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New PwC Study Shows Optimistic Shifts in CEO Focus

PwC’s new 2014 US CEO Survey takes the pulse of executives nationwide to get a sense of where the C-suite should be optimistic, what company transformations to expect in 2014, and what impacts may result in the near future. Overall, CEOs have a remarkably positive near-term outlook and expressed far more optimism than in recent years.

This year, 61% of CEOs plan cost-cutting measures–down 12% from last year. Almost 9 out of 10 are pretty sure their company will deliver revenue growth this year, with 36% even thinking it is already certain.

Growth is in for 2014. Indeed, 62% expect to hire more people this year. According to PwC, that is the highest rate of anticipated “headcount expansion” in the last five years.

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CEOs are also looking for ways to capitalize on potential within the existing structure, with 86% predicting that advancing technologies are what will transform their business over the next five years. Further, 36% believe that product and service innovation offers the main opportunity for growth in 2014.

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Some other key trends on the horizon:

Respondents considered the BRIC countries notably less important to future growth, continuing a decreasing focus on these regions since 2011.

BRIC Countries Graph

Transformational trends also showed a move away from focus on political and geographical efforts toward building and strengthening internal resources like technology.

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Transformational trends

CEOs are clearly focusing overwhelmingly on technology for growth. The specific developments generating the most interest for the C-suite are:

Technology Trends

New Climate Change Report Highlights Risk Management Strategies

Global Warming

This week, a new report from the United Nations’ Intergovernmental Panel on Climate Change summarized the ways climate change is already impacting individuals and ecosystems worldwide and strongly cautioned that conditions are getting worse. Focusing on impacts, adaptation and vulnerability, the panel’s latest work offers insight on economic loss and prospective supply chain interruptions that should be of particular note for risk managers—and repeatedly highlights principles of the discipline as critical approaches going forward.

Key risks the report identified with high confidence, span sectors and regions include:

i. Risk of death, injury, ill-health, or disrupted livelihoods in low-lying coastal zones and small island developing states and other small islands, due to storm surges, coastal flooding, and sea-level rise.

ii. Risk of severe ill-health and disrupted livelihoods for large urban populations due to inland flooding in some regions.

iii. Systemic risks due to extreme weather events leading to breakdown of infrastructure networks and critical services such as electricity, water supply, and health and emergency services.

iv. Risk of mortality and morbidity during periods of extreme heat, particularly for vulnerable urban populations and those working outdoors in urban or rural areas.

v. Risk of food insecurity and the breakdown of food systems linked to warming, drought, flooding, and precipitation variability and extremes, particularly for poorer populations in urban and rural settings.

vi. Risk of loss of rural livelihoods and income due to insufficient access to drinking and irrigation water and reduced agricultural productivity, particularly for farmers and pastoralists with minimal capital in semi-arid regions.

vii. Risk of loss of marine and coastal ecosystems, biodiversity, and the ecosystem goods, functions, and services they provide for coastal livelihoods, especially for fishing communities in the tropics and the Arctic.

viii. Risk of loss of terrestrial and inland water ecosystems, biodiversity, and the ecosystem goods, functions, and services they provide for livelihoods.

The report highlights more sector-specific risks, and one table even highlight the panel’s perception of the role of risk management in the future of climate change policy and planning:

IPCC Chart

On the whole, the report lays out many familiar risk management approaches and how they can be best applied to evaluating the risks of climate change and how to mitigate them. Perhaps the environment is warming to risk-informed decision-making as well.

Who’s Committing Economic Crime?

According to a recent survey from PricewaterhouseCoopers, economic crime is on the rise, particularly in the United States. Of organizations in the U.S., 45% suffered from some type of fraud in the past two years, compared to the global average of 37%. Further, 23% of companies that reported economic crime experienced accounting fraud, up from 16% in 2011.

So who is committing these crimes?

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External perpetrators are on the rise, closing the gap with internal perpetrators — it’s now 45% versus 50%, respectively. But the profile of these internal actors has changed since the last survey in 2011.

Now, most internal frauds are perpetrated by middle management (54%, compared to 45% in 2011), and fraud by junior staff has dropped by almost half, now totaling 31%.

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The typical internal fraudster is now a white male in middle management, age 31-40, who has been with the company for six years or more.

Internal Fraudster Profile

In good news, PwC also found that awareness of risk is higher among U.S. companies, for example, seven out of 10 American respondents perceived an increased risk of cybercrime in the last two years, compared to just under half globally. The C-suite is also increasingly getting the message about the risk of economic crime:

C-Suite and Economic Crime

For more details on the 2014 Global Economic Crime Survey, check out the report from PwC here.

Are Drone Cargo Ships the Next Step in Supply Chain Automation?

Rolls Royce Drone Ships

Ahoy, robots!

The $375 billion shipping industry, which carries 90% of world trade, is next in line for drones to take over—at least, that’s what Rolls-Royce Holdings is betting on. The London-based engine manufacturer’s Blue Ocean development team has already set up a virtual-reality prototype in its Norwegian office that simulates 360-degree views from a vessel’s bridge.

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The company hopes these advanced camera systems will eventually allow captains in control centers on land to direct crewless ships. The E.U. is funding a $4.8 million study on the technology, and researchers are preparing a prototype for simulated sea trials next year.

“A growing number of vessels are already equipped with cameras that can see at night and through fog and snow—better than the human eye, and more ships are fitted with systems to transmit large volumes of data,” said one Rolls-Royce spokesperson. “Given that the technology is in place, is now the time to move some operations ashore? Is it better to have a crew of 20 sailing in a gale in the North Sea, or say five people in a control room on shore?”

Crew costs of $3,299 a day account for about 44% of total operating expenses for a large container ship, industry accountant and consultant Moore Stephens LLP told Bloomberg News. By loading more cargo and replacing the bridge and other systems that support the crew, such as electricity, air conditioning, water and sewage, ships can cut costs and boost revenue, claims Oskar Levander, Rolls-Royce’s vice president of innovation in marine engineering and technology. The ships would be 5% lighter before loading cargo and would burn 12% to 15% less fuel, he reported.

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Unmanned ships would require captains to operate them remotely and people to repair and unload them in port, but the lack of crew at sea could change the landscape of piracy. Without people to take hostage, the risks would greatly reduce—as would the need for for kidnap and ransom insurance premiums. The material being transported, however, could be even more vulnerable without a human line of defense.

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Further, the remote operating system opens the door to digital hijacking from hackers or cybercriminals.

Currently, human error—most notably tied to fatigue—causes most maritime accidents, according to Allianz. But, as the 600,000-member International Transport Workers’ Federation is quick to point out, humans are also the first line of defense in a field plagued by unpredictable conditions. “The human element is one of the first lines of defense in the event of machinery failure and the kind of unexpected and sudden changes of conditions in which the world’s seas specialize,” Dave Heindel, chairman of the ITF’s seafarers’ section, told Bloomberg Businessweek.

Drone cargo ships would represent the latest part of a rapidly automating supply chain. As Wired pointed out, as customers’ desire for ever-more-instant gratification mounts and companies like Amazon find ways to drastically cut shipping costs with technology, consumer pressure may make this too tempting a development to pass up.