Asia Pacific business leaders eye AI and dealmaking as fears of a severe recession fade.
This is according to the findings of the latest EY CEO Outlook Pulse survey, which captured the views of 1,200 CEOs across the globe on the macro environment, and their capital allocation, investment, and transformation strategies.
Asia Pacific business leaders see the huge advantages of AI and its potential to drive productivity and positive outcomes for all stakeholders, spurring interest and investment in AI-driven innovation — they know that bold actions to harness the upside potential will lead to future competitive advantage, said Yew-Poh Mak, EY Asia-Pacific Strategy and Transactions Leader.
“CEO are equally concerned about the unintended consequences of AI, and see an opportunity to engage with stakeholders, particularly regulators and customers, on the ethical implications of AI,” Mak noted.
Survey highlights
- In Asia Pacific, 70% of CEOs agree that AI is a force for good, driving business efficiencies and innovation.
- 68% 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.
- 65% of CEOs said that the business community needs to focus on the ethical implications of AI, while 66% 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 (89%) are integrating AI into their capital allocation, of which, 37% are actively investing in the technology, while the other 52% said they are planning to make significant investments in AI in the next 12 months.
Economic sentiment improves, but Asia Pacific business leaders cautious of volatility ahead
- Asia Pacific CEOs are cautiously more optimistic about the global economy than at the start of 2023, as only 32% of CEOs expect a severe temporary or persistent downturn, compared to 54% in January.
- But CEOs remain split on whether they are more optimistic (45%) or less optimistic (37%) about the outlook for their own company’s financial performance than they were six months ago.
- For Asia Pacific CEOs, more than half (56%) expect macroeconomic and market volatility to significantly impact their businesses, while 55% anticipate significant impact from regulatory risks.
- Geopolitical concerns continue to loom large for Asia Pacific CEOs, with 62% expecting that geopolitical conflicts and trade tensions will have a significant impact on performance over the next 12 months.
M&A to rebound into 2024 as dealmaking sentiment shifts
- Nearly all (99%) of CEOs expect to actively pursue a strategic transaction in the next 12 months (up from 84% in January 2023), with 56% looking to M&A (vs.31% in January 2023), 44% looking to divest (vs. 29% in January 2023) and 53% looking to enter strategic alliances or joint ventures (vs. 44% in January 2023).
- The appetite to transact is close to a record high but barriers to doing deals in the current market such as increasing regulation and a higher cost of capital could temper many of these plans.
- Digital transformation and decarbonisation are key themes for M&A in Asia Pacific, with activity driven by almost three quarters of CEOs (71%) who say that they will either accelerate or maintain their rate of transformative changes over the next 12 months.
- Furthermore, CEOs are incorporating AI in M&A strategies – leveraging these technologies in their deal sourcing and processing.
- 72% are incorporating AI into the transaction process, either significantly or through pilot programs.
- Only a tiny cohort (4%) have no plans to use AI – and they risk being outmanoeuvred by the competition.
- Asia Pacific business leaders remain committed to their sustainability agenda, with 41% (vs. 33% of Americas CEOs) continuing to prioritise sustainability initiatives.
- 36% say that they have placed sustainability on the same level as other business priorities when it comes to capital allocation, and 17% say integrating sustainability into products and services is a primary driver of M&A.
