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PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyPwC Pulse 2010BusinessPost crisis business Role of government Climate change Business readinessbarometerchallengesindexWhat CEOs are saying...PricewaterhouseCoopers Pulse 2010 1

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyContentsSection 1 Introduction 03Section 2 CEO Confidence 04Section 3 Business Performance 06Section 4 Foreign Direct Investment 07Section 5 CEO Priorities 09Section 6 People Management 11Section 7 Sustainability/Climate Change 12Section 8 Actions for Government 14Section 9 Survey Methodology 15PricewaterhouseCoopers Pulse 2010 2

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologySome glimmers ofconfidence returningCautious optimism isthe single key highlightemerging from the PwC2010 CEO Pulse survey.The survey shows thatconfidence is returning.Nearly a third (29%) ofIrish business leadersare favourable aboutthe outlook for the Irisheconomy comparedto just 3% last year.However, another third(31%) are unfavourableabout the future outlook,demonstrating continuinguncertainty in a difficultoperating environmentfor some. 40% see nochange in the economyover the next 12 months.“One in five expect Ireland's economy toreturn to growth this year, while half expectthis recovering in 2011.”Chart 1:Favourable outlook trends for the Irish economy2007 - 201080%Chart 2:Outlook for the Irish economy for the next 12 monthsChart 3:When will the Irish economy return to growth?60%40%20%0%PricewaterhouseCoopers Pulse 2010 4

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyCosts and finance stilltop of mindFollowing significantcost-cutting andrestructuring over thelast year, continuingto keep a check oncosts and access toavailable finance aretop-of-mind for economicrecovery. For example,Irish CEOs feel thatthe top three factorscritical for Ireland’seconomic recoveryare reinstatement oflost competitiveness(68%), improvement inthe flow of credit (61%)and developing andcommunicating a clearrecovery plan (57%) forthe country. While muchwork has been done andpain has been taken inthese areas, the surveysuggests more needs tobe done.Other areas that needtackling are repositioningIreland as a location-ofchoicefor foreign directinvestment; nurturingand incentivising ourindigenous exportingindustry and up-skillingour workforce.“Competitiveness and availability offunding are critical for Ireland's recovery”Chart 4:Factors critical for Ireland’s economic recovery0% 10% 20% 30% 40% 50% 60% 70% 80%PricewaterhouseCoopers Pulse 2010 5

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyIrish CEOs morepositive about revenueand profit growthWith over three-quartersof CEOs last yearindicating they wereplanning cost reviewsand restructuring of theiroperations by the end of2009, business leadersindicated a clear intentionto tackle the challengesof the economic crisishead-on. This decisiveaction has paid off. Irishbusiness leaders now feelmore confident whererevenue and net profitgrowth are concerned.For example, over halfof survey participantsexpect revenues andprofits to grow in 2010.At the same time, costsare still very much onthe agenda with morethan a third (38%) of IrishCEOs indicating theiroverall cost base willdecline in the next 12months. Irish businessleaders are also feelingmore confident aboutemployment growth andcapital investment. Forexample, over a third ofIrish business leadersexpect growth in theseareas compared to lessthan a fifth last year.“Following a year of muchretrenchment, a return togrowth in their businessesis anticipated by many.”Chart 5:Anticipated performance of Irish operations (% of respondents)IndicatorGrowth Decline No Change2010 2009 2010 2009 2010 2009Revenues 53% 29% 20% 55% 27% 16%Costs 23% 25% 38% 50% 39% 25%Net profit 57% 23% 20% 55% 23% 22%Employment 34% 19% 27% 29% 39% 52%Capital investment 39% 18% 16% 29% 45% 36%PricewaterhouseCoopers Pulse 2010 6

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyCost competitiveness, taxand education are criticalIrish MNC CEOs rated thetop three factors to maintainIreland’s attractiveness asa location-of-choice forforeign direct investmentto be improving our costcompetitiveness (51%); acontinued commitment toa stable and low tax regime(43%), and enhancinginvestment in education andup-skilling (30%).“MNCs are positive about investment inIreland, but competitiveness is critical.”Chart 7:Factors critical to enhancing Ireland’s attractiveness as alocation-of-choice for foreign direct investment (% of MNC respondents)0 10 20 30 40 50 60PricewaterhouseCoopers Pulse 2010 8

