Survive, not thrive - PwC · 2018-08-27 · version of the survey “Survive, not thrive”. To be...

Russian edition of the 18th PwC Annual Global CEO Survey2015

Survive, not thrive

www.pwc.ru/ceosurvey/18

1 322 CEOs from 77 countries

101 CEOs from Russia

The Annual Global CEO Survey is PwC’s flagship survey in which hundreds of CEOs participate.

We pose dozens of questions to our respondents regarding trends in the global economy and their impact, the business environment of certain countries, and the overall mood in the entrepreneurial world. We also ask CEOs to evaluate the effectiveness of government actions and share their short-term plans for business development.

The goal of our survey is to identify patterns in the global economy that may become additional markers for business people and politicians in their decision-making.

Since 2013, we have prepared a Russian edition of this survey to capture the specific perspective of the Russian CEOs, the number of which participating in the survey increases every year.

Contents

Introduction 4

Key findings 6

View on the global economy 8

Political and business risks for companies 12

The basic instincts of business 18

Government efficiency 22

Survey methodology and contact information 24

“Unfortunately, in the next three years we will be encountering more threats than opportunities [due to macroeconomic and political risks]. That said, these challenges are difficult yet always interesting to tackle”.

Sergey Vlasov, Chairman of the Management Board, Public Joint-Stock Orient Express Bank

Dear colleagues,

This is the 18th edition of PwC’s Annual Global CEO Survey. PwC usually presents this annual survey at the World Economic Forum in Davos.

Introduction

Introduction

This time the report features 1,322 CEO interviews from 77 countries, including 101 interviews with Russian CEOs.

2014 was a challenging year with both economic and geopolitical headwinds for all global CEOs. The majority of the surveyed CEOs from Russia have, perhaps unsurprisingly, made very cautious forecasts. For the Russian CEOs, who participated this year, the focus is clearly on cost reduction. Thus, we have called the Russian version of the survey “Survive, not thrive”. To be fair, anxiety and stress can also be seen in the answers given globally. It should also be noted that despite geopolitical uncertainty, Russia is still among the Top-10 countries seen as interesting for business development by the people surveyed.

In the Russian edition, we have analysed the responses of all 101 CEOs from Russia, so that their opinions and expectations in terms of politics, economy and corporate development are accurately conveyed.

We would like to express our gratitude to all CEOs who took part in the 2014 survey and shared their time answering the questions, as well as those who understand the importance of this project for identifying significant trends for the business community and political leaders working at the federal and global levels.

King regards,

David GrayManaging Partner, PwC Russia

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Key conclusions

View on the global economyGeopolitical tension and a high level of uncertainty were very important factors in CEOs’ attitudes and expectations globally. The number of optimists has significantly decreased over the year. Cautious forecasts were made both in Russia and globally

Only 37% of the CEOs surveyed globally and just 14% of the CEOs from Russia are absolutely sure that the global economic situation will improve over the next 12 months. At the same time, 44% and 40%, respectively, do not expect any changes.

The list of ten countries that all surveyed CEOs consider to be most important for overall growth prospects has not significantly changed over the year. Reflecting the increasing confidence that the world’s largest economy has “turned the corner”, the USA (38%) regained the lead position from China (34%) while Germany is an important country for 19% of those surveyed, the UK – 11%, Brazil – 10%, India – 9%, Japan – 8%, Russia – 6%, Indonesia - 6% and Australia – 6% (Mexico held this place in the previous year). Despite the geopolitical challenges, international business is still interested in Russia.

Political and business risks for companies

Eighty-four percent of CEOs globally are somewhat confident or very confident about their companies’ prospects for revenue growth over the next 12 months. In Russia, 61% of CEOs surveyed expressed this view.

In addition, 39% of CEOs are very confident about their companies’ prospects for revenue growth over the next 12 months. At the same time, few Russian top managers are very confident about their companies’ prospects for revenue growth over the next 12 months. Only 16% of CEOs in Russia shared this opinion. This year’s results are in sharp contrast to the previous survey when top managers from Russia were usually the most optimistic of all global CEOs.

