The view of the river Liffey from Enda McDonagh’s corner office in Dublin on a bright sunlit morning is stunning. It is framed on the right side by the arc of the curved glass of the Convention Centre and in the background to the left the cantilever span of the Samuel Beckett Bridge. 

Dotted around his office are sporting memorabilia reflecting his love of the GAA, soccer, and American sports from his time working for PwC in Boston in the early noughties. There is a Limerick GAA jersey too, a gift from the firm’s Limerick office, as well as tombstones of various deals McDonagh worked on since joining PwC in 1994. 

“I’m a big lover of sport,” McDonagh admits. “My biggest love growing up was GAA, and I’m a big Dublin GAA fan. I’m also a Manchester United season ticket holder and that’s definitely for my sins these days,” he laughs. “I spent three very happy years in the States so I’m interested in American football, basketball, and baseball.”

McDonagh is acutely aware of PwC’s legacy in Ireland dating back to the mid-1800s, and the brass nameplate of the business from when it was called Craig, Gardner & Co and based at 40-41 Dame Street is also in his office. McDonagh has been managing partner of PwC Ireland since July 2023 and a partner with the firm since 2006. 

He has seen up close the financial crisis, the recession, recovery, the pandemic, and now the reality of climate transition and disruptive new forces like Artificial Intelligence and Cybercrime. The pace of change is increasing for business leaders, and staying relevant is an ever-greater challenge. 

Boardroom belief that inflation is being dealt with

I am meeting McDonagh to discuss the PwC 2024 Irish CEO Survey. It captures the views of 121 Irish CEOs in late 2023 as part of the 27th PwC Global CEO survey of 4,702 leaders in 105 countries. Before we drill down into the findings, McDonagh gives an overview of the outlook for the economy that is both optimistic but with a note of caution.

“Irish CEOs feel reasonably good and optimistic about 2024,” McDonagh said. “Half of Irish leaders expect economic growth will improve over the next 12 months, up from 33 per cent in 2023, but still more cautious than the all-time high of 92 per cent in 2015. 

“When you look at the short to medium window of three years in terms of revenue growth, that optimism significantly increases again,” he added. “I think what we’re seeing there is a belief around the boardroom that inflation is being dealt with structurally.”  

“The interest rate curve is starting to turn, probably a little slower than companies might have liked, but it is a signal that economies are getting going again and allowing businesses to do some of the things they want to do strategically to grow such as collaborations or acquisitions.”

But that said, concerns remain, McDonagh said, with 36 per cent of Irish CEOs believing that Irish economic growth will decline this year. 

Broad optimism about the Irish economy

Despite the broad optimism about the Irish economy, nearly one in three or 28 per cent of Irish CEOs said they do not believe that their current businesses will be viable in a decade if they are not prepared to change. This is significantly up from 21 per cent the previous year, but behind global leaders at 45 per cent.

“Strategy cycles are becoming shorter and shorter,” McDonagh said. “The old adage of a four-year plan just doesn’t ring true anymore.” He pointed out that CEOs were concerned about disruptive mega-trends like generative AI and climate transition. 

“While 94 per cent of Irish CEOs are confident about their own company’s prospects for revenue growth over the next three years,” he said “just half of these are extremely confident, likely reflecting the external uncertainties and disruption they need to manage.    

“For CEOs there is unprecedented change coming at them. Whether it is ESG, AI, or other technology, there is a struggle in being a chief executive who can see short–term opportunities to grow their businesses while creating space to think about where it is going to be in ten years time. 

“In an uncertain world, securing the longevity of their businesses has never been more challenging for CEOs,” he reflected. “The challenges facing them continue to grow more complex.”

“In the context of this complexity and increasing pace of change, more and more business leaders are acknowledging the need to reinvent their business for sustained success.”

“To be successful for the long-term, CEOs need to make decisions now on their strategic agenda to set their businesses up for the future,” McDonagh said. “A big theme of this survey is the need to reinvent business models. I think Irish businesses have been on this journey for a while, but I think what’s happening now is that it’s an accelerating play. There is a realisation that if you don’t actually deal with it, then the cliff is in sight in a way that maybe it hasn’t been before.”  

