- A majority of CEOs (Singapore 61%, global 70%) are accelerating GenAI investments to maintain competitive advantage
- Two-thirds of CEOs (Singapore 66%, global 68%) say GenAI uncertainty creates challenges for adoption
- M&A appetite hits nine-year low but CEOs double down on organic investments; Singapore is one of top five investment destinations among global respondentst
CEOs globally recognize the potential of artificial intelligence (AI), but most are encountering significant challenges in formulating and operationalizing related strategies, according to the latest EY CEO Outlook Pulse survey.
The EY quarterly survey of 1,200 global CEOs, which includes 40 from Singapore, provides insights on AI, capital allocation and investment strategies and reflects the difficulties and the urgency that CEOs find themselves acting under when it comes to the emerging technology. While about two-thirds (Singapore 61%, global 70%) of CEOs see the need to act quickly on generative AI (GenAI) to avoid giving their competitors a strategic advantage, a similar proportion (Singapore 66%, global 68%) also report being stymied by uncertainty around this space, which makes it challenging to act quickly.
Conscious of its potential to disrupt their own business models, almost all CEOs (Singapore 95%, global 99%) are making or planning significant investments in GenAI. To fund these investments, 73% of Singapore respondents (global 69%) are re-allocating capital from other investment projects or technology budgets and 13% (global 23%) are raising new capital. But investing in an AI-enabled future is easier said than done: a third (Singapore 33%, global 26%) of CEO respondents say the rapid pace of GenAI progress is the biggest challenge to making capital allocation decisions on GenAI initiatives. At least two-thirds (Singapore 73%, global 66%) also believe a surge in companies claiming to have AI expertise complicates decisions about identifying and implementing credible ecosystem partnerships and acquisition targets.
Sriram Changali, EY-Parthenon Asean Value Creation Leader says:
“AI is certainly on the agenda of Singapore’s CEOs. Yet, despite their appreciation for the potential of AI, many find it challenging to cut through the complexity and gain clarity on where to start, how to prioritize use cases, weigh the risks and translate into tangible business outcomes. To address these gaps, some organizations are forming cross-functional teams embedded in business units to drive the agenda. These teams are given room to experiment, bring onboard an ecosystem of AI experts and partners to co-create this journey.”
Despite challenges, CEOs are investing in the future of the workforce to accelerate GenAI initiatives — a majority (Singapore 93%, global 87%) have either completed or are in the progress of hiring new talent with relevant GenAI skill sets. Many are also establishing pilots and partnerships with multiple companies.
CEOs double down on organic investments, but M&A appetite declines to 9-year low
As business leaders continue to grapple with macroeconomic headwinds, regulatory changes and geopolitical volatility, many still anticipate high levels of growth in the near term and are doubling down on investments in R&D and capex.
The EY survey reveals that CEOs continue to be on the offense when investing for the future, with a clear majority (Singapore 90%, global 89%) planning some kind of transaction in the next 12 months. However, M&A deal intentions dipped to the lowest level since 2014 with only 28% of Singapore respondents (global 35%) planning M&A in the next 12 months. This can be attributed to the current geopolitical and macroeconomic uncertainty and also reflects the confusion on AI targets and the real-world drop-off in AI-focused M&A following a surge earlier this year.
The corporate appetite to pursue M&A appears to be far higher in the Americas region (47%) than in EMEA (29%) or Asia-Pacific (25%), reflecting the strong uptick in dealmaking seen in the region in 3Q23, especially deals involving US companies.
Changali says:
“The lower level of deal intentions could be attributed to the uncertain geopolitical and economic environment. Further, among the many priorities, corporates are following a more measured approach to capital allocation and portfolio optimization, as CEOs are tapping on M&A opportunities to build capability in technology and AI rather than meeting growth ambitions.”
Despite lower-than-expected growth in China, Asia-Pacific has emerged as a prominent destination among respondents globally. Singapore, together with China, Australia, India and Japan are listed as the top five investment destinations by global respondents, when asked where they would look to outside of their headquartered market.
Maximizing growth and profitability to fund transformations
The past four years have seen business leaders reacting quickly to shifting consumer behaviors, a resetting and reconfiguring of supply chains, an upending of the global energy market, and rapid changes in the growth, inflation and interest rate environment. Yet, a significant number of respondents anticipate higher levels of growth (Singapore and global 66%) and profitability (Singapore 51%, global 65%) in 2024 compared with 2023.
With global economic growth expectations more likely to be revised on the downside in the near-term, CEOs should consider whether their own growth expectations reflect the slower global market projected over the next five years.
Changali says:
“Change is the only constant today, hence transformation is a necessity. Corporates should take a critical look at their capital allocation and re-examine their operating model to create the headroom to enable consistent investments in transformation and build competitive advantage to navigate the evolving situation when the tide turns.”
To read the full report, please visit: ey.com/CEOOutlook
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About the EY 2023 CEO Outlook Pulse
On behalf of EY, in September and October 2023 FT Longitude, the specialist research and content marketing
division of the Financial Times Group, conducted a survey of 1,200 CEOs from large companies around the world. This anonymous online survey aims to provide valuable insights on the main trends and developments impacting the world’s leading companies as well as business leaders’ expectations for future growth and long-term value creation. Respondents represented 21 countries (Brazil, Canada, Mexico, the United States, Belgium, Luxembourg, the Netherlands, France, Germany, Italy, Denmark, Finland, Norway, Sweden, the United Kingdom, Australia, China, India, Japan, Singapore and South Korea) and five industries (consumer and health, financial services, industrials and energy, infrastructure, technology, media and telecoms). Surveyed companies’ annual global revenues were as follows: less than US$500m (20%), US$500m–US$999.9m (20%), US$1b–US$4.9b (30%) and greater than US$5b (30%).
The CEO Imperative Series provides critical answers and actions to help CEOs reframe their organization’s future. For more insights in this series, visit ey.com/en_gl/ceo
