What are Hungarian CEOs most concerned about?

Hungarian CEOs are more cautious than their global peers

PwC Hungary has surveyed the opinions of Hungarian CEOs for the eleventh time. The number of respondents this year was 262. The results show that even before the war in Ukraine, CEOs were much more cautious than their global peers about their outlook for 2022. 

While 77% of global CEOs said they expect global economic growth to improve during the year ahead, only 46% of Hungarian CEOs said they expect more growth (down from 65% in the previous year), and the majority of them expect growth to stagnate or decline.

Optimism about Hungarian economic growth has also waned, with more than half of Hungarian CEOs saying that a slowdown or stagnation is more likely in 2022,

PwC Hungary said in a press release.

Covidand the threat of war: CEOs’ top concerns

At the end of 2021, most respondents were concerned about health risks, followed by macroeconomic volatility and cyber risks. A sweeping majority, 96% of the CEOs in the poll projected that SARS-CoV-2 will become a docile, everyday virus by 2023.

Other risks such as geopolitical conflict and social inequality, which were perceived as less of a threat at the time, did not make it into the top three concerns; however, these rankings have been largely upended by the current situation.

PwC also asked CEOs about the potential business impact of the above threats. 

It is clear from the responses that cyber risks could inhibit innovation as well as sales, while health risks and macroeconomic volatility could inhibit CEOs’ ability to attract and retain key talent and to sell products and services,

said Barbara Koncz, Partner at PwC Hungary.

"Those who worry about geopolitical conflict anticipate that sales could be impacted, followed by the ability to develop services. So even before the war, most CEOs saw supply chain disruptions as the most likely consequence of these threats,” she added.

The survey also revealed that to offset these threats, 75% of Hungarian CEOs draw on their company’s specific assets, capabilities and relationships for value creation; 70% trust the industry’s long-term trends, and 60% rely on macroeconomic forces.

Satisfaction and automation

Two-thirds of Hungarian CEOs oversee roughly 6 to 15 initiatives for up to five overarching strategic objectives, which they evaluate several times a year and adjust at least annually.

Management planning cycles are still mostly based on one-year periods. However, the survey results show that 2021 was a difficult year to plan under the fast-changing economic conditions. The annual budgeted figures of one-third of the companies surveyed deviated by 6% or more from the actual results.

CEOs’ performance is still assessed mostly on the basis of financial metrics: only 45% of Hungarian CEOs said customer satisfaction is one of their performance indicators; 40% cited employee engagement, while 34% mentioned automation and digitalisation goals.

By contrast,

customer satisfaction and employee engagement feature as long-term strategic objectives for 82% of Hungarian companies, and automation and digitalisation for 80%.

In addition, less than half of the companies have set targets to reduce their environmental impact, and only 38% have addressed gender diversity in their operations.

The results show that the objectives shared by 98% of the companies surveyed are not included among the performance indicators of 34% of the CEOs.

Climate change: Inertia

While companies’ and their CEOs’ objectives do not completely overlap, inaction on climate change is also widespread, despite the fact that both clients and employees are calling on companies to take urgent and decisive steps. Responses show that only 38% of Hungarian companies have addressed the issue in a meaningful way. One-fifth of the companies are aiming for net zero, which means cutting greenhouse gas emissions to as close to zero as possible, while 35% have made a commitment to achieve carbon neutrality.

In addition to curbing climate change, the main reason for these commitments is to meet client and investor expectations.

Meeting employee expectations was the least important motivator identified by Hungarian CEOs in this regard.

Companies with serious decarbonisation commitments often include greenhouse gas (GHG) emission targets in their long-term corporate strategy as well as in the CEO’s personal annual bonus or long-term incentive plan. When asked why they do not have any decarbonisation commitments, 71% of respondents say they do not produce a meaningful amount of GHG emissions.

Based on the survey findings, Barbara Koncz highlights that

while CEOs’ performance is assessed primarily against traditional business metrics, there is rising interest among investors and employees in long-term ESG goals.

So, CEOs face a twofold challenge: they must meet both expectations in order to maintain lasting trust.

PwC’s survey also reveals that changes in global tax policy go unheeded by many CEOs. Almost half of CEOs have not taken any action to prepare for the changes, while only 19% think that the new tax policy will not affect their company.

These responses are particularly surprising given that the planned introduction of the global corporate minimum tax will be the most significant international tax reform since the beginning of the 20th century, with widespread application from 2024 and potentially affecting thousands of businesses in Hungary.

PwC thinks that the new set of rules

could lead to an increase in tax burdens and thus a reduction in shareholder profits, as many countries use tax incentives to achieve different economic policy objectives.

The introduction of the global corporate minimum tax could drastically increase the administrative burden for large enterprises, as they will have to develop a completely new income and tax calculation, which will require careful planning, capacity and expertise. And smaller businesses may be indirectly affected, as the new rules may lead to a change in certain tax types.

In the aftermath of the coronavirus pandemic and the resulting economic instability, trust in institutions and government decision-makers worldwide continued to decline in 2021, according to the Edelman Trust Barometer. As a result, business leaders have come to the fore as a link of trust between the private and public sectors. However, this new role also places new expectations on CEOs, as most people expect them to address and, in many cases, solve the societal problems that have emerged in recent years.

“In an increasingly volatile economic environment, members of the business community have gradually risen above other players in terms of the trust placed in them. CEOs and other business leaders remain the link of trust between the private and public sectors," said Tamás Lőcsei, PwC Hungary’s CEO.

"They are the ones who are accessible and more directly accountable for their words and actions, especially in today’s tight labour market. Meeting these expectations requires more responsibility and new roles from us leaders."

Cover photo: Getty Images