Gulf CEOs see need to restructure in a volatile market

Businesses across the region are expected to see an increasing need to transform or restructure

by

Issac John

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Published: Sun 28 May 2023, 8:36 PM

Almost 90 per cent of Gulf CEOs expect an increase in distressed businesses in 2023-2024 and anticipate a period of under-performance leading to increased liabilities and cash constraints.

According to a regional business trends survey conducted by Alvarez & Marsal, businesses across the region are expected to see an increasing need to transform or restructure in a volatile market.


The vast majority or 89 per cent of respondents expect an increase in businesses experiencing distress in 2023-2024 and see a need for specialist intervention in critical areas including liquidity management, cost reduction, capital efficiency and margin optimization.

Alvarez & Marsal survey shows that 75 per cent of respondents expect economic growth to slow or reverse, with the greatest issues expected to face businesses including cost of capital, inflation, market volatility, weakening demand and changes in tax and regulation.


Businesses across the GCC are expected to see an increasing need to transform or restructure in a volatile market. Ongoing macro-economic headwinds mean that respondents expect businesses across many sectors to experience a period of under-performance leading to increased liabilities and cash constraints.

Paul Gilbert, managing director, and co-head of Alvarez & Marsal in the Middle East, said while a number of economies and sectors across the Middle East are bucking the trend, it is clear that respondents consider other sectors to experience further under-performance and liquidity pressures in the face of global economic headwinds. “With rising interest rates and inflation, many struggling businesses are seeking short-term solutions to their debt burden. Unless the underlying operational business issues are also fixed, then too often a ‘restructured’ business will find itself in distress again further down the line.

On the contrary, a Gartner global survey shows that more than half of CEOs believe that an impending economic downturn or recession in 2023 will be shallow and short. The survey showed only a modest rise in cash flow, capital and fundraising concerns.

Despite the impact of these economic headwinds, half of CEOs cited growth as the top strategic business priority for the next two years. Technology also remains a top focus area for CEOs, closely followed by workforce’s issues.

The Gartner survey revealed that artificial intelligence (AI) was the top technology that CEOs believe will significantly impact their industry over the next three years.

“Generative AI will profoundly impact business and operating models,” said Mark Raskino, VP analyst at Gartner. “However, fear of missing out is a powerful driver of technology markets. AI is reaching the tipping point where CEOs who are not yet invested become concerned that they are missing something competitively important.”

“After three years of volatility, CEO priorities are stabilizing,” said Raskino. “Executive leaders are looking past the aftershocks of the omnic crisis period to a time when talent, sustainability and next-level digital change will be the levers of competitive performance.”

The 2023 Gartner CEO and Senior Business Executive Survey, which was conducted among over 400 CEOs and other senior business executives in the Middle East, North America, Europe, Asia/Pacific, Latin America, and South Africa across different industries, showed that sustainability ranked among CEOs’ top 10 priorities. Gartner predicts that by 2026, environmental sustainability will be a higher CEO strategic business priority than the technology-related category.

Inflation was ranked as the most damaging business risk by 22 per cent of CEOs, and nearly a quarter cited greater price sensitivity as the biggest shift in customer expectations they anticipate this year. However, increasing prices is still the top action that CEOs are taking in response to inflation per cent) and productivity, efficiency and automation (21 per cent).

When asked about the impact of various risks on the business, 26 per cent of CEOs in the Gartner survey cited the talent shortage as the most damaging risk for their organization. Attracting and retaining talent is, by far, CEOs’ top workforce priority.



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