The decline in optimism amongst Russian CEOs may reflect the fact that 63% of Russian CEOs agree or agree strongly that the number of threats facing their businesses has increased.

In addition to economic and political risks, the majority of CEOs globally are worried about over-regulation and geopolitical uncertainty. For Russian business people, geopolitical uncertainty is now front and centre on their minds, ranking first among the threats (86% of those surveyed).

Business risks related to lack of qualified personnel are still shared by CEOs globally (73%) and Russian CEOs (78%).

7Russian edition of the 18th PwC Annual Global CEO Survey

The basic instincts of business

The majority of CEOs globally (71%) plan to implement cost-reduction initiatives in the coming 12 months. In Russia, 75% of those surveyed said they are planning to do this.

At the same time, the new year will be interesting owing to various mergers and acquisitions both nationally and globally. Fifty-one percent of CEOs globally (and 24% in Russia) told us about entering into a new strategic alliance or joint venture, 29% – about acquisitions and mergers on a national level (15% in Russia) and on the international level – 27% (5% in Russia).

In the new year, 50% of CEOs globally plan to increase the headcount in their companies. In Russia, only 28% of those surveyed have such plans. Forty-eight percent of CEOs in Russia told us that their headcount will stay the same, while 24% stated they plan to reduce their headcount.

Government efficiency

In the opinion of CEOs globally, the aim of governments should be internationally competitive and efficient tax system (67%), as well as the training of highly qualified personnel (60%).

In the opinion of CEOs globally, the aim of governments should be internationally competitive and efficient tax system (67%), as well as the training of highly qualified personnel (60%).

In contrast to their foreign counterparts, respondents in Russia (50%) named access to affordable capital among priority government priorities.

Given the importance of State banks in Russia and the impact of sectorial sanctions, Russian CEOs clearly feel the State has a central role to play in ensuring access to affordable financing for business. 78% of Russian CEOs cite the importance of government actions in terms of access to capital least as effective, 60% – developing an innovation ecosystems, 58% – creating physical infrastructure, and 57% – training personnel.

They also said that government should be effective in terms of developing digital infrastructure (38%) and the good health and well-being of the workforce (19%).

"Instability always impacts business relationships and the capitalisation of domestic economies."

Vadim Dymov Founder and Chairman of the Board of Directors, Dymov company

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View on the global economy

The development of emerging markets in 2014 slowed, even as the overall global economy showed sustainable growth. The USA showed a high rate of growth following a difficult first quarter as the unemployment rate decreased and the country’s GDP increased. The economy in Western Europe was mixed.

Nonetheless, investors still have interest in BRICS economies. In 2014, the BRICS countries have created their

own Development Bank to counterbalance the influence of the World Bank. China’s economy, despite a modest slowdown of its growth, turned out to be the world leader in terms of GDP based on purchasing power parity (PPP). Previously, the USA was permanently at the top of the World Bank’s rating for this indicator for almost 150 years.

In addition, many business people gave more attention to Africa in 2014.

Figure 1. The number of CEOs globally and in Russia who are very confident in global economic growth for the year has gone down.

Question: Do you believe the global economy will surely improve over the next 12 months?

Respondents: Russia: 2012 (71), 2013 (41), 2014 (47), 2015 (101)Globally: 2012 (1,258), 2013 (1,330), 2014 (1,344) , 2015 (1,322).

CEOs from Russia

CEOs globally

2012 2013 2014 2015

15%

18%

44%

37%

4%

10%

17%14%

“In the next three to five years, the global economy will develop in various ways. The overall trend will be positive. However, every country will have to face their own circumstances. <...> Unfortunately, Russia will hardly be the beneficiary of economic growth in the next three to five years because of certain internal and external factors.”

Artem Konstandyan Chairman of the Management Board, Promsvyazbank


With respect to Russia, global economic and political events in 2014 added to the ongoing challenges of the country’s post-crisis development. These events include the conflict in Ukraine, EU and American sanctions, and the embargo in response to them. According to the Russian CEOs surveyed, these factors could not help but affect their plans for further business development, as well as their own attitudes about the economic situation.

