■ KPMG’s annual Global CEO Survey 2022, which includes more than 1,300 CEOs globally, shows that 8 out of 10 CEOs expect a recession in the next 12 months. 7 out of 10 CEOs believe a recession will hamper growth. 58 percent believe the recession will be ‘light and short’.
■ 39 percent of CEOs have already stopped hiring, while 46 percent have plans to lay off within the next 6 months. Four out of five CEOs paused their short-term digital transformation strategy to prepare their companies for the anticipated recession. Economic pressures are also slowing ESG targets.
The 2022 results of the “Global CEO Survey”, in which the independent audit company KPMG asked more than 1,300 CEOs of the world’s largest companies about their strategies and outlook, have been announced.
Eight out of 10 CEOs (86 percent) say they expect a recession within a year’s time, while 71 percent predict it will impact company earnings by up to 10 percent. The vast majority of senior executives (73 percent) believe that the recession will undermine expected growth. However, three out of four (76 percent) state that they have already taken precautionary steps before the upcoming recession.
58% expect recession to be mild and short
According to the study, 58 percent of leaders expect a mild and short-term recession. 14 percent of senior executives cite recession as one of their most pressing concerns today, slightly higher than in early 2022 (9 percent), while pandemic fatigue tops the list with 15 percent.
Despite these concerns, senior executives are significantly more confident in the resilience of the economy for the next 6 months (73 percent) compared to KPMG’s “CEO Pulse” survey of 500 CEOs in February (60 percent). In addition, 71 percent of leaders are confident of the growth prospects of the global economy in the next 3 years (60 percent in early 2022), and nearly nine out of ten CEOs (85 percent) are confident of their company’s growth in the next three years.
Other highlights of KPMG’s 2022 Global CEO Survey are as follows:
39% have stopped hiring, layoffs are on the way
Due to the ongoing economic turmoil, 39 percent of CEOs have already frozen hiring, while 46 percent plan to downsize their workforce in the next 6 months. Therefore, mass resignations are expected to slow down. However, CEOs’ three-year outlook is more optimistic, with only 9 percent planning to further staff down during that time.
40% of companies took a break from digital transformation, the rate will increase
The anticipated recession is pushing companies to reconsider their short-term digitalization strategies. Four out of five CEOs say they pause or slow down their digital transformation strategies to prepare their companies for the anticipated recession. While 40 percent of companies are taking a break from their digital transformation strategies, 37 percent are planning to pause or slow down these strategies in the next 6 months.
70 percent of respondents say they need to be faster to shift their investments to digital opportunities and exit digitally lagging areas.
More than a quarter of respondents believe that improving digitalization and business connections in the longer term is vital to achieving growth targets in the next 3 years. 74% agree that their company’s strategic, digital and ESG (environmental, social and governance) investments are inextricably linked.
Emerging disruptive technologies emerged as the biggest risk to job growth over the next 3 years, the research found. In addition, CEOs; also cited issues such as reputation, regulatory and operational issues, and climate change among the most important risks to growth. Reputation risk – a negative perception of the company in customers or the general public – is raising more concern among CEOs than in early 2022.
The rate, which was 3 percent in February, increased to 10 percent in August. Also, in response to geopolitical challenges, 51 percent of companies have stopped working with Russia, and 34 percent plan to do so within the next 6 months.
Cybersecurity no longer worries so much
Cybersecurity, which was in the top five among the risks to growth last year, has regressed in the ranking. Only 6 percent of CEOs cited cybersecurity as the top risk, up from 17 percent in February 2022. However, the development of cyber environments continues. 77% of respondents say their company sees information security as a strategic function and a potential competitive advantage. Geopolitical uncertainty also raises corporate cyberattack concerns, according to seven out of 10 CEOs (73 percent). About three-quarters (72 percent) of organizations have a plan to deal with ransomware attacks. However, almost one in four (24 percent) in 2022 admit that they are not adequately prepared for cyberattacks, compared to 13 percent in 2021.
“Problems seen once in a generation came one after another in a short time”
Evaluating the results of the research, KPMG Turkey President Murat Alsan said: “Global pandemic, geopolitical tensions, inflationary pressures and financial difficulties, which are seen once in a generation, came one after another in a short time. These challenges also negatively affect the optimism of global CEOs. While it is not surprising that economic developments are currently the top concern for business leaders, it is encouraging to see executives have reasonable confidence in their companies and their long-term growth prospects. Events in recent years have created a real turbulence for the business world. The findings from this research can provide cautious optimism that executives who have tackled and overcome these events have more confidence in their companies’ resilience and are focused on mitigating some of the real uncertainties we face today.”
Stakeholders are skeptical about the green approach: ‘Greeting’
When CEOs were asked what their biggest challenge was in communicating their ESG performance to stakeholders, about one-fifth (17 percent) said that stakeholder skepticism was centered around a “green approach”. In 2021, this rate was 8 percent. More than a third (38 percent) of CEOs say their company struggles to tell an engaging ESG story. Nearly three-quarters (72 percent) of respondents also believe that stakeholders will pay more attention to ESG issues such as gender equality and climate impacts. As for talent, more C-level executives believe having the right talent and skills is the key to achieving net zero or similar goals compared to early 2022. Almost a quarter (22 percent) say a lack of skills and expertise has hindered the implementation of solutions, up from 16 percent earlier this year.
Economic pressure slows ESG targets
Globally, CEOs recognize that ESG initiatives are important to their companies, especially when it comes to improving financial performance and supporting growth. In fact, 69 percent of senior executives report greater demands from stakeholders for reporting and transparency on ESG issues. This rate was 58 percent in 2021. Almost half (45 percent) of CEOs agree that progress in ESG improves corporate financial performance; this rate was 37 percent just one year ago. However, as economic uncertainty persists, half of CEOs are suspending or reconsidering existing or planned ESG efforts in the next 6 months; even 34 percent have already taken these steps.