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyBusiness respondingto shifts in customerbehaviourThe survey highlightssome significantrefocusing of businessesby Irish companiesin the wake of theeconomic crisis. Acrossall sectors, there hasbeen a profound shiftin purchasing patterns– with greater focuson 'buying smart'and seeking greatervalue-for-money. As aconsequence, businessesare having to respondimaginatively in orderto hold or increasetheir ‘share of wallet’.Some 86% of CEOsare reconsidering theirresponses to changingpurchasing behaviour,with 76% revisitingorganisation structurein order to ensure thatit is fit-for-purpose. Asexpected, Corporates’approach to riskmanagement (78%) ishigh on the CEO agenda.Risk management isclearly taking on greaterimportance as a result ofthe recession with CEOsbeginning to reshape theirstrategies. The result, webelieve, will be a smartercourse for growth with amore resilient path thatwill produce sustainablelong-term benefits fororganisations - alongwith their shareholders,employees, customersand communities.“Across all sectors, there has been aprofound shift in purchasing patterns –with greater focus on 'buying smart' andseeking greater value-for-money.”Chart 8:Expected change in business operating models in the next year (% of respondents)Responding to changing customerpurchasing behavioursNo changeChange14% 86%Approach to risk management 22% 78%Organisational structure 24% 76%Talent management strategies 30% 70%Capital structure 60% 40%PricewaterhouseCoopers Pulse 2010 9

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyReviewing contracts –key to cost reductionReviewing contracts scorestop of the league for costreduction initiatives (76%).According to the survey,other cost reductioninitiatives planned overthe next 12 months areinvestment in IT (53%),critically reviewing thesupply chain (47%) as wellas working capital reviews(40%).New products – route toexpansionThe most popular revenueincreasing initiative islaunching new products(73%). Other routes toexpansion are enteringnew markets (42%) andplanning a merger oracquisition (24%). Thesurvey suggests that nowis a good time to growby acquisition with manyCEOs seeing value in themarketplace.Shift in customerspending – key growthstumblerIrish business leaders seethe greatest potential riskto growth prospects tobe the permanent shift inconsumer spending (68%).This is not surprising givenconsumers’ concertedsearch for value in anintensely competitiveenvironment. After thecrisis consumers willdemand an even higherlevel of value and qualityand will be prepared toshop around until they getit, a trend that is unlikely toreverse.Other key risks for growthare lack of available finance(53%) and over-regulation(50%). This highlightsbusinesses need for cashand possible concerns thatover-regulation may bringadditional administrativeburden and costs withoutdelivering additional value.“A quarter of CEOs are seeking a mergeror acquisition.”Chart 9:Potential barriers to growth (% of respondents)0 10 20 30 40 50 60 70 80PricewaterhouseCoopers Pulse 2010 10

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyChart 10:People management priorities (% of respondents)“Two-thirds of CEOs are planning toredesign their bonus scheme.”0 10 20 30 40 50 60 70 80Chart 11:Elements of reward package to be redesigned (% of respondents)0 10 20 30 40 50 60 70 80Keeping employeesmotivated - top peoplepriorityOver three-quarters(76%) of Irish businessleaders feel that keepingemployees motivated isthe top people priority.Talent development(52%) and reducingpeople costs (45%)also feature strongly.Interestingly, managingunder performance wasa priority for nearly half(43%) of respondentsindicating performanceissues continue to bechallenging for some.Majority plan a payfreezeDespite one of the mostsevere recessions inliving memory, 60% ofrespondents said thatthey did not effect a basicpay reduction in the last12 months. However,nearly three-quarters(73%) of respondentssaid that they expectto implement a basicpay freeze in the next12 months. Some 12%said that they will awarda basic pay increase. Asbusinesses attempt toforge greater linkagesbetween performanceand reward, it is notsurprising that overtwo-thirds (68%) of Irishbusiness leaders plan toredesign their companybonus scheme. Nearlya third are planning toredesign their pensionscheme as well as theirexecutive long termincentive scheme.PricewaterhouseCoopers Pulse 2010 11

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyClimate change not onthe radar screenOnly a third of CEOs(35%) agreed that climatechange is a top priorityfor their organisationcompared to 62% lastyear. Furthermore,over half (55%) ofrespondents said thattheir organisations are notpreparing for the impactof climate change in thecoming 12 months.Linked to getting readyfor climate change, asimilar proportion (54%)said that they did notconsider sustainability/climate change planningas important in thebusiness at this time.However, cost does notseem to be a barrier asonly a minority (22%)agreed that compliancewith climate change willbe a significant expense.Perhaps, businesses arefinding it difficult to linkthe benefits of climatechange/sustainabilityinitiatives to their bottomline. Potential efficienciesif properly addressedinclude waste reduction,improved energy andresource efficiency andproducing productsin a more sustainablemanner. On the otherhand, perhaps, at anational level there is aneed for greater clarityon Government strategyin this area to stimulateactivity at corporate level.Nearly half (45%) ofCEOs agreed that climatechange initiatives willprovide reputationaladvantages. As theworld moves towardsa low carbon economy,corporate reputationin this area and how itimpacts shareholdervalue will increasinglycome under the spotlight.“Only a third of CEOs viewclimate change to be a toppriority at the moment.”Chart 12:Levels of agreement with climate change initiatives (% of respondents)Agree Disagree Don’t knowClimate change is a top business priority 35% 57% 8%My company will need to reduce itsemissions significantly19% 66% 15%Compliance with climate change willbe a significant expense22% 58% 20%Climate change will lead to significantnew products and services26% 55% 19%Response to climate change willprovide reputational advantages45% 39% 16%PricewaterhouseCoopers Pulse 2010 12

