EY Romania survey: 90% of Romanian business leaders say geopolitical challenges drive adjustments in strategic investments

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Developing and implementing a strategy that optimizes value for all stakeholders has never been more challenging. Under the pressure of the pandemic and the economic tensions generated by the crisis in Europe, Romania’s chief executive officers (CEOs) must find ways to keep their companies in balance, from reshaping portfolios to redefining their organization’s entire ecosystem. How are companies reacting to this context and what steps are leaders taking to ensure future company growth, business sustainability and long-term value creation?

Exogenous risks, such as geopolitical tensions, have been the main concern of CEOs of large companies in Romania (20%) since before the war in Ukraine, according to the new edition of the EY CEO Imperative Series – EY 2022 CEO Outlook Survey. 90% of leaders surveyed say geopolitical tensions are causing them to adjust strategic investments. The pressures felt by local executives put them at odds with global trends – with only 55% of executives indicating they intend to adjust their strategic investments.

Moreover, 59% of local respondents say they have postponed a planned cross-border investment until further clarification, 22% have stopped a planned cross-border investment in the last 12 months, while 19%, on the contrary, say they have accelerated cross-border investments. Investment in the UK has been most affected by geopolitical challenges, according to 29% of respondents locally and 22% globally.

CEOs will need to look at risk in a different way and be prepared to accept and manage higher levels than they would have been comfortable with in the past.

“Companies are resetting their risk identification systems to take account of new realities. Leaders of organizations are analyzing the impact of these interconnected issues and building, step by step, a flexible and highly adaptive strategy for a future that looks more dynamic, where agility, resilience and increased risk-taking will be essential to capitalize on new opportunities”, explains Bogdan Ion, Country Managing Partner, EY Romania and Moldova and Chief Operating Officer for EY Central and Southeast Europe and Central Asia Region.

As the events of the last two years have demonstrated how security of supply can be a competitive advantage, local leaders are reconfiguring their supply chains to reduce costs and minimize uncertainty. For example, 46% of local executives say they have adjusted their supply chains to manage geopolitical risks, 32% have increased the number of suppliers to increase resilience, 16% have adjusted their supply chains to reduce logistics costs and uncertainty, while 5% have reduced the number of suppliers to improve critical supply relationships. These results were recorded before the outbreak of the conflict at our border, implying the possibility of further adjustments planned or already underway.

More than half of respondents (54%) will priorities investment in existing businesses and digital transformation, according to companies surveyed in Romania. However, local leaders’ investment plans could be derailed by external risks to their businesses. Most executives surveyed appear concerned about rising prices and identify trade tensions and sanctions (20%), the impact of climate change (19%) and managing conflicting demands from different stakeholder groups (17%) as critical risks to their future business growth.

The pandemic was a wake-up call for many respondents, and the imperative for transformation is now clearer than ever. Many leaders are actively reconfiguring their companies to be resilient, and mergers and acquisitions are still on the agenda for boards.

42% of Romanian business leaders said they were looking to pursue mergers and acquisitions in the next 12 months, compared to 59% globally. 85% of local respondents said they had made the decision to cancel an acquisition in the past year due to the pandemic, compared to 44% of respondents globally. At the same time, 40% of respondents in Romania believe that environmental, social and governance (ESG) ratings are important for attracting investors, and mergers and acquisitions are a keyway to increase ESG scores.

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