Geopolitical tension and a high level of uncertainty played an important role in the overall mood and expectations as CEOs both in Russia and globally made cautious forecasts. The number of optimists has significantly decreased over the year. Only 37% of the CEOs surveyed globally and just 14% of the top managers from Russia are absolutely sure that the global economic situation will improve over the next 12 months. At the same time, 40% and 44%, respectively, do not expect any changes.

"Oil prices, which are extremely important for Russia, 'strayed' too far off from global economic growth. The global economy and global GDP growth pretty much have corresponded to oil prices mainly because oil prices depended on economic growth. Now, we can see that this isn't the case any more and oil prices are on their own trajectory. It is clear that the situation is different now. Under such circumstances, it is much more difficult to make forecasts about the future of the Russian economy".

Sergey Monin, Chairman of the Management Board, Raiffeisenbank

Figure 2. The majority of CEOs do not expect any changes in economy.

Question: Do you think that global economic conditions will remain the same?

Respondents: Russia: 2012 (71), 2013 (41), 2014 (47), 2015 (101)Globally: 2012 (1258), 2013 (1,330), 2014 г. (1,344) , 2015 (1,322).

37%

52%49%

44%44%51%

49%

40%

2012 2013 2014 2015

CEOs from Russia

CEOs globally

37%of the CEOs surveyed globally ...

È7%

14%... and just 14% of the CEOs from Russia are absolutely sure that the global economic situation will improve over the next 12 months.

È3%

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“China is huge. That’s why our company plans to carefully focus on opportunities for entering this market. Along with China, we also have great interest in Indonesia. In my view, it’s essential to monitor trends in this growing market and be on the lookout for new opportunities. This country has a large population, high growth rates, and a rather low point of entry. The discussion at last year’s Davos gathering focused on points of growth and breakthroughs, with much attention given to African countries, especially such economies as Nigeria. I agree that the future most likely belongs to such economies, but in terms of high-tech industries, such as biotech, it will take some time before we can fully capitalise on this growth. So, for now we are looking more closely at the countries in Southeast and East Asia, Korea for instance. Also, we see a clear future in the Middle East, for example in North Africa, or Turkey, which is a leader in the region. If we’re talking about our largest market, that would be the United States. Also, the US economy is in better shape than Europe at the moment. We want to be in that market.”

Alexey Repik, Chairman of the Board, “R-Pharm” CJSC

For all that, Russia did not change its position among the Top-10 countries that all surveyed CEOs consider important for business development.

Eighty-two CEOs surveyed globally (6%) consider Russia important for their overall growth prospects over the next 12 months (32 of them represent companies from Western Europe).

The Top-10 countries in terms of future growth did not change substantially over the year. The USA (38% of those surveyed consider this country to be important for their overall growth prospects) replaced China (34%) as the leader. In addition, 19% of those surveyed take interest in Germany. The UK is thought to be a priority by 11% of the respondents, followed by Brazil (10%), India (9%), Japan (8%) and Indonesia (6%). This year Mexico (5%) lost its place in the Top-10 to Australia (6%).

Figure 3. Russia is still in the Top-10 countries that are most interesting for business development (%).

Question: Which three countries, excluding the one in which you are based, do you consider most important for your overall growth prospects over the next 12 months?

Respondents: globally (1,322).

38

34

19

11

10

9

8

6

6

6

USA

China

Germany

UK

Brazil

India

Japan

Russia

Indonesia

Australia

6%of the CEOs surveyed globally consider Russia important for their growth prospects over the next 12 months.

È1%


“Chinese businessmen gaze at our market more and more often. They assume it is very possible for Russian businessmen to start creating their ventures in China, for example meat processing facilities. They are also interested in German market, but it’s not very easy for German businessmen to understand Asian mentality. We on the other hand understand it quite well... It is our Eurasian peculiarity – we are receptive to various mentalities... Russia is a melting pot of various cultures - we can transform different business cultures and package them for export”.


According to Russian CEOs, over the next 12 months the most important countries for their organisations’ overall growth will be China (27%), the USA (24%) and Germany (23%). The continued interest in Russia’s traditional trading partners indicates that business may be looking beyond short term geopolitical challenges; there is no sense of disengagement.

