Elevated exposure to risks is driving strategic decisions
In light of high costs of doing business and a slowdown in economic activity, business sentiments have taken a hit. Since July, Canadian and global CEOs have reported a higher degree of exposure to a variety of risks, including geopolitical conflicts, macroeconomic volatility, regulation, ESG and sustainability risks, and technology disruption, among others. Canadian CEOs continue to report higher levels of risk when compared to their global counterparts, potentially due to Canada’s reliance on global supply chains.
Since July, concerns around ESG and sustainability risks have increased notably among Canadian CEOs, with 92% reporting a moderate to high degree of vulnerability to ESG and sustainability risks, compared to the global average of 78%. Additionally, 88% of Canadian respondents highlight regulatory risks as one of the top considerations for future business performance, higher than their global counterparts (80%).
Further, geopolitical conflicts and trade tensions are a growing concern for Canadian CEOs, with 84% noting concerns relating to this risk factor, compared to 78% among global CEOs. The risk of geopolitical conflicts and trade tensions can affect global supply chains, which have resulted in notable challenges for the Canadian economy in recent years.
In response to such uncertainty, Canadian CEOs are reportedly more likely to consider restructuring or reducing their employee base (46%) than their global counterparts (36%). At the same time, 38% of Canadian leaders are considering a shift towards contract or hourly workers, in line with their global counterparts.
While business sentiment hints at a conservative position among Canadian leaders, their capital strategy continues to be bold for 2024. The majority of Canadian CEOs (96%) express their intention to pursue transaction initiatives in the next 12 months, surpassing their global counterparts at 89%. Of this, divestments, initial public offerings (IPOs) and joint ventures were the top choices of transaction initiatives by Canadian and global leaders.
Despite uncertainty, leaders are prioritizing significant investments in generative AI
With the rise in use of generative AI across industries, business leaders are wary of potential challenges. As more companies claim to have experience in AI, the majority (72%) of Canadian CEOs report a high degree of difficulty in identifying credible partners or acquisition targets, compared to 66% globally.
At the same time, most global (77%) and Canadian (72%) leaders reported challenges in developing and implementing an AI strategy due to the uncertainty around generative AI.
All Canadian respondents indicated that they are making, or have made, significant investments in generative AI, compared to 99% of global CEOs. Nearly half of Canadian leaders are also sourcing funds primarily by reallocating capital from other investment budgets, highlighting AI as a strategic imperative for Canadian businesses. Comparatively, nearly 40% of global CEOs are reallocating budget from other investments to support AI investments.