Most Surveyed CEOs Are Not Prepared For Inflation Or A Recession

The good news for business leaders is that preparation can be an essential success factor in ... [+] managing a crisis. The bad news is that most corporate executives say they are not ready for two economic-related crises: a recession and high inflation.

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The good news for business leaders is that preparation can be an essential success factor when managing a crisis. The bad news is that most surveyed corporate executives said they are not prepared for two economic-related crises: a recession and high inflation.

That’s according to a new study released today by The Conference Board which, conducted an online survey of 1,200 top executives in the United States, Latin America, Japan, and Europe between October 13 and November 24, 2023.

According to the survey:

Only 37% of CEOs in the United States are prepared to deal with a recession, and 34% are ready for high inflation. The numbers are worse for CEOs in regions around the world. Just 27% say they are prepared for a recession, and 27% for inflation. Doubts About A Soft Landing Executives Not So Sure

A rear view of a concerned businessman as he places his hand on his head and looks up at a U.S. One ... [+] Dollar bill coupled with a downward trending arrow and chart on the wall in front of him. This image illustrates the concept of a falling, or weakening U.S. dollar.

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“There is a growing consensus that the Fed believes we're in for a soft landing without a recession in 2024. But [the] executives that I talk to are not so sure. Many think we're in for a slowdown which will crimp both revenues and profits,”Robert Kelley, a Distinguished Service Professor of Management at Carnegie Mellon University’s Tepper School of Business, said via email.

“So CEOs need to continue to keep a real-time eye on costs and on actual revenues, not just projected ones,” he advised.

“Have separate plans for how to proceed should the economy sputter or if it picks up speed. Get out in the field talking to important customers, suppliers, and your operations and salespeople,” Kelley recommended.

‘A Real Risk Of Recession’

The good news for business leaders is that preparation can be an essential success factor in ... [+] managing a crisis. The bad news is that most corporate executives say they are not ready for two economic-related crises: a recession and high inflation.

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“With high inflation, rising interest rates, supply chain issues, and other economic headwinds, there is a real risk of recession,” Shawn Stack, founder and CEO of Hallmark Timmins, said via email.

“This could lead to reduced consumer spending, making it harder to grow revenues. It could also make capital more expensive, limiting investment in R&D and growth initiatives,” Stack warned.

Still Preparing For Growth

Despite the concerns of the executives that were surveyed, “business leaders are still preparing for growth this year and beyond,” Dana Peterson, chief economist at The Conference Board, said in a statement.

“CEOs are considering expansion, including into new regions, markets, and products and services,” she noted.” Leaders are also looking to invest in human capital, technology, and innovation. Notably, CEOs see AI and digital transformation as avenues for reducing costs and bolstering profits,” Peterson concluded.

Focusing On Prudent Financial Management

To address his concerns about the economy's future, "I plan to focus on prudent financial management,” Stack of Hallmark Timmins said.

“This includes maintaining healthy cash reserves, locking in lower interest rates where possible, and postponing major capital expenditures. Operationally, I will look for opportunities to reduce costs through process improvements and automation without impacting quality or customer service.

“Diversifying revenue streams and customer segments could also help mitigate the risk of an economic downturn in any one area,” Stack commented.

Meter read high level of national debt result. Color scale with arrow from blue to red. The ... [+] measuring device icon. Colorful infographic gauge element. National flag of USA

getty The #1 Geopolitical Threat

Another risk CEOs in the US are worried about is the country’s growing national debt, according to The Conference Board’s survey. The executives rank the country’s national debt and budget deficits as the #1 geopolitical threat to their operations in 2024.

“A national strategic goal should be to reduce the US debt-to-GDP ratio to 70%,” Lori Esposito Murray, president of the Committee for Economic Development at The Conference Board, said in a statement.

“To begin to achieve this reduction, a bipartisan commission on fiscal responsibility should be established to immediately address the biggest drivers of deficits and the long-term debt: Medicare and Social Security, whose trust funds are becoming insolvent,” Murray advised.

“To address the revenue challenge, the Commission should undertake comprehensive tax reform based on the principles of fairness, efficiency, and simplicity,” she concluded.

Consequences

The failure by businesses to prepare for a recession, inflation—or any other crisis—can make the impact on the organizations worse, more challenging to manage, and lengthen the time it takes to recover.

Considering what’s at stake for companies, why wait to prepare for a crisis?