KPMG 2020 global CEO survey finds China CEOs’ concerns shift to key areas: Talent, supply chains, digital transformation and ESG disclosure
15 September 2020 – The COVID-19 pandemic has had a significant impact on the global economy. KPMG’s annual study provides an in-depth perspective on how global CEOs' views of the future have changed as a result of the outbreak. KPMG conducted two rounds of surveys with global CEOs, with the first survey conducted in January to February at the beginning of the pandemic crisis, and then a follow-up survey in July to August.
The surveys observed that global CEOs’ risks and concerns have evolved significantly. Some CEOs of the world’s most influential companies have identified talent risk as one of the most significant challenges to growth. At the same time, the pandemic has prompted China CEOs to re-evaluate their wider societal contributions and corporate purpose. Against the backdrop of accelerating environmental, social and governance (ESG) development, agile work arrangements and digital transformation, the surveys identified significant changes in corporate leaders’ concerns.
As the world grapples with the impact of the pandemic, one-third of CEOs are less confident now about prospects for global growth in the coming 3 years, the surveys showed. Global CEOs’ confidence in the global economy has fallen, but compared to their counterparts in other countries, China CEOs have a more stable and confident outlook on the domestic economy and their businesses.
Honson To, Chairman, KPMG China and Asia Pacific, says: “This report provides a comprehensive understanding of the impact that COVID-19 has had on executive leadership at the world’s most influential companies. We explore how their strategies have shifted and how their concerns have changed, and we gauge their outlook on the global economy. China CEOs have a more confident outlook on their domestic economy than their peers in other parts of the world. Faced with the uncertainties created by the pandemic, China’s CEOs are focusing their future planning efforts on areas such as talent risk, supply chain risk, and digital transformation of their companies.”
Raymond Ng, Head of Market Development, KPMG China, says: “China has the largest consumer market in the world. Despite the fact that demand is recovering more slowly than supply due to the pandemic, as quarantine measures are gradually reduced, we believe that the recovery of consumer demand is expected to be the spotlight of China economy in the second half of 2020, and that domestic consumption will be a major pillar in stabilising China’s economic growth. Meanwhile, China is accelerating the development of new infrastructure and the digital economy in urban clusters, further unleashing the potential of China's growing consumer market.”
Talent retention has become a major problem for companies in various countries after the pandemic. Retaining key staff and attracting professional talent have a significant impact on future business performance. Meanwhile, three-quarters of China CEOs say they would be re-evaluating their global supply chains. Key supply chain management considerations include having a more agile response to changing customer needs, improved supply chain resilience for natural disasters, and proximity to customers. Only 9% of global CEOs surveyed said they would consider moving their supply chains back to their home countries due to government pressure.
Jeffrey Wong, Head of Advisory, KPMG China, says: “CEOs have identified talent risk as the number 1 challenge following the outbreak. Companies need to develop targeted talent management strategies and detailed operational plans to maintain long-term sustainable growth, such as improving the compliance for remote work, ensuring the availability of office equipment and resources, and establishing efficient communication mechanisms with employees.”
The July-August survey found that 55% of China CEOs believe that the pandemic has sharply accelerated their company's transition to digital operations, in contrast to 30% of global average. China CEOs are particularly interested in emerging technologies such as artificial intelligence and cloud computing. China CEOs are particularly interested in emerging technologies such as artificial intelligence and cloud computing. Both surveys indicate that China CEOs see cyber security risks, including the risk of cyber-attacks and potential data loss, as a critical challenge for their operations.
Reynold Liu, Head of Management Consulting, KPMG China, adds: “Digital transformation is impacting various industries, especially financial services, healthcare, consumer goods and manufacturing. Accelerated by the pandemic, the tremendous importance of technology is becoming more and more apparent, and technology companies have been given great opportunities for development. In the foreseeable future, enterprises will face various innovation-related challenges as they accelerate their digital transformation and aim to enhance the customer’s digital experience. In order to fully embrace the digital economy, Chinese companies will need to speed up their digital transformation to unlock value and improve their core competencies.”
The pandemic has also changed the way companies work. With centralised workplaces having been affected by the pandemic, 80% of China CEOs in our July/August survey say they would downsize their office space in the near term, which was 11 percentage points higher than the global average (69%). At the same time, 85% of China CEOs say that remote working has also expanded their company's potential talent pool; and three quarters (75%) of China CEOs say that their communication with employees has improved during the pandemic.
The pandemic has accelerated a transition to the virtual office model, and this reinforces the need for companies to integrate digital strategy into their business continuity plans. Companies need to adopt more flexible measures to protect and train talents, and secure business operations. This also requires companies to transition more of their traditional HR functions to digital to increase productivity and improve employee experiences. Adopting a flexible and resilient approach to workforce management is essential in coming years.
As a result of the pandemic, CEOs are paying more attention to the disclosure of ESG information and CSR issues involving their companies. Among the respondents, 90% of China CEOs said they have felt a stronger emotional connection with their companies since the crisis began, significantly higher than the global level of 79%. Similarly, 90% of China CEOs say they will do more to meet the needs of employees, communities, partners, investors and other stakeholders. This indicator is also significantly higher than the global average of 77%.
* Environmental, Social, and Governance (ESG) covers the three dimensions of information disclosure, evaluation and rating, and investment guidance. ESG forms the basis for socially responsible investment and is an important component of the green financial system.
David Ko, Head of Audit, KPMG China, says: “With the ongoing liberalisation of capital markets in China, there is an increased focus on the ESG disclosures of listed companies. At the same time, many more financial institutions and enterprises in China are also taking ESG into considerations when organising their business. Against the backdrop of an increasing societal focus on sustainable development, strengthening ESG disclosures is an unavoidable and necessary requirement for enterprises.”
KPMG initially surveyed 1,300 CEOs in January and February, before many key markets were beginning to feel the full impact of the pandemic crisis. KPMG conducted a follow-up survey of 315 chief executives 6 July - 5 August to understand how CEO thinking has evolved during the crisis. In both instances, all respondents are from organisations that have annual revenues over US$500M and a third of the companies surveyed have more than US$10B in annual revenue.
The January/February survey included leaders from 11 key markets (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the UK and the US) and 11 key industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications). The recently conducted follow-up survey included CEOs across the industries mentioned above and from 8 of key markets (Australia, Canada, China, France, Italy, Japan, the UK and the US). NOTE: some figures may not add up to 100 percent due to rounding.
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