M&A, ESG, innovations key focus of CEOS: EY

NEW DELHI: The pandemic has been a wakeup call for many CEOS as they are actively reconfiguring their companies for resilience and investing boldly for optimal growth with a focus on M&A, says latest EY survey of 2,500 top executives in 53 countries, including India, while cautioning those who stand still as they would fall behind in the race for market-leading growth. “The pandemic has been a wakeup call for many CEOS, and the transformation imperative is now clearer than ever. Many are actively reconfiguring their companies for resilience and investing boldly for optimal growth – with M&A still high on the boardroom agenda,” The EY 2022 CEO Outlook Survey said in its summary.

It, however, pointed at the danger for inaction: “But CEOS unable to take bold steps could face stern tests down the line, particularly as intensifying head winds pose challenges in the race to capture emerging opportunities.” The need to act now is too strong. CEOS who stand still will fall behind in the race for market-leading growth, it added.

Post dealing with pandemicinduced disruptions, Indian businesses are now facing supply-chain disruptions due to geopolitical reasons and higher inflation. These factors are shaping their capital strategy.

“For more CEOS (over 40%) sustaining and extending the core business, and digital transformation dominates the investment decisions to increase the potential to lead in the emerging landscape. The ongoing geopolitical tensions are also triggering the Indian CEOS to take proactive measures to readjust their supply chains, with 80% of them adjusting their supply chain to manage geopolitical risks or reduce logistic costs and uncertainty,” EY India said citing the survey. According to the survey, environmental, social and governance (ESG) is increasingly becoming important for CEOS with 78% of respondents identifying ESG at par with revenue growth as a factor when it comes to strategic decision making and driver of value.

“There is no doubt that Indian CEOS are leading from the front to combat the challenges emanating from the pandemic and geopolitical tensions. More than ever, CEOS are looking at how these interconnected issues may impact their growth agendas and are building agility and the ability to pivot quickly as circumstances demand into their overall corporate strategy,” said Rajiv Memani, Chairman of EY India. “They are increasingly looking at M&AS as a lever for accelerating business transformation and long-term value creation,” he added. The survey outcome concludes that post-pandemic challenges top on the agenda of CEOS are based on three key factors -- innovation, sustainability, and M&AS.

CEOS realise that innovation is the key to keep the rising input costs (due to the breakdown of the supply under chains) under check. Automation and technology offer tremendous potential for CEOS looking to drive transformation in their organisation and to pivot employees to higher-value activities, it said. Almost 50% of the respondents expect to improve their business’ profit margins through digital and technological interventions, it said. While 43% are using data effectively to develop new products and services and developing innovative delivery systems and channels for interacting with customers, it added.

Sustainability is also in the mind of CEOS. About 90% of them consider sustainability as the primary driver for competitive advantage, long-term strategic growth and lowering cost, it said. They realise that the climate change is real, and its consequences are beginning to show not only in terms of natural calamities but the preference of customers toward sustainable businesses.

78% CEOS SAID ESG WAS AT PAR WITH REVENUE GROWTH AS A FACTOR WHEN IT COMES TO STRATEGIC DECISION MAKING