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In 2018, only 5% of the world’s CEOs believed that global economic growth was about to decline; the vast majority were optimistic, Dr. Peter Bartels writes for PwC.
"This year, the proportion of cautious CEOs has risen sharply to 53% and private business CEOs mirror their gloom.
"And this was before the threat of a global public health emergency.
"Given the worldwide scale of geopolitical and economic uncertainty now, we can forgive private business CEOs their pessimism.
"But only for a moment, because the reality is that private businesses unbound as they are to the short termism of quarterly shareholder reports can be in a better position than many public companies to weather what may be ahead.
"They can also be well placed to grab opportunities when they arise, provided they avoid becoming paralysed by the prospects of a slowdown.
"This opening will now have to be balanced by the unprecedented challenges and uncertainty in the coming months brought about by the spread of COVID-19.
"Many leaders tend to take a defensive stance when faced with uncertainty and that usually means cutting back on investment, freezing hiring or reducing headcount, and avoiding making any big decisions about the future.
"But this is a short term response and private businesses don’t need to follow that playbook.
"What we learn from this year’s CEO survey data is that not all is doom and gloom among private business CEOs, particularly those who took on board the lessons of the 2008 global recession.
"For example, during the financial crisis, in our experience working with private business CEOs, they showed admirable loyalty to their employees, with many using the time to upskill their workers.
"That was an investment that paid off and it’s heartening to see today that 51% of CEOs of private businesses say they expect to increase headcount over the coming 12 months, compared with 46% of CEOs of listed companies.
"Many private businesses also have stronger balance sheets today, making them more resilient in the face of an economic slowdown.
"When banks, their primary source of finance, cut back on lending after the 2008 crisis, private businesses adapted quickly, focusing on building their capital reserves.
"One of the consequences is that equity ratios among private businesses have increased steadily since 2008.
"There’s a great deal of truth to the adage 'never waste a crisis' or, in this case, a slowdown.
"Private businesses are far better prepared to gain from uncertainty than they were a decade ago.
"They are stronger, have learned from experience and have a clearer view of their advantages their focus on values, purpose and loyalty toward employees has proved to be an important asset.
"These strengths will be tested by the current public health emergency and its economic implications, but private businesses are well aware of the value of good workforce relations." ■