In today’s increasingly challenging and complex business environment CEOs need to be able to demonstrate clarity in their investment decisions. They need to achieve the best outcomes with scarce resources and compare competing requirements from very different sectors of the organization, all while taking account of regulatory demands and customer impact.
Such choices are tougher than ever before. The imperative for every CEO is to get better at making the right investment calls, and quickly!
The investment challenge
Without sufficient investment, businesses slowly stagnate and die. But making the right investment decision is no simple matter. Increased risks due to inflation, supply chain disruptions, and the war in Ukraine, as well as changing consumer behavior in part the result of COVID-19, require responses that involve substantial capital inputs.
In this very challenging business context, capital expenditure during the first quarter of 2022 surged 19% compared with the same period in the previous year, according to a recent Bank of America report. The largest increase, of 47% year-on-year was in the industrial sector, followed by the energy sector with 42% and the financial sector at 35%. These investments are being made in economic conditions with the highest rates of inflation in several decades and the looming threat of global recession.
CEOs are paid for their ability to make the right choices. With market conditions tightening, it is imperative that they demonstrate the rationale for their decisions. And it is not only shareholders who are interested in a company’s investments. Regulators assess their probable impact on environmental, social, and corporate governance (ESG) and the broader economy, and employees scrutinize how they are likely to benefit from the new opportunities.