What are the top 3 challenges facing CEOs in 2023?

Stronger business conditions may be expected by many CEOs this year, but they're still most concerned about "three core challenges" that are forecast to slow down business growth, according to a new report.

The Ai Group's Australian CEO Expectations for 2023 found that 49% of 280 leaders surveyed "expect general conditions to be better than 2022."

Another 67% are also expecting turnover to lift, while 55% are planning to increase employment.

"These positive expectations have led businesses to pursue strong investment programs, with the majority indicating they will either raise or maintain levels of staff training, physical CAPEX, R&D and technology investments in 2023," the report said.

'Three core challenges'

Optimism for this year, however, is hampered by three core challenges, namely skills shortages, inflation, and supply chain disruptions, according to the report.

An "overwhelming 90%" of the respondents expect to be affected by staffing shortages this year.

"These are most keenly felt in higher-skilled occupations, but are evident across all skill levels, industries and geographic locations," said Innes Willox, chief executive of Ai Group.

The other two challenges? Inflationary pressures and supply chain disruptions this year.

"It will clearly be another challenging year for many businesses and the need for a relentless focus on productivity across the broader policy agenda has become even more important," Willox said.

Strategies, investment priorities

As part of their strategies to mitigate staff shortages, 44% of the respondents put increasing wages and benefits as their first or second strategy. Some 38% said they will increase staff numbers, while 36% report retraining or upskilling staff.

These strategies reflect a recent report from Robert Half which also found that 75% of over 300 employers in Australia plan to increase or maintain their headcount this year despite concerns over recession.

Staff training and development will also be the "highest investment priority" in 2023, according to the Ai Group report, with the respondents putting it as a first (29%) or second (25%) priority for spending.

It comes as business leaders are "carefully calibrating" their investment plans for 2023 to address the shortages and other workplace challenges, the report said.

Improving business processes and ICT investments ranked second and third, respectively, on employers' list of investment priorities.

"Process improvement and ICT allows for a more effective deployment of a business's current workforce and helps adjust to conditions in which labour supply will remain constrained," said AiGroup.