More than eight in 10 surveyed CEOs expect a recession in the next 12 months, with more than half expecting it to be mild and short.
Seven in 10 believe the recession will disrupt expected growth
However, confidence in the long-term growth of the global economy and the prospects of their own companies is increasing
HONG KONG SAR –
Media OutReach – 18 October 2022 – The KPMG 2022 CEO Outlook, which surveyed more than 1,300 CEOs at the world’s largest businesses about their strategies and outlook, shows that 58 percent of leaders expect the recession to be mild and short. Fourteen percent of senior executives identified a recession as the most pressing concern today – up slightly from early 2022 (9 percent), while pandemic fatigue topped the list (15 percent) .
Next year, more than eight in 10 (86 percent) global CEOs expect a recession, with 71 percent predicting it will affect company profits by up to 10 percent. A strong majority of senior executives believe a recession would disrupt projected growth (73 percent). However, three-quarters (76 percent) have already taken precautionary measures before a looming recession.
Despite those concerns, senior executives also feel more confident about economic stability over the next six months (73 percent) than they did in February (60 percent), when KPMG surveyed 500 CEOs for its CEO Outlook Pulse survey. Furthermore, 71 percent of leaders are confident about global economic growth prospects over the next three years (up from 60 percent in early 2022) and nearly nine in 10 (85 percent) are confident about the growth of their organization in the next 3 years.
Bill Thomas, Global Chairman and CEO, KPMG, said: “The issues of a generation – a global pandemic, geopolitical tensions, inflationary pressures and financial difficulties – have come one after the other and taken their toll. on the optimism of global CEOs . While it is no surprise that the economic climate is now a major concern for business leaders, it is encouraging to see reasonable levels of confidence among executives in their own companies and their long-term prospects for growth.
“The events of recent years have created real turmoil for the business community. Our findings should provide some cautious optimism that, in fighting and overcoming these challenges, executives are more confident on the stability of their companies and focused on mitigating some of the real uncertainties we face today.”
Honson To, Chairman of KPMG China and Asia Pacific said: “Four out of five of the surveyed CEOs from China remain confident about the growth prospects of the local economy over the next three years, which is in line with the figure last year. Since the global economy is currently facing great uncertainty, economic growth is slowing down and affecting various areas from strategies and operations to investments made in companies. Meanwhile, CEOs are actively using various measures to strengthen the resilience of their companies to achieve growth in the ever-changing market environment. For example, digital transformation is accelerated to enhance innovation and the agility of companies. By strengthening the synergy between environmental, social and governance (ESG) and corporate development strategies, companies aim to improve their financial results. To attract and retain high-quality talent, CEOs also increase the core competencies of their organizations.”
ADDITIONAL FINDINGS:
Hiring freezes and downsizing are under heavy consideration by CEOs
With the economic turmoil continuing, there are signs that the Great Resignation may be cooling off, with 39 percent of CEOs having already implemented a hiring freeze, and 46 percent considering reducing their workforce in the next six months . However, the three-year view is more optimistic with only 9 percent expecting a further reduced number of people.
Uncertainty fuels long-term digital transformation
While the current uncertainty pushes CEOs to continue to prioritize digital transformation, 40 percent of businesses have paused their digital transformation strategies and another 37 percent plan to make such steps in the next six months.
In the longer term, more than a quarter believe that advancing digitalization and business connectivity is also important to achieving growth goals over the next three years. Seventy-four percent also agree that their organization’s digital and ESG strategic investments are inseparable.
Shifting focus towards reputational and technological risks
Emerging and disruptive technology is considered the top risk to business growth over the next three years. In addition, CEOs identified several other areas as top growth risks: reputation, regulatory and operational issues, and climate change.
Reputational risk — such as a mismatch with customer or public sentiment — raises more concern among CEOs than in early 2022 (10 percent in August versus 3 percent in February).
Cyber security is no longer corporations’ biggest threat, with more companies prepared for attacks
Cyber security has dropped from the top five risks to growth over the past year, with only 6 percent of CEOs naming it as their top risk (17 percent in February 2022). However, the cyber environment is evolving with 77 percent saying their organization views information security as a strategic function and as a potential source of competitive advantage. Geopolitical uncertainty also raises concerns of corporate cyber attacks, according to 7 in 10 CEOs (73 percent).
Nearly three-quarters of organizations (72 percent) have a plan to handle ransomware attacks. However, more CEOs admit they are ill-prepared for a cyber attack with nearly a quarter (24 percent) admitting this in 2022, compared to 13 percent in 2021.
Stakeholder pressure increases ESG accountability
When asked what their main challenge was in communicating ESG performance to stakeholders, nearly one-fifth (17 percent) of CEOs indicated it was stakeholder skepticism over greenwashing, up from 8 percent in 2021. More than one-third (38 percent) of CEOs say their organizations struggle to articulate a compelling ESG story. Almost three-quarters of respondents (72 percent) also believe that stakeholder analysis of ESG issues — gender equality, climate impacts etc. — will continue to accelerate.
On talent, compared to early 2022, more C-suite executives believe that having the right talent and skills is also key to achieving net zero — or similar — ambitions. Nearly a quarter (22 percent) say a lack of skills and expertise is hindering the implementation of solutions — an increase from 16 percent earlier this year.
Economic pressure is slowing ESG ambitions
Global CEOs recognize the importance of ESG initiatives in their businesses, especially when it comes to improving financial performance and driving growth. In fact, 69 percent of senior executives perceive greater demand from stakeholders for increased ESG reporting and transparency — 58 percent in 2021.
Nearly half (45 percent) of CEOs agree that progress on ESG improves the company’s financial performance, an increase from 37 percent last year. However, as economic uncertainty continues, half have paused or reconsidered their existing or planned ESG efforts in the next six months, and 34 percent have already done so.
The full findings of the KPMG CEO Outlook survey include qualitative interviews with the CEOs of: AMP, Bankinter, Fujitsu, Ricoh Europe, Tata Steel and ServiceNow.
To view more information about the survey please visit
http://www.kpmg.com/CEOoutlook. You can also follow @KPMG on LinkedIn and Twitter for updates and conversations on #CEOoutlook.
Notes to Editors:
About KPMG’s CEO Outlook
The 8th edition of the KPMG CEO Outlook, conducted with 1,325 CEOs between 12 July and August 24, 2022, provides unique insight into the mindset, strategies and planning tactics of CEOs that cannot only be compared to pre-pandemic until now, but also from KPMG’s CEO Pulse The survey was conducted between January 12 and February 9, 2022, with 500 CEOs.
All respondents have an annual revenue of more than US$500M and a third of the companies surveyed have more than US$10B in annual revenue. The survey included leaders from 11 major markets (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, UK and US) and 11 major industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications). NOTE: some numbers may not add up to 100 percent due to rounding.
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