EY-Parthenon: Global CEOs Expect Lasting Supply Chain Issues
EY-Parthenon's Q3 CEO Outlook Pulse Survey shows that, despite a belief that geopolitical uncertainty will last at least a year, CEOs are feeling confident in their navigation of conflict.
Rather than having confidence volatility will ease, CEO's are becoming more confident in dealing with uncertainty, building agile supply chains and altering operating models.
Business leaders are turning towards mergers, technology advancements and localisation as a measure to maintain resilience amid volatility.
The CEO Outlook survey
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The EY-Parthenon was conducted by FT Longitude, gathering anonymous information of 1,200 CEOs from large global companies.
It aims to gather insights on main trends that leaders are facing and whether they anticipate long-term value creation.
CEOs represented 21 countries around the world, including Belgium, Mexico, Singapore, the United Kingdom, the United States, Australia and China.
They also covered five industries - consumer and health, financial services, industrials and energy, infrastructure; technology, media and telecoms.
The annual global revenues of the companies were:
- less than US$500m - 20%
- US$500m–US$999.9m - 21%
- US$1bn–US$4.9bn - 29%
- greater than US$5bn - 30%
Adapting to volatility
More than half of respondents see global uncertainty lasting more than 12 months, and 24% are expecting it to last more than three years.
79% of respondents see inflation as an operational problem, with 78% posing tariffs as a challenge.
69% CEOs are feeling less confident with technology innovation as a result of cybersecurity threat increases, while 70% say their digital transformation is also hampered by fragmented and inconsistent technology regulations.
Rather than facing uncertainty with fear, however, CEO respondents are looking to embrace transformation, using this as an opportunity for growth.
Within the next 12 months, 52% are looking to invest more into their portfolio transformation, with a further 39% maintaining consistent transformation.
CEOs around the world agree that the global economy as they've known it is changing. Now, localisation (keeping product growth/manufacturing in the country they're sold) and regionalisation (creating regional supply chains to serve a particular bloc) are becoming more popular, moving away from importing and exporting.
Almost three-quarters of CEOs view localisation as a long-term strategy shift, with almost two-thirds are supporting regionalisation as a long-term strategy.
“Today’s CEOs are not merely reacting to the challenges posed by volatility; they are embracing it as a catalyst for transformation," says Andrea Guerzoni, EY Global Vice Chair – EY-Parthenon.
"The findings of our survey highlight a clear shift toward localisation and regionalisation, as leaders seek to enhance resilience and agility in their operations. This mindset is helping them to seize opportunities and drive sustainable growth in an unpredictable environment.”
As volatility is changing market dynamics, localisation and regionalisation allows companies to adapt to customer expectations and local demands much faster.
Building new supply chains
In response to global volatility, 48% CEO respondents are looking to form more traditional mergers and acquisitions (M&A), and 73% are anticipating participating in joint ventures or strategic alliances.
The increase in mergers and alliances shows that companies are eager to innovate during volatility without the risk of a full acquisition.
Andrea continues: “CEOs are recalibrating their approach to transactions, focusing on strategic partnerships that allow for agility and shared risk. The current environment demands a shift in mindset, where collaboration becomes essential for navigating uncertainty and driving growth.
"As global CEOs adapt to the complexities of today’s business landscape, their focus on localisation, strategic transactions to drive transformation, and technology investments positions them to thrive amid ongoing challenges.”
M&A plans are currently the most popular within the US, followed by Canada, the UK, India and Germany.
Technological innovation is proving a critical reason for M&A pursuits by 41% of respondents, demonstrating how important it is for today's businesses.
- only 19% believe regulatory unpredictability will seriously derail their ambitions
- CEO Confidence Index is at 83/100, up seven points since the previous survey in May
- 72% regard localisation as a long-term strategic shift - 63% echo from a regional perspective
- 38% have already completed localisation plans, with further 36% currently in process of implementing localisation plans
- 21% have completed regionalisation plans, with a further 35% mid-implementation
- 42% US CEOs believe volatility will resolve in the year, compared to 36% in APAC and 39% in Europe
- long-term anxiety is highest in APAC CEOs, with 11% fearing uncertainty will continue for another 5 years
Although there is a division in volatility expectations, CEOs are significantly more optimistic about facing these issues than before.
Now that businesses have become accustomed to these issues and have started embedding risk management into their strategies, they are now looking, with confidence, towards building long-term operational resilience rather than simply surviving alongside geopolitical risks.
