it comes to expectations for their own companies’ revenue growth over the next 1-3 years, though they’re less optimistic on profitability. Just 53% expect it to increase over the next 12 months, compared with 65% globally. Proportions were higher in each of the remaining categories – decline (12% versus 9%), stay the same (28% versus 23%) and don’t know (7% to 3%).
Notably, the proportion of executives saying they’re “very confident” in their company’s prospects for revenue growth over the next 12 months didn’t show as big a bounce from last year as the figures for other regions did – because our CEOs’ forecasts didn’t dip as low in the 2020 survey. This year’s figure was 39%, up from 37% in both 2019 and 2020; the global number was 35% two years ago and dipped to 27% last year, before rebounding to 36%.
CEOs in our region also stand out for their longevity in the position, with 29% having served as CEO for 11-25 years, compared with 19% globally. That’s particularly impressive against our region’s backdrop of dynamic social and economic change over the past three decades. About one-third of our CEOs have been running their companies at least since the immediate aftermath of the global financial crisis, meaning they have a well-developed sense of how their organisation responds to a range of circumstances.
3. Threat profile
The top threats identified by CEOs in our region were in line with the global picture: pandemics were No. 1, while over-regulation ranked second in our region and third globally. The difference was in CEOs’ assessment of cyber threats, which came in second globally but only 10th in our region. Instead, our leaders said geopolitical uncertainty is their third-most-pressing concern. This reflects both recent developments and long-term trends across CEE.
Continuing armed conflicts within our region amid long-standing border disputes; the prospects for a change in US policy toward CEE under the new Biden administration; tension between the European Commission and the EU’s new member states; and the need to respond to China’s rise as an investor and trader are just a few of the geopolitical issues that executives in the region have to contend with. Thirty-nine percent of them described themselves as “extremely concerned” about geopolitics, compared with 28% globally.
The importance of Germany and Western Europe more broadly as a market for the region’s companies is also visible in executives’ concern about the future of the Eurozone, with 20% saying they’re extremely concerned – double the global rate of 10%. In fact, managers in our region fret more about the Eurozone’s prospects than their Western European counterparts, just 12% of whom rate themselves extremely concerned. Among countries in our region that have adopted the single currency, this anxiety over the euro’s future also reflects the importance of Eurozone membership as an economic and political anchor in the West.
Executives are also more concerned about exchange-rate volatility than their peers elsewhere, with 38% saying they’re extremely concerned, compared with 21% globally. Volatile commodity prices are another worry, with 68% extremely or somewhat concerned, versus 56% globally.
CEOs in the region are a bit more sanguine than their global peers about cyber threats, with 76% saying they’re somewhat or extremely concerned (compared to 85% globally). Still, while cybersecurity used to be an IT issue, today it’s a C-suite issue, and the survey shows that this is no less true in our region. While executives’ concerns about geopolitics are certainly legitimate, they can’t be allowed to overshadow the growing threat from nefarious online actors. And while geopolitics is largely beyond the control of corporate leaders, bolstering their organisations’ defenses against cyber-attacks is something they can work on starting today.
Taxation issues remain a concern for the region’s CEOs. However, it seems that for CEE, this is more of a long-term worry than a new complaint about how their governments have ramped up spending in response to the Covid crisis. Just 52% agreed or strongly agreed that “Tax policy changes to address rising government debt levels in the country/territory in which you are based will Increase my organisation’s total tax obligation,” compared with 60% globally. But in response to a broader question, about concern over an “increasing tax obligation,” 83% versus 73% said they were somewhat or extremely concerned.
We believe this demonstrates two truths about our region: first, the relative change in our public debt levels driven by Covid was much smaller than in places where small deficits were suddenly pumped up, or that even swung from surplus to deficit. More broadly, it shows a pragmatic approach by central and eastern European CEOs, acknowledging that “desperate times call for desperate measures” and recognising that the region’s governments had little choice but to ramp up spending.
CEOs in our region are also more concerned than their global peers about the availability of key skills, at 82% versus 72%. In response, they’re adjusting their workforce strategy to improve competitiveness in ways including automation (40%) and workforce engagement and communications (39%). One lasting positive legacy of the virus may be that companies and their leaders have a deeper sense of the need to care for their employees’ well-being.
