The survey finds the Covid-19 crisis has hampered global CEOs’ confidence in global economic growth. Today, around one-third say they are less confident now about prospects for global growth over the next three years than they were at the start of the year. However, only 17% are less confident now about the future growth of their own companies.
As we saw above, CEOs are more confident in their own businesses’ growth prospects over the coming three years. In part, this is because they have greater control over the levers that will determine this, such as digital acceleration. With commerce increasingly taking place online because of factors such as physical distancing and lockdowns, companies are having to rethink what customers want and how to deliver these requirements.
Farhan Syed, Head of Advisory, KPMG Lower Gulf (in the UAE and Oman), explained that companies in the UAE are speeding up the adoption of digital technologies to make them more resilient as well as to drive customer-focused growth. “Companies that proactively invested in technology were better prepared for the current crisis, which demands flexibility and digitalized operations,” he says. “The widespread adoption of digital technologies – in addition to establishing robust cybersecurity measures – is helping to future proof UAE businesses and opening up new customer channels.”
The challenge for organizations is to focus efforts and investment on the areas that are capable of generating the most long-term value, while avoiding reactions to the pandemic that may only prove to be short-term solutions. When we asked CEOs to name the greatest challenge they have faced in accelerating digital transformation, the biggest issue was ‘lack of insight into future operational scenarios’.
Our UAE CIO survey findings show that 94% of CIOs agree that transformation is now business as usual. Interestingly, this represents a pre-pandemic statistic. Companies need to understand whether a Covid-related change – such as shifting customer behavior – can be evidence of a permanent trend that is emerging rather than just a temporary effect of the pandemic.
As they plan their path to long-term growth, business leaders recognize Covid-19 has brought with it a number of new business risks. A second wave of Covid-19 and accompanying lockdowns could deepen these concerns.
Supply chain risk is now seen as the second most significant threat to business growth. Even before Covid-19, this potential threat was in the spotlight as a result of increasing volatility, be it trade tensions or extreme climate-driven events.
Building resilient, flexible supply chains – ones that can withstand shocks and offer the agility to pivot to new opportunities – will be critical for organizations to drive growth and build a competitive advantage post-Covid. This will be particularly important in a world where CEOs are aware that increasing territorialism – which is their third-placed risk today – could make the transfer of goods both more difficult and more costly.
Marketa Simkova, Head of People & Change, KPMG Lower Gulf (in the UAE and Oman), points out that while other risks have not disappeared, human or talent risk has assumed new importance in what could be both a global humanitarian and economic crisis. “The report shows that potential human and operational threats have risen to the top of the list of perceived risks as a direct result of Covid-19. Business leaders are acknowledging that looking after your staff’s physical and mental safety and welfare, and keeping and training specialized staff, can have a significant effect on organizational performance.”
Indeed, 70% of CIOs in the Emirates feel that a skills shortage prevents their organization from keeping up with the pace of change, as per the KPMG CIO survey’s UAE findings. With advances in analytics, artificial intelligence and process automation, and the Internet of Things accelerating, the organization of the future will look very different from today’s: flatter, digitalized and with a different talent profile, potentially made up of fewer people who have distinct, new skills. CEOs will likely need to make some difficult people decisions and prioritize investment. Today, we find CEOs are focused on bold and ambitious digital transformation, with 67% of global CEOs more likely to place capital investment into technology than they are into their people.
With digital acceleration shaping the future of industries, organizations may need a deep understanding of how customer behavior will shift and how to meet these emerging demands.
Data-driven insight – and scenario modelling – is likely to be critical in understanding which major shifts are likely to emerge. Pre-pandemic, the major challenge to many organizations’ digital transformation was the burden and complexity of legacy IT, amid a continuing struggle to manage their data effectively. These challenges have not gone away and organizations should focus on IT transformation across organizational silos drawing on cloud technologies and agile techniques.
This may also be a good time to reflect on the talent base and build robust digital skills.
Unless otherwise indicated, throughout this report, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating under the KPMG name and affiliated with KPMG International or to one or more of these firms or to KPMG International.