Figure 5. The most interesting countries for Russian CEOs in terms of their organisations’ overall growth over the next 12 months (%).

Respondents: Russia (101).

Figure 4. Russia is interesting mostly to CEOs in Western Europe (%).

Question: Which three countries, excluding the one in which you are based, do you consider most important for your organisation’s overall growth prospects over the next 12 months? (Answer – Russia)

Respondents: China (136), Western Europe (330), USA (103), globally (1,322).

27

24

23

15

13

10

8

7

7

6

China

USA

Germany

Kazakhstan

Ukraine

UK

Belarus

Brazil

India

Turkey

China

4

Western Europe

10

USA

3

6

Globally

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Political and business risks for companiesInstability in the national and global economy is now a common thing. The forecasts and expectations under such circumstances are not favourable. Could analysts and business people really have predicted the imposition of sanctions, the embargo in response and the plunge in oil prices down to their lowest point since 1999? There were no signs of radical degradation in various economies.

In the context of political instruments being used to put pressure on the economy, amidst fierce opposition of countries and the creation of political alliances, self-preservation has become the order of the day for business.

Globally there are 39% (as in the previous year) of those who are very confident about their companies’ prospects for revenue growth.

At the same time, few Russian top managers are very confident about their companies’ prospects for revenue growth over the next 12 months. Only 16% of CEOs in Russia shared this opinion. This is sharp contrast to the previous survey when top managers from Russia were usually the most optimistic of all. For instance, a year earlier 53% of CEO respondents from Russia were very confident about improvements in their companies’ revenue growth.

Globally 84% of CEO are somewhat confident and very confident about improvements in their companies’ revenue growth. Sixty-one percent of these respondents are from Russia.

Figure 6. Russian CEOs are most cautious of all in making forecasts about revenue growth over the next 12 months (%).

Question: How confident are you about your company’s prospects for revenue growth over the next 12 months?

Respondents: Russia (101), China (136), Western Europe (330), USA (103), globally (1322).

RussiaChina Western EuropeUSA Globally

Not confident at all and not very confident Somewhat confident and very confident

86

38

61

11

85

16

82

14 15

8486

16%of CEOs from Russia are very confident about increases in their companies’ revenue growth over the next 12 months

È37%


The majority of CEOs in Russia agree or agree strongly that the number of threats facing their businesses has increased. In Russia, 63% of the respondents agree with this statement.

Over-regulation (78%) and geopolitical uncertainty (72%) are the two factors that CEOs globally are most concerned about. Unsurprisingly, Geopolitical uncertainty is now threat No. 1 for Russian business people: 58% are very concerned about it while 27% of respondents are somewhat concerned about it.

Increasing tax burden ranks second (72%) in the list of concerns. Faced with the challenging economic environment, government faces difficult choices in how to support

business in generating growth.

Figure 7. Percentage of CEOs from Russia who are very confident in revenue growth over the next 12 months has slumped.

Respondents: Russia: 2008 (61), 2009 (30), 2010 (30), 2011 (60), 2012 (71), 2013 (47), 2014 (101). Globally: 2008 (1,150), 2009 (1.124), 2010 (1,198), 2011 (1,201), 2012 (1,258), 2013 (1,344), 2014 (1,322)

50%

21%

31%

48%

40%36%

39% 39%

80%

30%

53%

60%

48%

66%

53%

16%

2008 2009 2010 2011 2012 2013 2014. 2015

CEOs from Russia

CEOs globally

86%of CEO respondents from Russia are concerned about geopolitical uncertainty.

“The most important task is to alleviate the social tension in the large number of depressed regions of Russia… it is necessary to ensure that the population feels safe and comfortable. This is what awakens the entrepreneurial spirit, desire to work and a positive attitude".


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CEOs in Western Europe and the USA tend to be more concerned about the measures their governments are taking to decrease the debt burden and prevent fiscal deficit. And there is a reason for this: the foreign debt of the USA and European Union comes to almost USD 18 trillion and counts for more than 100% of GDP1.

Figure 8. When asked main political and economic threats, over-regulation and geopolitical uncertainty were the two factors CEOs globally were most concerned about. (%).