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyBenefits of climatechange not clearlyunderstoodIn terms of benefits, lessthan half (45%) expectthat their companies’response to climatechange initiatives willprovide a reputationaladvantage while only aquarter (26%) were of theview that climate changewill lead to significantnew products andservices.Despite the apparentdisinterest at a strategiclevel in climate change,some work is ongoing.For example, a fifth (21%)of Irish CEOs said thatthey had sustainabilityobjectives underdevelopment. A similarproportion (18%) saidthat they had strategicobjectives developed.The three key compellingreasons to implementsustainability initiativeswere regulation (66%);brand enhancement(64%) and wastereduction (62%).Majority do not reporton climate changeNearly three-quarters(72%) of Irish businessleaders said thatthey do not report onsustainability/climatechange to externalstakeholders.In terms of carbonfootprint measurement,only a fifth (20%) saidthey have measured theircarbon footprint; nearlyhalf (43%) said they haveintroduced measuresto reduce their carbonfootprint and just overone tenth (12%) said theyhave set specific targetfootprint (ie by reducingenergy and waterconsumption, reducingwaste and increasingrecycling etc) levels for2010/11. The surveyindicates that very fewhave purchased carboncredits.“Businesses are findingit difficult to link thebenefits of climate change/sustainability initiatives totheir bottom line.”PricewaterhouseCoopers Pulse 2010 13

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyClear action byGovernment to drive therecovery agendaThe survey reveals clearactions for Government asset out in the chart below.While action has beentaken by Government toaddress Ireland's budgetdeficit and fiscal position,business is now lookingfor Government to drivethe recovery agenda inother areas. Top of the listfor action are reducingpublic expenditure;promoting growth for theSME sector, and restoringavailable finance throughthe banking system. Thesurvey suggests clearareas where resourcesmight be directed in orderto position Ireland for theeconomic upturn.Chart 13:Actions by Government following the financial crisis (% of respondents who agreed)“CEOs are clearly looking for Governmentto drive the recovery agenda.”0 20 40 60 80 100PricewaterhouseCoopers Pulse 2010 14

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyThe survey wasconducted in May 2010amongst Ireland’s topCEOs and there wereover 200 participantscovering a range ofsectors and ownershiptypes.Chart 14:Respondents by sector (%)Chart 15:Ownership of company (%)PricewaterhouseCoopers Pulse 2010 15

PwC Pulse 2010What CEOs are sayingIntroductionCEO Confidence Business Performance Foreign DirectInvestmentCEO Priorities People Management Sustainability/Climate ChangeActionsfor GovernmentSurveyMethodologyPwC contactsPaul Tuite Advisory Leadere: paul.tuite@ie.pwc.comAnn O'Connell Advisory Consulting Partner (Strategy)e: ann.oconnell@ie.pwc.comBusiness PerformanceForeign Direct InvestmentPeople ManagementSustainability/Climate ChangeCiarán Kelly Advisory Consulting Partner(Technology / IT Systems)e: ciaran.kelly@ie.pwc.comGarrett Cronin Advisory Consulting Partner(Financial Operational Effectiveness)e: garrett.cronin@ie.pwc.comLiam Diamond Tax Partner &Inward Investment Leadere: liam.f.diamond@ie.pwc.comAlisa Hayden Assurance Partnere: alisa.hayden@ie.pwc.comMark Carter HR & Reward Services Partnere: mark.p.carter@ie.pwc.comCamilla Beglan Advisory Consulting Director(People & Change)e: camilla.beglan@ie.pwc.comBartley O'Connor Senior ManagerSustainability & Climate Changee: bartley.oconnor@ie.pwc.comActions for GovernmentJohn Dillon Public Sector Services Partnere: john.p.dillon@ie.pwc.compwc.com/ieThis publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express orimplied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers, its Partners, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences ofyou or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.© 2010 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the Irish firm, PricewaterhouseCoopers, One Spencer Dock, North Wall Quay, Dublin1 which is authorised by the Institute of Chartered Accountants in Ireland to carry on investment business. As thecontext requires, "PricewaterhouseCoopers" may also refer to one or more member firms of the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate legal entity. PricewaterhouseCoopers does not act as agent of PwCIL or any other memberfirm nor can it control the exercise of another member firm's professional judgment or bind another member firm or PwCIL in any way. Designed by PwC Design Studio 02594.PricewaterhouseCoopers Pulse 2010 16