CEO confidence in artificial intelligence tempered by social, ethical and security risks
► 65% of respondents see AI as a force for driving business efficiency – but also fear unintended consequences
► 88% are integrating AI into capital allocation, almost half plan significant AI investments in the next year
► M&A to rebound into 2024 – 71% of CEOs using AI to strengthen deal strategies
CEOs globally are embracing opportunities created by AI, but also remain wary of unknown, unintended consequences, according to the findings of the latest EY CEO Outlook Pulse survey. Nearly two-thirds (65%) of CEOs agree that AI is a force for good; however, a near equal proportion say more work is needed to address social, ethical and security risks – from cyberattacks to disinformation and deepfakes.
The survey of 1,200 global CEOs, which provides insights on AI, capital allocation, investment, sustainability and transformation strategies, found that 66% of CEOs believe the impact of AI replacing humans in the workforce will be counterbalanced by new roles and career opportunities that the technology creates.
However, while CEOs embrace the potential upsides AI can bring for business and society, they are cognizant of the risks of the emerging technology. Two-thirds (67%) of CEOs said that the business community needs to focus on the ethical implications of AI, while almost the same proportion (64%) say businesses are not doing enough to manage the unintended consequences of the technology.
Despite these concerns, CEOs are adapting investment strategies to maximize the benefits that AI could bring to their businesses. A significant majority of CEOs (88%) are integrating AI into their capital allocation, of which, 43% are actively investing in the technology, while the other 45% said they are planning to make significant investments in AI in the next 12 months.
Economic instability remains; sustainability initiatives at a crossroads
Despite ongoing macroeconomic volatility, CEOs are cautiously more optimistic regarding a global economic downturn than at the start of 2023, as only 33% of CEOs expect a severe temporary or persistent downturn, compared to 50% in January. But CEOs remain split on whether they are more optimistic (47%) or less optimistic (36%) about the outlook for their own company’s financial performance than they were six months ago.
The harsh realities of today’s low-growth, high-inflation and rising interest rate environment has compelled many CEOs to focus more sharply on near-term performance, particularly at the expense of sustainability goals.
Today, just 38% of CEOs stated that they would prioritize sustainability issues when making capital allocations decisions. This is in contrast to the CEO Outlook of January 2022, when 83% of CEOs said that sustainability and ESG issues would be an important driver of growth in the near-to-mid-term.
M&A to rebound into 2024
Dealmaking remains a priority for CEOs. Nearly all (98%) of CEOs expect to actively pursue a strategic transaction in the next 12 months (up from 89% in January 2023), with 59% looking to M&A, 47% looking to divest and 63% looking to enter strategic alliances or joint ventures. The appetite to acquire is close to a record high but barriers to doing deals in the current market such increasing regulation and a higher cost of capital will likely temper many of these plans.
Improving technology capabilities and innovation is a primary driver of M&A, with 16% of respondents stating that this a primary investment goal. Furthermore, CEOs are incorporating AI in M&A strategies – leveraging these technologies in their deal sourcing and processing. Seventy-one per cent are incorporating AI into the transaction process, either significantly or through pilot programs. Only a tiny cohort (5%) have no plans to use AI – and they risk being outmanoeuvred by the competition.
Commenting on the survey, Stelios Demetriou, Partner, Head of Strategy and Transactions at EY Cyprus, said: “CEOs clearly see the huge advantages of AI and its potential to drive productivity and future competitive advantage as well as positive outcomes for all stakeholders, and are heavily investing in the technology. However, they are also acknowledging society’s concerns about the unintended consequences of AI and see a role for business leaders to address these fears. Even at a time when an uncertain macroeconomic environment leads companies to focus on near-term performance, CEOs need to retain their focus on stakeholder sustainability demands and address society’s concerns about ethical issues, including how the use of AI could impact key areas of our lives, such as privacy.”