Respondents: Russia (101), China (136), Western Europe (330), USA (103), globally (1,322).

72

70

60

78

58

40

53

72

49

36

Geopolitical uncertainty

Increasing tax burden

Social instability

Over-regulation

Protectionist tendencies amongnational governments

Access to affordable capital

Inadequate basic infrastructure

Government responseto fiscal deficit and debt burden

High unemployment/ underemployment

Pandemics

86

72

69

64

57

57

53

51

34

16

CEOs globallyCEOs from Russia

#1

Globally

#1

in Russia

1 http://www.treasurydirect.gov/govt/reports/pd/mspd/2014/opds012014.pdf; http://svpressa.ru/economy/article/105164/?rss=1


Business risks related to a lack of talent are still cited by CEOs globally (73%) and by 78% of CEOs surveyed in Russia. A year earlier lack of personnel ranked first, concerning 63% and 85% of respondents in Russia and globally, respectively.

Russian business people are also concerned about a shift in consumer spending and behaviours (70%), as well as bribery (67%).

Figure 9. When asked about main business threats, Russian CEOs were mostly concerned about a lack of talent, shift in consumer behaviours, bribery and corruption..

Respondents: Russia (101).

78%

70%

67%

54%

53%50%

45%

43%

22%

Lack of qualified workforce

Shifts in consumer spending and behaviour

Bribery and corruption

Lack of trust in business

High or volatile energy costsSupply chain disruption

Cyber threats, including lack of data security

New market entrants

High or volatile energy costs

"Today almost all industries feel the lack of qualified workforce, especially engineers. That's why we have our own strategy – in colleges in regions, where we operate, we open PhosAgro courses for talented young people. After graduating from such colleges, they can continue their studies at top Russian industry-oriented universities. Then they easily find jobs in industrial companies, including PhosAgro".

Andrey Guryev CEO, Chairman of the Management Board, PhosAgro

78%of Russian CEOs are concerned about a lack of talent.

È7%

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Figure 10. According to CEOs globally, changes in industry regulation are going to have the most serious implications for sector legislation (%).

Question: How disruptive do you think the following trends will be for your industry over the next five years?


54

38

42

28

22

63

77

78

66

37

60

60

50

47

43

75

68

73

55

70

66

61

61

50

47

Changes in industry regulation

Changes in customer behaviour

Changes in distribution channels

Russia China Western Europe

USA Globally

Changes in core technologies of production or service provision (e.g. 3D-printing, mobile customer service)

Increase in number of significant direct and indirect competitors — traditional and new

The majority of respondents singled out (among other factors that may have grave consequences for business) changes in regulation of the industry where their businesses operate. Fifty-four percent of CEOs in Russia voiced concerns about such regulatory

changes. At the same time, CEOs in China are seriously concerned about the increase in the number of competitors (78%) and a shift in client behaviours (77%). Furthermore, CEOs in the USA mostly share the same concern about all of these issues.


Even though the concern about challenges is clear, the majority of CEOs globally still see more opportunities for their businesses, than three years ago. CEOs in China (71%) are the most optimistic about this, as China’s GDP growth, even if slowly, remained strong, falling only marginally in 2014 to 7,4%. Respondents in the USA are also increasingly positive about future GDP growth. However, only 38% of the respondents from Russia think that there are now more growth opportunities.

38%of the respondents from Russia think that there are now more growth opportunities.

Figure 11. There are more growth opportunities than there were three years ago (%).


7167

61

52

38

China USA Globally Western Europe

Russia

"There is a demographic gap in many industries... We can see that the labour market is growing with new personnel. The market has become more employer-oriented than employee-oriented".


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Cutting back and consolidating

The basic instincts of businessAgainst a background of geopolitical instability and slowing economic growth in 2014, the majority of CEOs globally (71%) plan to introduce initiatives for reining in expenses and cutting costs. In Russia, 75% of respondents indicated that they had such plans.

However, this is not a new trend in business. A year ago, 79% of CEOs surveyed in Russia (76% globally) told us that they are implementing initiatives to cut back on expenses. Last year 83% of CEOs in both Russia and globally noted the need to optimise costs.

