According to a survey by consulting firm Ernst & Young (EY), chief executive officers (CEOs) have grown more confident of their immediate prospects and the actions needed to create capital for investment in future growth, but short-term returns remain a key focus.
The latest EY CEO Outlook Pulse quarterly survey drew its data from 1,200 global executives, including 40 in Singapore, and 300 institutional investors globally.
On the back of improved optimism about global economic growth, 55% of Singapore CEOs are more optimistic about their companies’ revenue growth, lower than the 60% of global survey respondents, while just 48% of Singapore surveyees feel more positive about their business’s profitability compared to 65% of global surveyees.
EY Asean Strategy and Transactions Leader, Vikram Chakravarty, says: “CEOs in Singapore appear to be less optimistic about their companies’ growth and profitability than their global counterparts. This is despite the major trends and geopolitical disruptions that potentially allow Singapore and Southeast Asian markets to benefit from labour and trade flows, highlighting their relatively more cautious approach and perspectives.”
Technology and AI top priorities
Notably, survey respondents see technology as a key approach to help their companies address challenges, from enhancing business performance to sustainability.
The survey found that while investing in technology, including artificial intelligence (AI), to improve growth and productivity over the next year, is a top priority for 33% of Singapore respondents, the number is still lower than the 47% of global respondents. Similarly, just 33% of Singapore respondents indicated enhancing data management and cybersecurity as a top priority, compared to 45% of global respondents.
Investing in employees’ training and re-skilling, however, was an area in which Singapore respondents signalled a higher interest, at 23% to the 15% of global respondents.
Chakravarty says: “AI and generative AI (GenAI) are among the most important emerging technologies to impact productivity and creativity. However, it will take time for companies to experiment and fully leverage the opportunities from AI and GenAI. Hence, CEOs need to consider all aspects of AI, digital as well as cybersecurity to fully exploit the potential of technology on their company’s business performance and growth.”
See also: Prudential Financial Advisers plans to grow number of representatives to 1,500
CEOs favour mergers and acquisitions
While Singapore executives may not see eye-to-eye with their global counterparts on the adoption of AI and technology, 100% of all Singapore respondents are pursuing some form of mergers and acquisitions (M&A) over the next 12 months, as are 99% of global respondents.
These transactions include IPOs, divestments or spin-offs, joint ventures and strategic alliances with third parties and M&A, signalling a robust appetite for deals.
When asked what the top strategic drivers were for pursuing acquisitions, the survey found that reacting to changing customer behaviour, growing market share and accessing new geographies stood out as the top three drivers. For global respondents, acquiring technology, new production capabilities or innovative startups was also a key consideration, with 40% indiciating so, while just 22% of Singapore respondents agreed.
“With the easing of inflation and interest rates, the time is ripe for M&A activities. With global funding markets more open in 2024 than 2023, acquirors should be more confident in securing funding. In addition, companies looking to divest will be supported by increasing appetite from large Singapore companies and conglomerates, as well as private equity players based in Singapore,” says Chakravarty.
Despite the clear interest in M&A activities, both Singapore and global executives have a ways to go in understanding the know-hows of structuring deals in today’s complex environment, with 36% of Singapore and 20% of global respondents reporting limited or no capabilities in anticipating potential regulatory challenges ahead of such deals.
Similarly, just 28% of Singapore respondents and 20% of global respondents have reported having a comprehensive narrative to engage stakeholders, while 28% of Singapore respondents and 21% of global respondents are confident in managing the tax implications of a deal.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
Sustainability less of a priority for Singapore CEOs a year on
Although the importance of sustainability continues to be a global focus across industries, Singapore executives have seemingly deemed the problem less pressing, with 58% of surveyees deprioritising their focus on the subject from a year ago.
In contrast, just 23% of global respondents echo a similar sentiment.
Although 43% of Singapore executives indicate that this was due to challenging economic or financial circumstances, 15% stated that it was due to a focus on other boardroom priorities.
Conversely, 54% of global respondents report that sustainability has become an even higher boardroom priority today, with just 23% of Singapore respondents agreeing so.
The majority of both groups of surveyed respondents believe that technology and AI hold the answers to the key sustainability challenges faced, and share fears of being accused of greenwashing, which leads to “greenhushing” among companies.
Worryingly, 70% of Singapore respondents and 73% of global respondents indicate that shareholders are more focused on companies’ earnings targets than long-term sustainability performance.
On a global scale, investors are pulling back from environmental, social and governance (ESG) issues, with more than a third of institutional investors around the world pointing to sustainability’s lower priority for their investment portfolios compared to 12 months ago.
Chakravarty concludes: “Achieving sustainability targets can be challenging, particularly in a difficult, cost-focused market, but the thrust toward a sustainable future is not just a financial and business imperative but a shared commitment across the corporate world.”
