According to the 2020 KPMG Global CEO Outlook report, only 22 percent of CEOs in Asia Pacific remain confident about the growth prospects of the global economy over the next three years (a significant drop from 67 percent in January 2020). But on a more positive note, CEOs are much more assured in the resilience of their own business as 63 percent expressed confidence in their company’s growth for the same time period.
In the first study of its kind, the report measures how CEOs’ priorities and concerns have changed during the global pandemic. KPMG conducted two surveys – one at the onset of the pandemic in January and a second survey in July/August.
A clear result from the study reveals that business leaders have radically shifted their perspectives as businesses and governments around the world continue assessing the long-term impact of COVID-19. During this period of unprecedented uncertainty, CEOs are prioritizing digital transformation, talent and ESG (Environmental, Social and Governance) factors at the top of their agendas.
Datuk Johan Idris, Managing Partner of KPMG in Malaysia commented: “A majority of CEOs have undertaken critical measures to bolster their company’s medium-term resilience. This is particularly evident at the height of the crisis when business leaders worldwide took steps to maintain business-as-usual activities in answer to restricted movements. With the extension of the Recovery Movement Control Order (RMCO) until 31 December 2020, business leaders are forced to relook at their operational strategies and key to this is the ability to move away from short-term measures and prepare for mid and long-term growth.”
One way CEOs are collectively doing to secure long-term growth is channeling resources towards digital transformation initiatives. Before the pandemic, 64 percent of CEOs felt overwhelmed by the lead times required to achieve significant progress on digital transformation. However, following worldwide lockdowns and the need for physical distancing, 46 percent of CEOs have reported that progress for their digitization of operations has sharply accelerated, putting them years in advance of where they expected to be. Almost two out of 3 (61 percent) plan to prioritize more capital investment in buying new technology and digitization.
“Clearly, there has been a momentous change in mindset in that CEOs are now more confident and willing to invest in technology to make their companies more operationally resilient, agile and customer-focused to achieve growth during this tumultuous time. We expect digital acceleration to increase in speed and scope even after the pandemic subsides,” Datuk Johan observed.
New risk paradigm
CEOs have identified talent risk as the main threat, a category which encompasses recruitment/retention, overall wellbeing and health of staff. This was the threat that CEOs were least concerned about at the beginning of the year. As a result of this pandemic, it has now risen to be the highest perceived threat to long-term growth.
This could reflect the challenges CEOs face with recruiting and retaining personnel while motivating the workforce despite disruption to the usual ways of working. Most CEOs (72 percent) have said that remote working caused them to make significant changes to their policies to nurture culture, while 69 percent reported how remote working has widened their potential talent pool for future hires.
We can infer that regardless of the barrier caused by physical distancing measures, CEOs recognize that losing key employees, attracting specialized talent, keeping workforces productive and the health and wellbeing of their staff can have a critical impact on their future business performance.
In addition, the rise in supply chain concerns compared to earlier in the year could be attributed to the fact that over two-thirds of organizations (72 percent) have had to rethink their global supply chain approach given the disruptive impact of the pandemic. This could potentially lead to a redesign of global supply chains to become more agile in response to changing customer needs, and more robust to reduce risks and disruptions over the long term.
Renewed sense of purpose
Recent developments have driven 78 percent of CEOs in Asia Pacific to develop a stronger emotional connection to their organization’s purpose, with 66 percent stating how they responded to the pandemic by shifting focus towards the ‘Social’ component of their ESG program. KPMG’s survey also found that 76 percent have had to re-evaluate their organization’s purpose as a result of the COVID-19 crisis.
Datuk Johan concluded, “Recovery from the pandemic does not mean a return to normal, but instead an opportunity to define our post-pandemic reality. As the crisis continues to change what good corporate leadership looks like, the role of the CEO is more important than ever in steering the business towards growth in the new reality and beyond.”