Global CEO confidence returns to pre-pandemic levels, claims new report

BY Fraser Tennant

Confidence among global chief executives is returning to pre-pandemic levels, with eight out of 10 stating a willingness to launch aggressive M&A plans in the next three years, according to a new KPMG report.

In its ‘KPMG 2021 CEO Outlook’, which asked more than 1300 global chief executives about their strategies and outlook over a three-year period, KPMG found that 60 percent of leaders are confident about the global economy's growth prospects – up from 42 percent in January/February 2021.

Moreover, the prospect of a stronger global economy is leading chief executives to invest in expansion and business transformation, with 69 percent of senior executives identifying inorganic methods, such as  joint ventures, M&A and strategic alliances, as their organisation’s main strategy for growth.

In terms of M&A, KPMG reveals that 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.

“Despite the continued uncertainty around the pandemic, chief executives are increasingly confident that the global economy is coming back strong,” said Bill Thomas, global chairman and chief executive of KPMG. “This confidence has put leadership in an aggressive growth stance. While inorganic growth strategies are a priority, chief executives are also looking to expand organically and continue to assess the future of work to ensure they can attract top talent.”

Another positive noted by the KPMG report is a greater focus on environmental, social and governance (ESG) among leaders. “If there is a positive to come out of the past 18 months, it is that chief executives 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.”

To this end, the report highlights that 30 percent of chief executives plan to invest more than 10 percent of their revenues into sustainability measures and programmes over the next three years.

Mr Thomas concluded: “I am 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.”

News: CEOs back to pre-pandemic levels of confidence, KPMG survey shows

Investment in UK digitalisation stalls despite COVID-19, reveals new survey

BY Fraser Tennant

More than half (56 percent) of businesses in the UK are not planning to increase investment in digital transformation, despite the coronavirus (COVID-19) pandemic accelerating the need for digitalisation, according to a survey published this week by Cheil UK.

The survey, which features the views of more than 200 senior decision makers from medium to large businesses in the UK on their plans for digital transformation post-COVID-19, reveals a general lack of continuity as to what the term ‘digital transformation’ means.

The retail sector, for example, lacks unity, according to the survey, with the majority of retail leaders disagreeing on what digital transformation means for their industry. Similarly, 33 percent of financial services sector respondents said their digital transformation plans had been “rolled back a lot” by the pandemic.

More promisingly, when asked what digital transformation means to their business, 48 percent of financial services sector leaders said optimising online performance and investing in new technology for in-store experiences, while 41 percent indicated setting up new digital propositions alongside core business.

“Challenges with budgets are apparent and valid, but we will see the ramifications of not investing in direct to consumer, digital and customer service in the coming months and years,” said David Bedford, director of digital strategy at Cheil UK. “This is not just about moving capabilities online; consumers expect to be kept safe when shopping in store and investment in digital capabilities – from virtual reality to contactless payments to increasing hygienic shopping experiences – is key to success in the future.”

Of the sectors planning to invest more in digital transformation, the top response among business leaders to improve customer experience was implementing faster delivery solutions and easier returns – a key challenge during lockdown as commerce switched to online. Other popular solutions included creating new products, improving site search, and better data collation and interrogation.

“The growing appetite for online purchases should be a wake-up call for those still asleep when it comes to ecommerce and digital capabilities,” continued Mr Bedford. “If you cannot provide the shopping experience your customer wants when they want it, they will move on.”

The survey also found that 75 percent of respondents were unimpressed with the majority of other businesses’ online customer experience.

Mr Bedford concluded: “The customer experience is key, and in a COVID-19 and post-COVID-19 world, this has to be considered and embedded as part of digital transformation to meet the needs of today’s customer.”

News: UK business leaders scale back plans to invest in digital transformation

CEO pessimism over global growth hits record high, says new report

BY Fraser Tennant

Chief executives are showing record levels of pessimism in the global economy, with 53 percent predicting a decline in the rate of economic growth in 2020, according to a new report by PwC.

In ‘Navigating the rising tide of uncertainty’, PwC’s 23rd annual global chief executive survey, PwC notes that chief executive pessimism over global economic growth is particularly significant in North America, Western Europe and the Middle East, with 63 percent, 59 percent and 57 percent of chief executives from those regions predicting lower global growth in the year ahead.

“Given the lingering uncertainty over trade tensions, geopolitical issues and the lack of agreement on how to deal with climate change, the drop in confidence in economic growth is not surprising – even if the scale of the change in mood is,” said Bob Moritz, chairman of the PwC Network. “These challenges facing the global economy are not new – however the scale of them and the speed at which some of them are escalating is new, the key issue is how are we going to come together to tackle them?”

The report – which features the views of almost 1600 chief executives from 83 countries across the world – also reveals that chief executives are not too positive about their own companies’ prospects for the year ahead, with only 27 percent saying they are “very confident” in their own organisation’s growth over the next 12 months – the lowest level recorded since 2009 and down from 35 percent in 2029.   

