00:00I can understand in February, March, certainly April, that tariffs would be on the tip of everyone's tongue that you spoke to.
00:07Here in early October, are they still talking about it?
00:11CEOs are absolutely still concerned and talking about the impact of tariffs on their business,
00:17along with a couple of the other top risks that we're seeing in the Outlook survey, Romain,
00:20including AI investment around it and the return on investment that certainly shareholders and boards are looking to understand,
00:28and also the risks around cyber.
00:30But if I dig into the tariff risk, CEOs, these are major issues that CEOs and companies are dealing with
00:39in terms of being able to flex their supply chain, look and analyze where those suppliers can move to,
00:46if they can be moved at all, renegotiate supply contracts, look at cost takeout,
00:51and then lastly, move toward pricing to the extent their consumers can absorb it.
00:57And that is certainly uncertain at the moment.
01:00On the issue of actually where you source from and the idea of maybe potentially moving that around,
01:04I mean, it's kind of become a little bit of a whack-a-mole, right?
01:07Because you can say, OK, we're going to move out of China, and then you go to India,
01:09and the U.S. imposes tariffs there.
01:11How are they approaching, I guess, the geographical fluidity, if you will, of trade policy
01:18and how you can maybe set up shops somewhere else and then all of a sudden find yourself still up against the gun?
01:22Yeah, so that's one of the major challenges that CEOs are facing into, not only tariffs,
01:27but the changing dynamic around tariffs that are changing, sometimes monthly.
01:34One of the benefits that we're seeing with AI right now is the fact that it is helping CEOs manage through this risk.
01:41One of the major things that we're doing with clients right now is helping them analyze tariffs,
01:47helping them understand with big, big pieces of data very, very quickly, understand what the financial impact is,
01:54immediately be able to forecast it into their models, and or solve for what-if scenarios,
01:59depending on what their view is on potential changes to their tariff environment.
02:05So AI emerging is a real tool here for the C-suite, but to Romain's point,
02:10the whack-a-mole nature of some of our tariff policy coming from the U.S.,
02:15for how many CEOs is the answer to just try to move production onshore, domestic production?
02:21Is that a possibility?
02:22I think it's very, very difficult for CEOs to move their supply chain,
02:26but it is dependent upon the industry that the CEOs are working within.
02:30If you look at the automotive industry, for example, it is challenging because you've got such a deep and wide supply chain that CEOs are working through.
02:43And so moving that supply chain quickly is not necessarily a possibility.
02:46So, again, moving very, very quickly to cost takeout and looking at pricing adjustments.
02:52I do think it's interesting that, again, that the top challenge for CEOs in the short term is supply chain resilience,
02:57because I feel like that could have been the answer at any point in the last five years.
03:02When you think about the pandemic and where we were, of course, in 2020.
03:06And I do wonder if all those different experiences that we've had, of course,
03:10when we're talking about global trade policy and tariffs,
03:13that's a different conversation than just what we're talking about with the pandemic.
03:17But I do wonder if that has made supply chains on the whole more flexible than they might have been.
03:22I think we're seeing that.
03:23And certainly when we get through this period of changing tariffs and that environment around trade policy,
03:30supply chains will be much more flexible.
03:32But, again, it's not.
03:34It is AI helping CEOs around this issue.
03:37But, in addition, as we're seeing in the survey results, AI is a major, major topic,
03:44certainly for management teams and in the boardroom.
03:47As companies, even one year ago, if you were to think about it,
03:50CEOs were thinking about investing in AI.
03:53It was an if, and now it's really, truly a when.
03:56Well, when we talk about the when,
03:58and I assume we're talking more about investing in AI for their own corporate purposes, right,
04:02and internally improving their workforce or improving their workforce productivity,
04:07is there a sense that they feel like there is enough,
04:11the cost benefit is sort of in favor of the benefit in investing in that space now?
04:16So it is a few elements there, Romain.
04:19So it is certainly looking at their own productivity and their own, the way they do business.
04:24But CEOs right now are also seeing the advantage of agents.
04:28And agents are a complete game changer.
04:30Agents will help companies and CEOs design their products differently.
04:35They will change the products that are potentially put into market.
04:38In some cases, for some industries, they'll have new products to actually to sell.
