EY: CEO confidence in artificial intelligence tempered by social, ethical, and security risks

CEOs globally are embracing opportunities created by AI, but also remain wary of unknown, unintended consequences, according to the latest EY CEO Outlook Pulse survey findings. Nearly two-thirds (65%) of CEOs agree that AI is a force for good; however, a near equal proportion say more work is needed to address social, ethical, and security risks – from cyberattacks to disinformation and deepfakes.

The survey of 1,200 global CEOs, which provides insights on AI, capital allocation, investment, sustainability, and transformation strategies, found that 66% 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.

However, while CEOs embrace the potential upsides AI can bring for business and society, they are cognizant of the risks of emerging technology. Two-thirds (67%) of CEOs said that the business community needs to focus on the ethical implications of AI, while almost the same proportion (64%) 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 (88%) are integrating AI into their capital allocation, of which, 43% are actively investing in the technology, while the other 45% said they are planning to make significant investments in AI in the next 12 months.

In Romania, 43% of the CEOs believe that AI is a force for good – driving business efficiency and therefore creating positive outcomes for all, such as innovations in healthcare treatments.

When they were asked about the impact of AI replacing humans in the workforce will be counter-balanced by the new roles and career opportunities that the technology creates, 40% somewhat agree with this statement.

“The confidence of business leaders in artificial intelligence is essential for the development of the field. This is a premise for adopting and implementing AI-based solutions within organizations to improve efficiency, optimize processes and drive innovation. The use of AI can bring significant benefits to companies. The ability of AI to process and analyze large amounts of data in real-time can lead to better-informed decisions and improved organizational performance. Nonetheless, the social and ethical implications of the widespread adoption of AI are critical, requiring responsible and equitable approaches to the use of artificial intelligence in business. Security is also a critical concern in the implementation of AI. The ability of AI systems to learn and adapt behaviors can expose organizations to potential vulnerabilities, which is why investment in cybersecurity becomes essential to protect companies’ data and operations,” said Bogdan Ion, Country Managing Partner EY Romania & Moldova and Chief Operating Officer for EY South-East & Central Europe and Central Asia (CESA).

Economic instability remains; sustainability initiatives at a crossroads

Despite ongoing macroeconomic volatility, CEOs are cautiously more optimistic regarding a global economic downturn than at the start of 2023, as only 33% of CEOs expect a severe temporary or persistent downturn, compared to 50% in January. But CEOs remain split on whether they are more optimistic (47%) or less optimistic (36%) about the outlook for their own company’s financial performance than they were six months ago.

The harsh realities of today’s low-growth, high-inflation and rising interest rate environment has compelled many CEOs to focus more sharply on near-term performance, particularly at the expense of sustainability goals.

Today, just 38% of CEOs stated that they would prioritize sustainability issues when making capital allocations decisions. This is in contrast to the CEO Outlook of January 2022, when 83% of CEOs said that sustainability and ESG issues would be an important driver of growth in the near-to-mid-term.

Half of the Romanian CEOs (50%) believe that at global stage will be a moderate and persistent downturn, 26,7% think that the global economy will face a severe and temporary downturn, 16,7% tend to believe that there will be a moderate and temporary downturn and only 6,7% thinks the global economic system will be challenge by a severe and persistent downturn.

At the local level, the Romanian market will face a moderate and temporary downturn according to 36.7% of respondents. 30% believe that there will be a moderate and persistent downturn, 26.7% think that the challenge will mean a severe and temporary downturn and only 6.7% think that the local market in Romania will be affected in a severe and persistent way.

Geopolitical conflicts and trade tensions will affect business performance significantly according to 40% of Romanian respondents, while 23.3% believe it will have a very significant and moderate impact, and only 13.3% believe the impact will be minimal.

When asked how they see the next 12 months compared to the beginning of 2023 in terms of financial performance, half of the Romanian CEOs (50%) are now less optimistic than they were at the beginning of this year.

In terms of prioritizing sustainability, the recorded answers for Romania were the same for those who prioritize sustainability initiatives and allocate a significant portion of their capital towards them – 30% and those who stated that sustainability initiatives are at the forefront of their capital allocation strategy and dedicate substantial resources to support them.

M&A to rebound into 2024

Dealmaking remains a priority for CEOs. Nearly all (98%) of CEOs expect to actively pursue a strategic transaction in the next 12 months (up from 89% in January 2023), with 59% looking to M&A, 47% looking to divest, and 63% looking to enter strategic alliances or joint ventures. The appetite to acquire 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 will likely temper many of these plans.

Improving technology capabilities and innovation is a primary driver of M&A, with 16% of respondents stating that this is a primary investment goal. Furthermore, CEOs are incorporating AI in M&A strategies – leveraging these technologies in their deal sourcing and processing. Seventy-one percent are incorporating AI into the transaction process, either significantly or through pilot programs. Only a tiny cohort (5%) have no plans to use AI – and they risk being outmaneuvered by the competition.

In Romania, 56.7% said they would not stop an already planned investment in the next 6 months, while 43.3% would cancel plans for future investments in the next half year. 63.3% believe that due to the uncertainty created by the current political situation, there will be reconfigurations of supply chains in the next 6 months, while 36.7% said there will be no change.

Globally, companies tend to postpone investments already planned in the next 6 months (40%). 60% of the respondents believe that there will be no postponement of investment projects in Romania in the next 6 months. The percentage of investment postponements is similar to the global one, i.e., 40%.

From the M&A perspective, 90% of the respondents in Romania believe they will pursue these types of transactions in the following months, 83% believe there will be divestments / spin-offs / initial public offerings (IPOs) and joint ventures or strategic alliances with third parties.

A solid majority of the Romanian respondents – 76,7% – stated that they have already fully integrated AI-driven product/service changes into their capital allocation process and are actively investing in AI-driven innovation.

20% of the local respondents mentioned that they have not made significant capital investments to date but plan to do this in the next 12 months, while 3,3% answered that they do not plan any significant capital investment into AI-driven product/service innovation.

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