At the same time, CEOs anticipate, that the next 12 months will be marked by various mergers and consolidations, both at the national and global levels.

Fifty-one percent of CEOs globally (and 24% in Russia) reported having entered into a new strategic alliance or joint venture, while 29% reported being involved in M&A activity at the national level (15% in Russia) and 27% (5% in Russia) at the international level.

Thirty-one percent of global CEOs surveyed (22% of Russian CEOs) intend to actively outsource business processes or functions.

Eighteen percent of Western European CEOs and 23% of American top executives are planning to dispose of a controlling stake in their company or exit a key market.

"In turbulent times, you tend to think back to what is known as the 'core', and focus on those things that really matter. That's why we intend to focus our work on the most important issues, and will definitely work toward improving our operational performance, through achieving greater efficiency for all elements, processes and employees of the business."

Alexey Marey CEO, Alfa-Bank

Figure 12. As in previous years, cutting costs is a No.1 priority for CEOs globally (%).

Question: Which, if any, of the following restructuring activities do you plan to initiate in the coming 12 months?

Respondents: Russia (101), China (136), Western Europe (330), USA (103), all countries (1,322).

24

60

49

44

51

22

32

35

30

31

15 5

28

23

54

29

10

34

39

27

75

59

75

65

71

8 3

12

14

15

14

7

18

23

13

8

7

10

8

Russia

China

Western Europe

USA

World total

Entering into a new strategic alliance or joint venture

Outsourcing a business process or function

Completing a domestic M&A deal

Completing a cross-broader M&A deal

Implementing a cost-reduction initiative

“Insourcing” a previously outsourced business process or function

Disposing of a majority stake in a business or exiting a key market

Winding down an existing strategic alliance or joint venture


HR policies in Russia differ from those in other countries. Fifty percent of CEOs globally plan to increase their headcount. However, in Russia only 28% of top executives surveyed have such plans. Forty-eight percent of CEOs in Russia told us that their headcount would remain unchanged, while 24% have plans to cut staff. Globally, 28% and 21%, respectively, of CEOs surveyed responded similarly.

It is interesting to note, however, that 57% of Chinese CEOs and 59% of American CEOs have plans to increase headcount.

Along with reducing costs, companies are looking for ways of boosting their earnings.

Business diversification will remain a source of competitors for the next three years. Fifty-six percent of global CEOs believe that many businesses will make serious attempt to compete in industries beyond their core sectors.

"In this situation, controlling expenses is something that all banks will be focused on, including ours. And, the tough macroeconomic climate has also given us the opportunity to improve the performance and operational productivity of each employee."


"In difficult times of uncertainty, we start looking to tap into our organisation's internal reserves and seek to enhance our performance. This will be our main priority over the next couple of years."

Sergey Monin Chairman of the Management Board, Raiffeisenbank

Figure 13. Meanwhile, in Russia only 28% of CEOs are planning to increase staff numbers (%).

Question: Do you expect headcount in your company to increase, decrease or stay the same over the next 12 months?

Respondents: Russia 47 (2014), 101 (2015).

Decrease in headcount

Headcount will stay the same

Increase in headcount

2014 2015

28 24

4834

36 28

"In times of uncertainty, your focus tends to shift to simply working more efficiently. We also give particular attention to diversification. This is a general rule of thumb, but one that becomes especially relevant in difficult times."

Sergey Monin Chairman of the Management Board, Raiffeisenbank

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58%of Russian CEOs belive that competition will be tougher.

A large number of those surveyed are expecting new competitors to appear from the Technology (32%), Wholesale and Retail (19%), and Communications and Media (16%) sectors, as well as from Consulting Services, including financial sector and real estate companies (13%).

"My company decided that, in addition to the meat processing sector, it could integrate further. So, if previously we had invested just a bit in agriculture, this year we've decided to integrate even further and are now investing rather large amounts in the agriculture sector. What drives us is the overall market landscape and, of course, common sense."


"If we're talking about the market for mobile payment systems, we've certainly learned a lot about such markets and their related segments in the past few years."