“Continuous reinvention of business models will be a new norm for CEOs,” McDonagh predicted. “There is a high degree of CEO uncertainty ahead, but CEOs are taking action.” 

Leaders face the challenge of AI

One of the biggest challenges facing leaders is figuring out how to respond to Artificial Intelligence.

The majority of Irish CEOs, 63 per cent, see Generative AI as a catalyst for reinvention that will power efficiency, innovation, and transformational change but not to the same extent as global peers, 70 per cent of whom believe the same thing.

Irish CEOs are more concerned about the risks associated with GenAI than their global peers with 76 per cent of them expecting it to increase cybersecurity risks, and 62 per cent expecting it to lead to more disinformation. Six out of ten Irish CEOs believe that GenAI will increase competition in their industry as firms battle to figure out the best use cases. 

“There is an underlying belief among CEOs that AI represents an opportunity to address organisational inefficiency,” McDonagh said. “They understand it is a catalytic opportunity but in the same breath it’s not always immediately obvious how they do that.” 

PwC has invested in its Gen AI Business Centre in partnership with Microsoft to help its clients respond to this mega-trend. 

“We want to bring CEOs in and take them from the theory of GenAI to the practical,” McDonagh said. “We ask CEOs before they come in to identify inefficiencies in their own organisation then turn that into a dialogue about what AI tools exist today that might solve that problem.” 

“When we bring people in, one of the things we absolutely insist on doing is giving them the tools to see AI in action as there is no substitute for a real-life example,” McDonagh said. “CEOs and the C-suite do not need to be the architects of AI but they do need to understand its potential and how to appoint the talent within their own organisations to deal with it or bring it in from the outside.” 

“AI upskilling is something that PwC is helping clients with,” he added. “We’re upskilling ourselves too as for us to be credible in the market talking to any company about AI, it can’t be an abstract conversation. We’re taking our partners and all our professional staff through a level of digital and AI upskilling to make sure that they are familiar with what the tools are that are out there and what their capabilities are.”

Every CEO is looking for an AI advantage

PwC has also helped companies to look at governance and risks around using AI tools to ensure the best outcomes. “These discussions can generate a lot more questions than answers,” McDonagh said. “Nobody has figured this all out yet, but every CEO is looking to get an edge and move ahead of their competitors.” 

McDonagh said PwC is committed to further investment in AI to prepare itself and its clients to be able to respond to this disruption.

“When I ran for election as managing partner here in December 2022,” he explained, “Generative AI didn’t feature. There was a lot of talk about technology and what we were going to invest in but GenAI wasn’t on the radar.” 

A month later as ChatGPT rocketed in popularity from its launch the previous month it was obvious the world had changed. “It just exploded,” McDonagh said. “So why are CEOs saying it’s so much more challenging? It’s because of the very pace of change”.

This can be seen too among findings from Irish CEOs who feel that their company is exposed to geopolitical conflict. It is high at 81 per cent but has fallen from 93 per cent last year. The survey was however completed late last year before the escalation of conflict in the Middle East.

Climate change is going to change business models

Enda McDonagh said two other big themes of this year’s survey were climate transition and regulation. “As much as 87 per cent of the Irish CEOs surveyed expect climate change is going to shift the way they do business and how they deliver value over the next three years,” he said. “It is being driven by shifting consumer behaviours and that feeds back into the supply chain and how businesses organise themselves.” 

The other driver McDonagh said was regulation. “Obviously, the EU is very active and to the fore on regulation and it’s forcing companies to reimagine how they actually go end-to-end in the value chain of their business in a way that’s sustainable and supports both a company’s own climate goals and the commitments that we all need to make as a society,” McDonagh said.  