04:42So CEOs are now seeing the efficiency play come through their investments in AI.
04:50But it's the rest of that investment and impact
04:54and the ability to stay ahead of their competition
04:57and, of course, the capital intensity around that investment.
05:01That's important to justify.
05:03Another big component of the report was in cybersecurity.
05:05And this, in a lot of ways, directly feeds out of what's going on with AI.
05:09Because as a lot of companies sort of adopt these AI programs, these AI models,
05:13there's a big question of what data you're using, if it's your own proprietary data,
05:17how do you protect that?
05:18Just today, before you came on the air, there was a headline about Salesforce disclosing
05:22a breach of one of its main products that we didn't know about.
05:26And we've seen a lot more of this.
05:28And I do wonder about the vulnerabilities as these companies do open up,
05:32particularly the companies that aren't traditionally thought of as tech companies,
05:35sort of move into this tech space and maybe aren't fully aware of the potential vulnerabilities.
05:39So cyber has always been at the very top of the CEO agenda,
05:43but it is amplified by the fact that AI is enabling threat actors to harm businesses
05:51in a more extensive manner.
05:54I think the good news around this is that you can fight AI threat with AI.
05:58And so you're seeing AI enhanced fraud detection, for example.
06:02But it is absolutely something that CEOs are very, very much focused on
06:06in terms of being able to protect their environment.
06:10And what's really interesting is where CEOs were really focused also on inside threat actors.
06:17Inside threat actors now are agents.
06:20And so you can build an agent, leave it in an environment,
06:24and leave a company incredibly exposed.
06:27So risks are, again, increasing.
06:30And the final risk around cyber that I would just highlight,
06:33which is interesting, is the capability around quantum.
06:38And so that is showing up now as well in terms of the acceleration
06:42on when that capability will be available and in market.
06:45Because with quantum, that supercomputing power,
06:48all standard encryption can be broken.
06:51And companies need to right now start thinking about what that looks like,
06:55what their tech environment looks like,
06:56and how they will re-encrypt everything from your personal to your company to your government data.
07:04Well, I was hoping you could expand a little bit more on quantum
07:07because this is a conversation we're having on the close
07:10as to what is the timeline for really needing to get serious
07:13and understanding what exactly quantum computing is.
07:16Because even from the mouth of Jensen Wang, the NVIDIA CEO,
07:20it feels like that timeline shifts around a lot.
07:23It does shift around a lot, but the concern I have certainly is that that timeline is accelerating.
07:31And so if you were to even go a year ago or two years ago,
07:34you were talking about quantum, what seemed to be in the distant future to some extent.
07:39That timeline is accelerating.
07:41I have not heard a definitive when.
07:45And so what I can tell you is that our clients and CEOs are beginning to do those assessments.
07:52And our advice certainly is to start looking at those quantum assessments right now
07:57because it is a journey to be able to get through that,
08:01not only the assessment, but the changes that are required.
08:04Well, certainly investing in quantum stocks has paid off handsomely this year.
08:08But I digress.
08:08Let's talk a little bit about M&A
08:10because I thought this was an interesting finding in the outlook as well,
08:13that 33% of U.S. CEOs indicate that they have a high M&A appetite.
08:18So they're motivated buyers here in this specific environment.
08:22Yeah, that is good news, certainly.
08:25It's interesting because the uncertainty and the challenges that we've been talking about already here
08:30have really taken the attention of CEOs and businesses elsewhere.
08:36But it's becoming this conclusion that this uncertain environment is one that we just need to work within.
08:44And so companies are getting back onto their original strategy,
08:47and we're starting to see M&A certainly around, first, some larger deals.
08:51Yeah.
08:52Well, that's what I'm curious in terms of just overall the risk appetite
08:55that you're hearing from these CEOs and other folks in the C-suite.
08:58Is it there or is it just kind of we're still waiting to figure out where all this goes
09:02before we really do anything aggressive?
09:04So CEOs are confident, and you can see that come through the survey results.
09:09They're confident that, yeah, there are many challenges, but that they can manage through them.
09:14And you're seeing that confidence, I believe, start to pick up in the M&A markets right now.
09:20And so we shall see where it leads to.
09:24Listen, certainty will lead to more consistency in the markets
09:28and, I believe, more deal activity, and time will tell.
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