“As the possibility of recession looms, many CEOs are already prepared with a deep focus on planning and agility”, according to the KPMG 2022 CEO Outlook report.
The eighth edition of the KPMG CEO Outlook survey draws on the perspectives of 1,325 global CEOs across 11 markets (the US, the UK, Australia, Canada, China, France, Germany, India, Italy, Japan and Spain) to provide insight into their 3-year outlook on the business and economic landscape. The survey was conducted between July 12 and August 24, 2022.
“Tested by enormous challenges in quick succession — a global pandemic, inflationary pressures and geopolitical tensions — it’s encouraging that CEOs, surveyed in our 2022 CEO Outlook, were confident in their companies’ resilience and relatively optimistic in their own growth prospects”, said Bill Thomas, Global Chairman and CEO, KPMG.
The report highlights that CEOs are finding opportunity in uncertainty brought on by the promise of technology, talent and ESG. These business leaders are prioritising digital investments to areas of their business that drive growth. They are changing how they support and attract talent and are experimenting with ways of working to see what best suits their people. Meanwhile, CEOs are balancing the need to build resilient and transparent ESG plans with the possibility of having to pause or reconsider their approaches.
Global CEOs preparing for a recession, but majority think it will be mild and short
Eighty-six percent of CEOs believe a recession will happen over the next 12 months, but nearly three out of five (58 percent) feel it will be mild and short. Seventy-six percent have plans in place to deal with it.
Despite short-term recession fears, “The increased confidence CEOs have for the longer term indicates they feel well prepared to navigate their businesses through turbulent times. In fact, when asked about their confidence in the resiliency of the global economy over the next six months — a period likely to be fraught with uncertainty and constant change — 73 percent still had a positive outlook, up 13 percentage points from February 2022”, the report explains.
While CEOs may be resilient, they’re also pragmatic and mindful about the challenges ahead. Seventy-five percent believe a recession will make post-pandemic recovery harder, while 71% of CEOs predict a recession will impact their organizational earnings by up to 10% over the next 12 months.
The report states that the top three measures initiated by CEOs to combat short-term economic challenges include boosting productivity (50%), managing costs (43%) and reconsidering digital transformation strategies (40%).
Top risks looking forward
Cybersecurity, geopolitical risks, rising interest rates and inflation top the list for the most pressing concerns for CEOs today. However, as CEOs gaze into the future and look to the next three years, they realize that risks do not exist in isolation. They are intertwined and interconnected.
Source: KPMG 2022 CEO Outlook
Emerging/disruptive technology, which was not featured among the top five risks last year, has risen in rank to be the leading risk or the greatest threat to organizational growth over the next three years. Operational, regulatory, environmental/climate change, and reputational concerns are the other four risks in the list of the top five risks to growth over the next three years.
Compared to last year (37%), more CEOs (45%) increasingly agree that ESG programmes improve financial performance. One thing is certain: the climate agenda is coming into sharper focus for CEOs, with most of them agreeing that environmental/climate change is a matter of acute concern.
Strategies for achieving organizational growth objectives over the next three years
One of the key learnings from the last year for TV Narendran, CEO and Managing Director of Tata Steel, has been “The importance of building supply chain resilience”, brought to the forefront of the corporate agenda because of the COVID-19 pandemic and geopolitical uncertainties.
“The pandemic and the events in Europe have shown us how interconnected we are as a world,” he mentions in the report. “To me, geopolitical issues are the number one risk. I think we all need to build optimized and resilient supply chains.”
Geopolitical uncertainties will continue to impact CEOs’ strategies and supply chains over the next three years, which is why 81% of global business leaders have adjusted or plan to adjust their risk management procedures to achieve their growth objectives, as per the survey report.
With geopolitics expected to remain a key agenda item in 2022 and the near future, strategic alliances (26%), organic growth (22%) and managing geopolitical risks (20%) top the list of the most important strategies being deployed by CEOs for attaining organizational growth objectives over the next three years. During this period, the appetite for M&A, joint venture and outsourcing is predicted to remain high despite economic issues and concerns.
In conclusion, “The combination of uncertainty, delays and price fluctuations is forcing some executives to significantly shift their priorities and pivot their business models, in an attempt to maintain their growth and confidence as they enter an incredibly challenging period”, observed Regina Mayor, Global Head of Clients and Markets, KPMG.
Over the past few years, CEOs have learned to navigate the unpredictable, realign their workforces, untangle supply chain disruptions, and adapt to geopolitical and economic impacts, advises the KPMG 2022 CEO Outlook report. For now, as the chances of a global recession tick higher, optimism in long-term growth remains.
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