Optimism in long-term growth remains

The KPMG 2022 CEO Outlook surveyed global CEOs on their three-year outlook for the business and economic landscape. Despite ongoing geopolitical and economic challenges, global economic confidence in the next three years has rebounded from early 2022 — rising to 71%.

As companies continue to navigate a changing landscape shaped by the COVID-19 pandemic, 85% of global CEOs report positive growth expectations in 2022; a steady response from earlier this year and a slight drop from 2021 (87%).

CEOs anticipate a recession, but they’re prepared

While confidence is up over the next three years, CEOs anticipate challenges in the shorter term. Nearly nine out of 10 CEOs (86%) believe a recession will happen over the next 12 months, but three out of five (58%) feel it will be mild and short and 76% have plans in place to deal with it. 

In spite of short-term recession fears, the increased confidence CEOs have for the longer term indicates they feel well prepared to navigate their businesses through turbulent times. More than seven in 10 (73%) are confident about the resiliency of the global economy over the next six months — a period likely to be fraught with uncertainty and constant change — up 13 percentage points from February 2022. 

While resilient, CEOs are also realistic about the challenges ahead. Seventy-three percent of CEOs believe a recession will upend anticipated growth over the next three years, and three-quarters (75%) believe a recession will make post-pandemic recovery harder. The majority (71%) of CEOs surveyed predict a recession will impact company earnings by up to 10% over the next 12 months.

Compared to 2019 and 2020, CEOs are better prepared to weather short-term challenges with resiliency measures in place while still anticipating long-term growth. The top three courses of action include: boosting productivity (50%), managing costs (43%) and reconsidering digital transformation strategies (40%). 

Top risks ahead

Pandemic fatigue and economic factors, including the threat of rising interest rates and inflation, top the list of most pressing concerns for CEOs today at 15% and 14%, respectively. As we look to the next three years, risks are more interconnected than ever. Emerging technology (not in the top five factors last year) is now the top risk and greatest threat to organisational growth. Operational, regulatory and reputational concerns also slid into the list of business leaders' top five concerns.

Managing geopolitical risk

Strategic alliances (26%), organic growth (22%) and managing geopolitical risks (20%) top the list of most important strategies for achieving organisational growth objectives over the next three years.

CEOs indicate that geopolitical uncertainties will continue to impact their strategies and supply chains during this period. Most CEOs (81%) have adjusted or plan to adjust their risk management procedures considering geopolitical uncertainties, and 21% will increase measures to adapt to geopolitical issues to achieve their growth objectives. With geopolitics a key agenda item in 2022, CEOs need to be knowledgeable about the subject and adept at navigating risks. Geopolitical risk assessment will have to be core to their overall strategy.

Increasing M&A appetite

The three-year outlook for appetite in mergers and acquisitions (M&A) remains high despite economic concerns. In our survey, 47% of CEOs report a high appetite for M&A while 38% reflect a moderate keenness  — a significant shift from the 23% who expected to have a high appetite for M&A in early 2022. Amid higher interest rates and borrowing costs, rapid innovation will be key to staying competitive. Deal makers may be taking a sharper pencil to the numbers and focusing on value creation to unlock and track deal value, every step of the way.