“The other statistic I found really interesting was that 40 per cent of Irish CEOs seem to recognise that there’s almost an intrinsic need to accept that reaching climate goals might require lower rates of return on investment.” This was almost the same as their international peers who came in at 41 per cent globally on this metric,” he said.

“To me, that’s a really interesting indicator that absolutely says that CEOs are getting it,” McDonagh said. “We may not get the same rates of return, at least not initially, but if we don’t pivot and be seen as a climate-friendly business or organisation, our long-term value as a business is going to be impacted negatively”.

“And that goes back to the viability of your business model. There are pretty profound impacts of climate transition, depending on which sector you’re in. There are sectors where that’s an easier thing to tackle and digest and then there are some sectors for which it’s pretty fundamental.”

Deals that would have happened just didn’t

Four out of ten (41 per cent) Irish CEOs reported that their organisation intends to make at least one acquisition in the next three years. “I think there’s a degree of pent-up M&A in the system,” McDonagh said. “A lot of companies have built up capital over the last number of years that they haven’t been able to deploy because the return on investment with high interest rates doesn’t make sense.” Companies had reined in M&A due to the uncertainty of rising interest rates. “I think there is a lot of deferred M&A,” he said. “Deals that would otherwise have happened just didn’t.” 

According to McDonagh, a theme coming out of the survey and from PwC’s own experience is that adapting to the rate of change could require acquisitions or partnerships. “The idea of trying to build everything yourself and innovate every solution isn’t always going to be possible,” he said. “If you think about some of the challenges around climate or AI there is a lot of logic from a business perspective in thinking about going to market together, like we have with Microsoft on AI, or acquiring the technology and skills that are needed.”

Seventy–five per cent of Irish CEOs said that a lack of skills is a barrier to their organisation’s innovation and growth. “Acquiring other businesses with a different competency level to their own is another way to accelerate,” he said. “I think both those coming together explain why that indicator is as high as it is.”

Eighty-eight per cent of CEOs cite a concern about regulation as a challenge to business. “It is very high,” McDonagh said. “On climate, the EU has gone for the highest regulatory framework of any major jurisdiction. The cost of compliance is high. So if you’re a CEO, you’re trying to think about the value chain, your business, and how to remodel it.” 

Leaders committed to meeting regulatory requirements

The EU AI directive is coming into force, he said, meaning that there is another source of regulation especially in financial services. “It feels that for CEOs there is an awful lot happening on the regulatory side,” McDonagh said. However, leaders are committed to meeting regulatory requirements and investors expect it. 

“Investors want to know where companies are on climate and how they are embracing AI,” McDonagh said. “It feels like a lot is colliding at the same time which is contributing to that sense of pace and urgency.”

“This goes back to the start of our conversation. There is a real concern among CEOs over where their business will be in five, ten years time if they don’t get decisions right today,” McDonagh said. “You can be the most profitable organisation in the world today but where is that going to leave you from a value perspective in the long term.”

“CEOs have choices to make. How do you get that right? How do you bring shareholders and other stakeholders with you? How do you comply with regulations, and drive the changes that you know you need to do in your business?”

“You have to bring your people also,” McDonagh said. “The CEO and the C-suite aren’t enough. You have to bring your organisation with you.” McDonagh predicted that this would become a more dominant theme in future surveys. “GenAI will ultimately lead to requiring workforces to change and people to acquire new skills, it’s not really a big thing in our survey this year, because GenAI is at such an early stage, but I think if we were having this conversation in a couple of years, the future of work will become a very interesting theme that will develop.”

McDonagh said studying the results of the survey also made him think about PwC and how it stays in front. “If you think of our business in its simplest sense,” McDonagh explained. “We only exist to the extent that we’re relevant to the market which we serve.” 

“We spend a lot of time thinking about what we do in PwC to set ourselves up to support our clients,” he said. “We want to provide trusted solutions that deliver sustained outcomes and drive value for our clients. For all the short-to-medium term positivity about the economic outlook, there are huge changes coming for business. This is a call to action moment.”

This article is partner content and has been produced in association with PwC.