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Key findings

The Irish economy

56 percent of Irish CEOs are confident about domestic growth – down from 92 percent in January

Global outlook

Only one third of global CEOs are optimistic about global growth in the next three years compared with 68 percent in January

Risk concerns

Irish CEOs are more concerned about interest rate and cyber risks while talent risk is a greater issue for their global peers

Optimism levels

The global 2020 KPMG CEO Outlook pulse survey shows that CEOs have become less optimistic about the future performance of the global economy, marking a significant change since the beginning of the year,

Only one-third of those surveyed globally in June/July stated optimism about growth prospects over the next three years, compared with 68 percent in January 2020. 

In terms of the economy in the Republic of Ireland, the picture is somewhat more optimistic with over half of Irish CEOs (56 percent) confident about Ireland’s growth prospects over the next three years. However, this is down sharply from 92 percent in January – a 36 percent drop.  Emer McGrath, Co-Head of Markets with KPMG in Ireland, acknowledges the clear differences in how the pandemic is impacting various parts of the economy. “Labour intensive sectors such as transport, tourism and hospitality have been badly affected and are areas where appropriate support and clarity is needed to help them plan for recovery.” These sectors also clearly play a key role in the regional economy given their geographic spread. On a more positive note, Emer McGrath says that sectors such as healthcare, life sciences, technology and food, whilst seeing changes to purchasing patterns and channels “have been buoyed by steady or increased demand and have shown their potential to play an important role in economic recovery.”

CEO confidence in domestic economy over next three years
CEO confidence in domestic economy over next three years

Northern Ireland & Brexit

The situation in Northern Ireland is equally challenging for CEOs. 44 percent of Northern Ireland CEOs are confident about the region’s growth prospects over the next three years. However, this is down sharply from 80 percent in January – a 36 percent drop.  Johnny Hanna, Partner in Charge with KPMG in Belfast says “COVID -19 has been the key driver in the decline in business sentiment and whilst not as sharp a drop as has been the case in some markets, Northern Ireland business leaders are having their resourcefulness and capabilities challenged like never before.”

Whilst COVID-19 is clearly the key driver of downward sentiment, it is not the only challenging issue for CEOs. Whilst a return to territorialism has declined somewhat as a major concern when compared with last year’s report, CEOs are acutely aware of risks beyond the pandemic. Brian Daly, Head of Brexit with KPMG in Ireland points out that Brexit remains a significant risk for business across the island. “Whilst the politics of the issue may ebb and flow, the stark reality remains that for almost all businesses North and South, Brexit will inevitably mean added complexity in some shape or form” he says. “Forward thinking CEOs will be ensuring their teams are focused on the implications, doing robust scenario planning wherever they can and looking to see what opportunities might emerge.”

Titanic Quarter, Belfast

Shifting risks

As they plan their path to long-term growth, business leaders recognise that there have been new challenges to contend with during the lockdown.

Continued COVID-19 issues in key markets will inevitably deepen these concerns, with further adverse consequences in terms of retaining key employees, hiring talent and keeping their workforces productive.

A significant difference was recorded between CEOs in both the Republic of Ireland and Northern Ireland and their global counterparts as it relates to the threats to business following the pandemic. CEOs worldwide highlighted talent risk as their greatest challenge whilst those in the Republic highlighted concerns regarding interest rates as their single greatest concern. Given the unprecedented requirement for government borrowing to fund COVID related state payments, this may well reflect worries about the longer-term impact on public finances.

Cyber security was cited by CEOs in the Republic of Ireland as the second greatest risk to their organisations growth – a point reinforced by Dani Michaux, KPMG’s EMA Cyber Leader Head and Head of Cyber Security in Ireland who says; “The hybrid nature of current working from home arrangements is also causing challenges for organisations. The workplace is no longer in the office for many people, it is in their homes and for some it is in both. This has meant that homes have become far more attractive targets for criminals, as they are essentially an indirect extended part of the corporate networks.”

Meanwhile, in Northern Ireland, CEOs locally are most concerned about environmental and climate change risks and a return to territorialism – the latter most likely driven by the unique circumstances faced by Northern Ireland business in the context of Brexit. Frankie Devlin, Belfast based tax partner with KPMG says; “It’s absolutely clear that exporting from and importing to Northern Ireland is going to be transformed from the start of 2021, and whilst much of the detail still needs to be clarified, it’s vital that every business knows how it will impact them and puts in place strategies to overcome any difficulties. In particular companies should make sure they fully understand the movement of goods in their supply chain.”

Poolbeg lighthouse, Dublin

Global risk concerns

In January, CEOs worldwide ranked talent risk behind 11 other risks to growth. However, since the start of the pandemic, talent risk has risen to be named as the most significant threat to global businesses.

This puts it ahead of supply chain, the return to territorialism and environmental risk. Supply chain risk has accelerated up the agenda from its ninth-placed position at the beginning of the year – it now occupies second place as a major strategic threat. Even before COVID-19, supply chain risk was in the spotlight as a result of increasing volatility, be it trade tensions or extreme climate-driven events. However, the pandemic has brought this issue into even sharper relief, as organisations sought to maintain supply chain continuity in the midst of worldwide lockdowns.

Building resilient, flexible supply chains – ones that can withstand shocks and offer the agility to pivot to new opportunities – will be critical for organisations 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. We address supply chain issue in more detail later in this report.

Gary Reader, Global Head of Clients & Markets, KPMG International, points out that while major risks have not disappeared, human or talent risk has assumed new importance in what is both a humanitarian and economic crisis. “This year’s report highlights that human and operational risks have been given greater priority by senior executives as a result of the pandemic. Geopolitical, tax, operational and regulatory challenges have not ceased to exist, but CEOs recognise that losing key employees and attracting specialised talent can have a critical impact on future business performance. Many leadership teams are concerned about the mental and physical wellbeing of their staff, but also recognise that unless they manage this properly, growth will likely be stunted.” 

At Kyocera Corporation – an electronics and ceramics manufacturer that is one of Japan’s most successful companies – a determination to focus on talented employees is second nature and underpins a unique management philosophy. Chairman Goro Yamaguchi explains how the employee-centric philosophy of the company’s founder, Kazuo Inamori, a celebrated Japanese business leader and management thinker, still permeates the organisation today, over 60 years on from Kyocera’s founding in 1959. “Our founder Kazuo Inamori came up with the ‘Kyocera Philosophy’ soon after the company’s founding, and has been disseminating this philosophy to all employees from when the company was still small up to the present day,” he explains. “The philosophy is based on our management rationale, which is ‘to provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind’.”

By focusing on people, Kyocera fulfills its wider role in the world. “We have always valued the idea of ‘Living Together’ and working not only for ourselves but for the world,” he says. “There are three types of co-existence – with society, with the world, and with nature – which we have been maintaining since the 1970s. A company cannot continue to exist without co-existing with society and with nature.”

Conclusion

Business leaders need to make quick decisions about the future demand and profitability of what they provide.

It is a near certainty that even with a successful vaccine, consumer behaviour has changed for good. Habits formed in the past few months will endure and issues such as where and how people work will inform much of business thinking. The pandemic has amplified and accelerated many existing trends - providing new opportunities whilst shortening the life cycles of other products and services. Businesses, sectors and markets exposed to the latter will face major challenges whilst those that can move at pace to stay relevant can look to a more optimistic future. All the while geopolitics and the risk of protectionism remain a universal risk to business.

For what’s next…

COVID-19 is challenging leaders like never before. To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch. We’d be delighted to hear from you. 

2020 CEO Outlook

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