“On a brighter note, while there is record pessimism among business leaders, there are still real opportunities out there,” continues Mr Moritz. “With an agile strategy, a sharp focus on the changing expectations of stakeholders, and the experience many have built up over the last ten years in a challenging environment, business leaders can weather an economic downturn and continue to thrive.”

That said, the shortage of key skills remains a top threat to growth, with only 18 percent of chief executives stating that they have made “significant progress” in establishing an upskilling programme. 

Mr Moritz concluded: “Business leaders, educators, government and civil society must work together to ensure that people around the world stay productively engaged in meaningful and rewarding work. Although people may have fears about the future, they want to learn and develop, and they are looking to leaders to provide a trusted path forward.”

Report: Navigating the rising tide of uncertainty

CFOs fear Brexit will hit business in long-term, claims new survey

BY Fraser Tennant

A challenging and uncertain macroeconomic environment caused by Brexit fears is weighing on UK companies and their job creation and investment plans, according to a new Deloitte survey.

In its ‘CFO Survey: 2019 Q2’ – which features the views of 79 chief financial officers (CFOs) from 48 FTSE 350 companies –  Deloitte reveals that 83 percent of company chief financial officers (CFOs) say they expect the long-term business environment to deteriorate as a result of the UK leaving the European Union (EU). Furthermore, only 4 percent believe the time is right to take greater risk onto their balance sheets.

In terms of the short-term effects of Brexit, pessimism remains elevated, states the report, with 62 percent of CFOs expected to reduce hiring – the highest level in three years – and 25 percent likely to cut their M&A activity. The survey findings also show a drop in confidence among CFOs, with only 9 percent saying they are more optimistic about the prospects for their company than they were three months ago.

“Events in the last three years, and recent news suggesting the economy shrank in the second quarter, have added to worries about the impact of Brexit,” said Ian Stewart, chief economist at Deloitte. “This is not solely a question of the long-term outlook. Brexit has not happened, but it is acting as a drag on corporate sentiment and spending.”

According to the survey, almost two thirds (62 percent) of CFOs expect to reduce hiring in the next three years as a result of Brexit and almost half (47 percent) expect to reduce capital spending, suggesting a cautious approach from businesses.

“Ironically, risk appetite in the corporate sector has slumped just as it has taken off in the equity market,” added Mr Stewart. “Measures of financial market volatility have declined, even though a majority of CFOs rate uncertainty as being at high or very high levels.”

Furthermore, the survey found that UK companies remain focused on defensive strategies with 52 percent citing cost control as a strong priority. Increasing cash flow is also a strong priority for 43 percent of CFOs, down from 52 percent in Q1.

Richard Houston, senior partner and chief executive of Deloitte North and South Europe, concluded: “Companies are looking for more certainty around our country’s economic future, as they prepare themselves for a post-Brexit environment.”

Report: Deloitte CFO Survey: 2019 Q2

CCOs need to enhance ethics and compliance capabilities, says new report

BY Fraser Tennant

Ethics and compliance are the key areas in which chief compliance officers (CCOs) need to improve, according to a new report by KPMG.

In its ‘2019 CCO Survey: Insights for the future of ethics & compliance’ – based on a survey of 220 CCOs representing the largest organisations in various industries – KPMG notes that while most organisations take ethics and compliance risks seriously, the functions need to work on achieving a “trusted advisor” relationship with business front lines.

The report also identifies the top five areas where CCOs plan enhancements to their enterprise-wide ethics and compliance activities: investigations (65 percent), monitoring and testing (65 percent), data analytics (32 percent), regulatory change management (32 percent), and reporting and data visualisation (32 percent).

“There is a growing consensus across all industries regarding the key areas organisations need to focus on and enhance, not only in ethics and investigations but also on the maturity of ethics and compliance programmes,” said Amy Matsuo, KPMG principal and regulatory insights national leader.

“This is likely driven not only by a commonality of risks but also converging business models.”

Despite this, the report found that board of director engagement in ethics and compliance oversight and supervision is strong, and business line accountability for ethics and compliance is well-established. 

In order to improve their ethics and compliance functions, KPMG suggest that organisations: (i) revamp investigations processes, case management, reporting and communication; (ii) embed accountability via ethics and compliance-driven employee metrics; (ii) continue to drive integrated governance and reporting across ethics and compliance, legal and HR departments; (iv) evaluate available data and the integrity of that data for use in predictive analytics enterprise-wide; (v) establish guardrails and new risk processes for evolving business digitalisation, data analytics and automation; and (vi) invest in technology to drive greater data access.

“Increased public awareness and regulatory focus – along with market pressures for greater agility and real-time responsiveness to identify misconduct – are driving organisations to improve their investigations function,” continues Ms Matsuo. “Integrating investigation activities more closely with ethics and compliance risk management by enhancing investigation reporting and investing in new technology, such as AI, can help to consistently identify and analyse root causes and trends and improve the production of investigation resolutions.”

Report: KPMG’s 2019 CCO Survey: Insights for the future of ethics & compliance