Alexey Marey CEO, Alfa-Bank

"Business diversification has always been a factor, both for strong, established market players and those that are still catching up. But, history shows that not all market entries are a success... we're always looking for new opportunities to enter new markets, both within the product industry and geographically, but for now the company has been focusing on its current markets."

Alexander Eliseev Co-founder, Non-Executive Director, Globaltrans Investment PLC


"In partnership programmes, there are many components related to communications; for example, knowledge and experience sharing... In many cases, this can be compared to a 'marriage' between two brands. Not always, but sometimes it is a partnership based on the 'our services under your brand' model. In many cases, one brand in alliance with another produce a bigger effect than two separate brands in terms of their attractiveness to clients and the level of client trust, which is also quite important for Russia in the current environment. Therefore, partnership offers numerous opportunities."

Oliver Hughes CEO, Tinkoff Bank

"In our industry correct using of the fertilisers is when manufacturers can maximise their value and simultaneously the environment is taken care of. That's why we get into partnerships with leading Russian and international scientists that develop new technologies that apply to so called green chemistry. In partnership with UNESCO we implement a project entitled "Green chemistry for life", which supports young chemists. The aim of our partnership with UNESCO is to enhance the prestige of scientific activities aimed at better life quality for people and developing of new ecological technologies for chemical fertilisers manufacturing".


Figure 14. Recently, a lot of companies have successfully entered new markets (%).


29

32

Russia

2223

China

30

20

Western Europe

36

25

USA

33

21

Globally

Yes, we have entered a new industry

No, our company has not entered a new industry, but is considering such opportunities

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Administrative resources

Government efficiencyCEOs globally think that governments should concentrate on ensuring a robust and competitive tax system (67%) and training skilled staff (60%).

In contrast to their foreign counterparts, respondents in Russia (50%) also mentioned “access to affordable capital” among government priorities, perhaps reflecting the greater role of State bank in the country. In the USA and Western Europe, only 20% and 27%, respectively, of the respondents checked this point.

However, CEOs in Russia are satisfied with the digital infrastructure in the country. Only 10% of them believe that the government should pay more attention to digital infrastructure and 38% of those surveyed said that the government has been “effective” or “greatly effective” in achieving these objectives.

As a comparison, 41% respondents in Western Europe and 28% globally believe that this should be a priority area for the government.

Fifty-six percent of CEOs in the USA mentioned that physical infrastructure development should be their government’s priority

"We understand that the Russian eduction system is failing to respond to the various realities of today's economy, and postgraduates need additional training."

Alexander Eliseev Co-founder , Non-Executive Director, Globaltrans Investment PLC

38%of Russian CEOs stated that the government is efficient in addressing digital infrastructure development.

50%Russian CEOs believe that one of the government’s priority should be “Providing access to affordable capital.”

Figure 15. Efficient tax system, physical infrastructure, access to affordable capital and skilled staff are the things that Russian CEOs expect from the government (%).

Question: “Which three areas should be government priorities in the country where you are based?”


77

53

50

49

10

An internationally competitive and efficient tax system

Adequate physical infrastructure

Access to affordable capital

A skilled and adaptable workforce

Adequate digital infrastructure


Russian top managers state that government is efficient in developing digital infrastructure (38%) and ensuring good health and well-being of the workforce (19%). Meanwhile, 49% of West European and 37% CEOs in the USA believe that good health policies are effective.

Sixty percent of American CEOs believe in the effectiveness of the government’s policies related to access to affordable capital while 57% of CEOs in China are satisfied with the efficiency of physical infrastructure development.

It is interesting to note that Chinese CEOs showed a certain reticence, when asked to assess the government’s effectiveness in a certain area, 18% – 32% of them preferred not to answer or said “do not know.” Globally, only 6% of the respondents answered this way.

When CEOs answered questions related to whether they are seeing changes in international policies and regulations, top managers in Russia said that cooperation among governments and businesses is increasing cross-border data flows (73%).

They also mentioned that improved regulatory coordination has increased cross-border capital flows (63%) and that governments are increasingly implementing more competitive tax policies, which have an influence on organisations’ decisions on where to operate (60%).

