Published on November 9, 2023, 4:00 am

Asia-Pacific CEOs are prioritizing investment to proactively address the interconnected challenges posed by the ongoing COVID-19 pandemic, geopolitical tensions, and climate change. According to the EY CEO Outlook Pulse – October 2022, 48% of APAC CEOs view the continuation or return of COVID-19 disruption as the greatest risk to their businesses, surpassing CEOs in the Americas (43%) and Europe (41%).

A significant concern for 68% of APAC CEOs is inflation, with fears that it will adversely affect earnings and growth. Rising prices of essential inputs such as labor, energy, and raw materials have led to 20% of respondents considering inflation as the most substantial threat to their revenue and margins.

Furthermore, geopolitical tensions are seen as critical risks to growth by 38% of APAC CEOs. Similarly, 35% identify climate change as a pressing concern. As a result, 95% of respondents are reevaluating their investment plans and operations compared to 69% in February 2022.

To address these challenges, Asia-Pacific CEOs are taking concrete actions. For instance, they are restructuring supply chains (48%), postponing planned investments (43%), relocating operational assets (39%), halting planned investments (26%), or exiting some markets entirely (25%). Yew-Poh Mak, EY Asia-Pacific strategy and transactions leader, emphasizes that navigating this complex business environment requires mitigating risks while creating conditions for long-term value creation.

Despite these headwinds, Asia-Pacific CEOs remain committed to their investment plans. In fact, 66% intend to increase capital investment while only 13% plan to reduce it. Additionally, half of the respondents plan on pursuing acquisitions in the coming year. Furthermore, 42% aim to be active across various fronts—acquiring new businesses or divesting existing ones while entering into joint ventures or strategic alliances.

The driving force behind future transactions varies among respondents, with 26% planning to invest in early-stage businesses to enhance their portfolios and access new talent. Another 17% intend to acquire businesses in adjacent sectors to explore new growth opportunities.

When it comes to strategic actions, Asia-Pacific CEOs are primarily focused on embedding sustainability products and services (42%), improving profitability through pricing adjustments (36%), and adapting supply chains for greater resilience (35%). Mak highlights that despite the challenges, Asia-Pacific remains the fastest-growing region globally. CEOs recognize the need to bolster investments to keep pace with rapidly evolving market dynamics.

Mak further emphasizes that while M&A, joint ventures, and alliances are seen as critical tools for transformation and future growth, Asia-Pacific CEOs are becoming more selective in pursuing deals. They have strengthened their due diligence processes to ensure they secure deals that offer the right value at the right price. This represents a critical period for Asia-Pacific CEOs to review assumptions and strategies through a fresh perspective.

In conclusion, leading companies understand the importance of adopting a localized approach by diversifying risk exposure, prioritizing stakeholder value, and bringing supply chains closer to customers. With a focus on long-term success amidst complex challenges, Asia-Pacific CEOs are positioning themselves strategically for 2023 and beyond.

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