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ASPAC CEOs concerned over supply change risks as Global CEO confidence returns to pre-pandemic levels
Eight out of ten global executives say they are ready to make an acquisition in the next three years Business leaders believe government stimulus needed to meet net-zero targets Three out of four CEOs believe that the pressure put on public finances during the pandemic has increased the urgency of multilateral cooperation in the global tax system
CEOs of the world’s largest businesses are increasingly optimistic about the outlook for their own business and despite the Delta variant slowing down the ‘return to normal’, their confidence in the global economy has returned to levels not seen since the start of the pandemic. The KPMG 2021 CEO Outlook, which asked more than 1,300 global CEOs about their strategies and outlook over a three-year horizon, finds that 60 percent of leaders are confident about the global economy’s growth prospects over the next three years (up from 42 percent in the January/February’s pulse survey).
The prospect of a stronger global economy is leading CEOs to invest in expansion and business transformation, with 69 percent of senior executives identifying inorganic methods (e.g. joint ventures, M&A and strategic alliances) as their organization’s main strategy for growth. A majority (87 percent) of global leaders stated that they are looking to make acquisitions in the next three years to help grow and transform their businesses.
The survey found that 30 percent of CEOs plan to invest more than 10 percent of their revenues toward sustainability measures and programs over the next three years.
Bill Thomas, Global Chairman & CEO, KPMG, said: “Despite the continued uncertainty around the pandemic, CEOs are increasingly confident that the global economy is coming back strong. This confidence has put leadership in an aggressive growth stance. While inorganic growth strategies are a priority, CEOs are also looking to expand organically and continue to assess the future of work to ensure they can attract top talent.
“If there is a positive to come out of the past 18 months, it is that CEOs are increasingly putting ESG at the heart of their recovery and long-term growth strategies. The unfolding climate and societal crises have made it clear that we need to change our ways and work together. I’m encouraged about what the future holds because business leaders are acknowledging that they need to be the drivers of positive change, supporting measures to tackle environmental dangers, as well as societal challenges — from gender and race, to equity and social mobility.”
In contributing his observations on findings from the Asia Pacific region, Honson To, Chairman for KPMG Asia Pacific and KPMG China, remarked: “CEOs in Asia Pacific (ASPAC) are generally more optimistic than their global counterparts on prospects for the world economy over the next three years. They anticipate headcount increases across the region, with lasting changes to ways of working brought about by the pandemic. While talent continues to be a consideration, supply chain has gone up the ranks as a key threat to the growth of organizations in ASPAC and outranks similar concerns globally. Like their global counterparts, ESG will be a crucial component of organizational strategy among ASPAC leaders, and I’m heartened to see that both the social and environmental dimensions are receiving ever increasing attention at the highest organizational levels.”
Charoen Phosamritlert, Chief Executive Officer, KPMG in Thailand adds “Despite slower economic recovery than expected due to the third wave of the pandemic, confidence in the world economy remains high among ASPAC CEOs, with 72 percent of CEOs surveyed in Thailand being confident. However, risk perceptions have shifted and two-thirds of the CEOs in ASPAC reported that supply chains have been under increasing stress over the past 18 months. To mitigate this, companies will have to closely monitor their supply chains, diversify to new input sources to increase resilience, onshore more inputs, and adopt strategic measures like hedging and longer-term contracts.”
Reaching net zero with government support
Among the many socio-economic, social and environmental challenges facing the world, stakeholders are putting immense pressure on businesses to tackle climate change and leave a positive impact on society. As a result, over a quarter (27 percent) of business leaders are concerned that failing to meet climate change expectations will result in the public markets not investing in their business. Over half (58 percent) of CEOs said that they face increased demands from stakeholders (e.g. investors, regulators and customers) for more reporting on ESG issues.
Three out of four (77 percent) of global executives believe that government stimulus will be required if all businesses are to reach net zero. Furthermore, three-quarters (75 percent) of global CEOs have identified COP26 as a pivotal moment to inject urgency into the climate change agenda.
More than eight out of ten (86 percent) global leaders state that their corporate purpose will shape capital allocation and inorganic growth strategies. The research found that corporate purpose, what the company stands for and its impact on communities as well as the planet, is driving 74 percent of CEOs to act in addressing the needs of their stakeholders (customers, employees, investors and communities). There has also been a 10-point increase since the beginning of 2020 in the number of CEOs who say their principal objective is to embed purpose into the decisions they make to create long-term value for their stakeholders (64 percent).
Shifting focus toward operational and environmental risks
When looking at risks for growth over three years, senior executives identified three areas they see as top risks: supply chain, cyber security and climate change. 56 percent of global CEOs say that their business’ supply chain has been under increased stress during the pandemic.
Table 1: Biggest risks to growth over the next three years 2021 CEO Outlook (July/Aug 2021)
|Table 1: Biggest risks to growth over the next 3 years 2021 CEO Outlook (July/Aug 2021)||2020 CEO outlook pulse (July/Aug 2020)|
|Risk to growth||Rank||Risk to growth||Rank|
|Cyber security risk||#1||Talent risk||#1|
|Environmental/climate change risk||#1||Supply chain risk||#2|
|Supply chain risk||#1||Return to territorialism risk||#3|
|Emerging/disruptive technology risk||#2||Environmental/climate change risk||#4|
|Regulatory risk||#2||Cyber security risk||#5|
|Operational risk||#2||Emerging/disruptive technology risk||#6|
Changing sentiment on the future of work
Just 21 percent of CEOs now say they are planning to downsize, or have already downsized, their organization’s physical footprint, a dramatic shift from August 2020, with the first wave of the pandemic at its peak, when 69 percent of global leaders said that they planned to downsize their space.
Unprecedented international tax reforms a significant focus for CEOs
Three out of four (75 percent) CEOs believe that the pressure put on public finances by the pandemic response has increased the urgency for multilateral cooperation on the global tax system. At the same time, 77 percent of senior executives agree that the proposed global minimum tax regime is of “significant concern” to their organization’s goals on growth. Meanwhile, they are more worried about regulatory and tax risks than they were prior to the pandemic (reference table 1 above).
The research found that 74 percent of CEOs recognize the strong link between the public’s trust in their businesses and how their tax approach aligns with their organizational values. As businesses aim to build back better, a majority (69 percent) of CEOs are feeling increased pressure to report their tax contributions publicly as part of their broader ESG commitments.
Published : September 07, 2021