Figure 16. Effectiveness of the government in the opinion of CEOs from different countries (%).


Russia China Western Europe

USA Global

Adequate digital infrastructure 38 44 35 44 35

Access to affordable capital 9 33 33 60 34

Adequate physical infrastructure 13 57 36 27 33

Good health and well-being of the workforce 19 24 49 37 32

A skilled and adaptable workforce 12 28 26 17 21

Efficient tax system 17 20 20 8 20

Reduced risks of climate change 10 12 24 7 13

Developing an innovation ecosystem 13 21 12 17 12

"As for Russia, we think that the negative impact of the factors that led to a slowdown in growth in 2014 will diminish. Also, conditions for improved investment climate and the creation of a more comfortable environment for doing business can compensate for both negative geopolitical barriers to growth and the overall slowdown in the Russian economy. Just as before, private companies are continuing to make solid investments and many new manufacturing projects are going forward. At the same time, strategic development programmes for major state-owned companies are being scaled down somewhat given the need to use available resources more efficiently. I think this is only natural."

Alexey Repik Chairman of the Board of Directors, “R-Pharm” CJSC

PwC24

Survey methodology and contact informationIn your hands is the 18th edition of PwC’s Annual Global CEO Survey.

This year we interviewed 2,345 CEOs from 60 countries. Fifty-six percent of our respondents participated in our on-line survey, 28% in teleconferences and 13% answered by mail.

Figure 17. Background of the survey’s participants.

5

27

43

13

7

1

23

47

21

6

3

20-29

30-39

40-49

50-59

60-64

65+

Age, %

Ownership structure, %

Gender, %

14 86 937

4354

2079 Listed on at leastone stock exchange

Privately owned

Россия Все страны

GlobalRussia


The latest issue of the global survey includes answers from 1,322 CEOs. The number of representatives of a country was calculated based on its size and GDP. Based on theat methodology, only 40 responses from Russia were included into the global report. However, this Russian edition of the survey comprises answers from all 101 respondents from Russia in order to make sure we have the most comprehensive results at a territorial level.

The confidentiality of all responses was ensured during the preparation of this report.

For the purposes of getting fullest picture possible for each country, we selected respondents from variety of sectors.

We also carried out 10 in-depth interviews with CEOs of companies operating in Russia. You may find their quotes provided in this report and more detailed excerpts and video clips at this website: www.pwc.ru/ceosurvey/18.

Meet the CEOs

Alexander EliseevCo-founder, Non-Executive Director, Globaltrans Investment PLC

Alexey MareyChief Executive Officer, Alfa Bank

Alexey RepikChairman of the Board, “R-Pharm” CJSC


Andrey VarichevCEO, Management Company METALLOINVEST LLC

Artem KonstandyanChairman of Management Board, Promsvyazbank

Oliver HughesCEO, Tinkoff Bank

Sergey MoninChairman of the Board,Raiffeisenbank

Sergey VlasovChairman of the Management Board, Public Joint-Stock Orient Express Bank

Vadim DymovFounder and Chairman of the Board of Directors, Dymov company

26

Please contact us for a more detailed discussion of the matters covered in the report that may be relevant for CEOs globally and in Russia:

To discuss the contents and methodology of this survey, please contact:

David GrayManaging Partner, PwC Russia +7 (495) [email protected]

Ksenia SmolyaninovaProject Head in Russia+7 (495) 223-5040 [email protected]

Anna ShepelevaHead of Research+7 (495) [email protected]

Media enquiries should be addressed to:

Anna Gorbacheva PR Specialist+7 (495) [email protected]

Vadim KhrapounPwC Russia, Advisory Leader+7 (495) [email protected]

PwC Russia (www.pwc.ru) provides industry-focused assurance, tax, legal and business consulting services. Over 2,600 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Novosibirsk, Rostov-on-Don, Krasnodar, Voronezh, Yuzhno-Sakhalinsk and Vladikavkaz share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. The global network of PwC firms brings together more than 195,000 people in 157 countries.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2015 OOO PricewaterhouseCoopers Advisory. All rights reserved.

www.pwc.ru/ceosurvey/18

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