Globally, 30% of CEOs say they’re extremely concerned by climate change, up from 24% last year – but in the context of growing anxiety about almost every threat. The number who are “not very concerned” was close, at 27%, and only 40% of CEOs are factoring climate into their strategic risk management. In central and eastern Europe, 28% are extremely concerned and 37% are somewhat concerned, but just 27% are factoring it into risk management. That fits with the global pattern: at a country level, our results show a moderately negative correlation between exposure to natural hazards and companies’ preparedness for climate risk. Companies in the countries with the most exposure — and which are among the largest contributors to CO2 emissions — are less likely to have embedded climate change into their overall risk-management approach.
At least some of our region’s relative lack of concern about climate can be explained by fossil-fuel dependence in some of CEE’s largest economies. Still, as global efforts on climate will only intensify over the next few years, we think the data show a clear opportunity for forward-looking executives to take the lead on this issue. Our conversations with clients show that there is an emerging focus on the issue and an awareness that leaders can and must do more, faster.
4. Plans and investments in the future
In response to their subdued forecasts for revenues and profits at their own organisations, executives in our region seem to be taking a wait-and-see attitude rather than leaping into new initiatives. For the next 12 months, just 21% are considering new M&A to drive growth, compared with 38% globally, while 20% are looking at a new strategic alliance or JV, versus 35%. Nor are they planning to sell businesses (4% versus 13%). In fact, of the eight potential ways to drive growth that we asked about, the only one where a greater share of CEOs planned this type of activity was “seeking operational efficiencies” – by 78% to 77%.
Geographically, Germany remains the most important country for growth. It was identified by 28% of CEOs, the largest share of any country and well ahead of the global figure of 17%. The US was the top pick for global CEOs with 35%, compared with 23% in the region; China was picked by 28% globally and 18% in CEE.
The Covid pandemic is causing leaders in CEE to reconsider their companies’ role in the community: 63% are making or considering changes to their organisational purpose to better reflect the role their organisation plays in society, significantly more than the global total of 43%. However, just 44% say they plan to increase investments in sustainability and ESG initiatives over the next three years as a result of the COVID-19 crisis, well below the global figure of 60%. And when asked about areas of impact and value they believe their organisation should be doing more to measure, 39% of CEOs globally chose Environmental impact, compared to just 29% in CEE.
In terms of priorities they’re looking for governments to deliver, CEOs in our region ranked “a skilled, educated and adaptable workforce” at the top, with 68% as compared with 52% globally. Hearteningly, they also said it should be the top priority for business, with 67% (versus 61% globally), showing an awareness that companies too have a key role to play in upskilling and reskilling to meet the talent challenges of tomorrow.
Conclusion
Central and Eastern European executives have come through the worst of the Covid-19 crisis with a clearer awareness of the challenges facing our region, and in response there are encouraging signs that they’re looking for new ways to respond to those challenges.
As communities and countries work to build a sustainable recovery from the pandemic, companies have the opportunity to be engaged in the process through robust environmental, social and governance (ESG) initiatives. The survey offers encouraging signs that business leaders are emerging from the crisis with a clearer sense of purpose and an awareness of the resources they need to achieve it.
Taking care of your people has always been the hallmark of good leadership, and it’s encouraging to see this holds true in Central and Eastern Europe as well. The next step, of course, is to extend this attitude of care beyond the walls of the company, to the communities and societies our organisations inhabit. And the Covid-19 pandemic is indeed causing leaders in CEE to reconsider their companies’ place in the community: 63% are making or considering changes to their organisational purpose to better reflect the role their organisation plays in society, significantly more than the global total of 43%.
PwC surveyed 5,050 CEOs in 100 countries and territories in January and February 2021. This is up from 3,501 respondents in last year’s survey. PwC surveyed 678 CEOs in Central and Eastern Europe. The global and regional figures in this report are based on a sub-sample of 1,779 CEOs, proportionate to country nominal GDP to ensure that CEOs’ views are representative across all major regions. There were 163 CEOs from Central and Eastern Europe included in the sub-sample.
Of the 1,779 CEOs whose responses were used for the global and regional figures:
- 6% of their organisations had revenues of US$25bn or more
- 9% of their organisations had revenues between US$10bn and US$25bn.
- 35% of their organisations had revenues between US$1bn and US$10bn.
- 34% of their organisations had revenues between US$100m and US$1bn.
- 14% of their organisations had revenues of up to US$100m.
- 60% of their organisations were privately owned.
We also conducted in-depth, face-to-face interviews with CEOs from six regions. Some of these interviews are quoted in this report, and more extensive transcripts can be found on our website at https://www.strategy-business.com/inside-the-mind-of-the-ceo.
