More than 80 percent of the Middle East-based CEOs who responded to the annual survey said they were confident of their prospects in the next 12 months (82 percent), and 79 percent are expecting a recovery in their national economies in the next two years. More than a third of Middle East respondents, 39 percent, believe their national economy has either already rebounded or will rebound by the middle of 2010.
The global recession has also led business leaders to rethink their approach to risk and CEOs now recognize the increasing importance of reshaping their strategies in order to address risk at a deeper level. One in five CEOs say their board of directors is 'significantly more engaged' in assessing strategic risk indicating a move beyond controls-based risk management to corporate strategy and financial management.
"The clear sentiment of the CEOs that responded from the Middle East is one of optimism," said Warwick Hunt, Middle East managing partner of PricewaterhouseCoopers. "While the global economic slowdown clearly had a negative impact on a number of business sectors, it is clear that signs of recovery are now emerging and with them a new economic paradigm.
"After years of unprecedented growth, businesses across the region are now refocusing on fundamentals with a greater emphasis on regulatory issues, understanding market risks and the implementation of long-term investment strategies."
Over a third, 39 percent, of Middle East CEOs agreed their governments have been effective in helping create a skilled workforce. There is emerging evidence of the 'talent gap' growing, a trend that is also present on a global scale. In the Middle East in particular, the mismatch between supply and demand is among the most pressing challenges to Arab businesses going forward. Just under three quarters of Middle East CEOs, 71 percent, are planning to increase their focus and investment on managing employees through the changing economic environment.
A number of Middle East CEOs also urge caution against overconfidence, suggesting the path to the new paradigm may not always be smooth. While many expressed support for efforts to strengthen regulatory processes, they warn over-regulation could threaten long-term growth.
Nevertheless, most believe the region is well positioned to emerge with a stronger, more transparent, better regulated and more sustainable business environment.
"It is clear that the fears of a global economic meltdown have started to recede and CEOs in the Middle East are more upbeat about the future," Hunt added. "The economies of the Middle East are recovering at a faster pace than in other parts of the world and companies with the best prospects are those who managed through the recession while keeping an eye on the recovery ahead.
"While the timing of the recovery will vary by geography and industry, it is encouraging to see that CEOs in the Middle East have been quick to adapt to many of the challenges they have faced and are now in a strong position to take advantage of a global upturn," Hunt said.
Published annually, the extensive report provides an important benchmark on the economic climate, both globally and regionally. Collating the responses of 1,198 global CEOs, the survey explored a variety of factors impacting on businesses in the post-crisis environment, including the measurement of procedures that organizations are taking in response to the downturn, how they view the post-crisis business environment and what changes have been implemented to adapt to the current economic challenges.
Key findings
Fear for future: Protracted global recession remains the biggest overall concern of CEOs around the world (65 percent), followed closely by fear of over-regulation (60 percent). More CEOs are "extremely concerned" about over-regulation (27 percent) than any other threat to business growth. Other high-ranking potential business threats included instability in capital markets, and exchange rate volatility. At the other end of the spectrum, CEOs in the Middle East were more concerned about business threats such as inflation, lack of available key skills in their markets and terrorism.
Love-hate relationship with regulators: CEOs were very clear about the threat of over-regulation. Over Two-thirds of CEOs disagreed with the notion that governments have reduced the overall regulatory burden. However, Middle East CEOs were less concerned than their global counterparts about over-regulation and were more likely to view government intervention as positive, and to agree that governments take adequate steps to improve their country's infrastructure and access to health care at lower cost. They also saw their governments to be more effective in helping create a skilled workforce, and helping companies to secure access to natural resources such as raw materials, water and energy.
At the same time, CEOs were optimistic about governments' efforts to address systemic risks such as another economic crisis - 65 percent of CEOs agreed that regulatory cooperation would help successfully mitigate systemic risks.
Combating effects of recession: To combat recession, nearly 90 percent of all CEOs said their companies had initiated cost-cutting measures in the past 12 months, led by those in the US, Western Europe and the UK. And nearly 80 percent overall said they would seek cost cuts over the next three years.
Risk management: Risk management took on greater importance among CEOs as a result of the recession. Forty-one percent of CEOs plan to make major changes to their company's approach to managing risk, and another 43 percent report plans to make some change to their processes.
Boards of Directors are becoming more engaged in key aspects of management, such as assessing strategic risk, monitoring financial health, and overseeing company strategy.
Climate change: More than 60 percent of CEOs said their companies are preparing for the impact of climate change initiatives and believe those efforts will improve their company's reputation. The recession had little impact on the green momentum; 61 percent of companies with climate change initiatives saw no effect of the recession on their strategies and 17 percent raised such investments last year.
