- 92 per cent of Singapore CEOs eyeing M&As to quickly grow business
- 8 in 10 Singapore CEOs expect their headcount to increase
1 September 2021, Singapore – Singapore CEOs across sectors are more bullish about Singapore’s growth potential and their companies’ earning power over the next three years, compared to their global peers’ sentiments on their respective countries and organisations. They aspire to disrupt their sectors and are aggressively scaling through mergers & acquisitions (M&A), while managing cyber security and supply chain risks. However, they are feeling the heat from the climate change agenda especially where their salaries are increasingly tied to environmental, social and governance (ESG) outcomes and they struggle to tell the ESG story convincingly for their organisations, according to the KPMG 2021 CEO Outlook Survey1.
92 per cent of Singapore CEOs surveyed expressed confidence for Singapore’s growth outlook as compared to 82 per cent of CEOs globally on the growth outlook of their respective countries. Confidence levels for Singapore CEOs rose 15 per cent year on year, up from 80 per cent in 2020, compared to an eight per cent increase year on year for their global peers (up from 76 per cent in 2020).
96 per cent of Singapore CEOs predicted that their company’s earnings will increase in the next three years. Majority (72 per cent of Singapore CEOs) suggested an earnings outlook of up to 5 per cent per annum. 24 per cent of Singapore CEOs surveyed were relatively more bullish, suggesting an earnings outlook of 5 to 20 per cent per annum over the next three years, as compared to the global figure of 14 per cent of CEOs who felt the same way. This is a sharp contrast to 2020, where zero per cent of Singapore CEOs surveyed felt their company’s earnings could be higher than 5 per cent per annum.
84 per cent of Singapore CEOs also expected more jobs to be created over the next three years, as compared to 88 per cent of CEOs globally. For most sectors here, the CEOs (52 per cent) are anticipating up to 5 per cent headcount increase in their companies. Singapore CEOs (28 per cent) from the consumer and retail, energy, insurance, manufacturing and telecommunications sectors, expect an increase in headcount by 6 to 10 per cent. Local infrastructure sector CEOs (four per cent) were the most optimistic, projecting a rise in organisational headcount by as much as 11 to 25 per cent. These numbers are similar to global findings which recorded 27 per cent for 6 to 10 per cent headcount increase and 5 per cent for headcount increase of 11 to 25 per cent, though sectors may differ.
Even so, CEOs here are cognizant of the global war for talent. 24 per cent of them said a top operational priority will be to attract and retain the necessary talent. Compared to last year, more than double of them (38 per cent in 2021 vs 14 per cent in 2020) will also prioritise how they reward and incentivise talent.
Another worry is the global tax deal that is expected to come into effect from 2023. 4 in 5 Singapore CEOs say the implications are of “significant concern”, as compared to 74 per cent globally. Majority of CEOs here (88 per cent) are feeling increased pressure to boost public reporting of their global tax contributions, more so than their global peers (68 per cent). They are also acutely aware that how their organisation approaches tax will affect public trust in their businesses. 92 per cent of Singapore CEOs (versus 78 per cent globally) agree that there is a strong link between public trust and how their tax approach is aligned with their organisational values.
Mr Ong Pang Thye, Managing Partner, KPMG in Singapore, said, “CEOs are actively charting their path of recovery out of the pandemic, as the new normal becomes apparent. Even as new areas of growth are aggressively pursued, a challenge remains for leaders to get their ESG story narrated convincingly, while making ESG culturally ingrained in the organisation. This could mean changing their business models, re-designing supply chain and operations, hiring exceptional talent and retraining existing employees. International tax rules will also continue to evolve, making it essential for companies to be structured to roll with ambiguity, while remaining cost and tax-efficient.”
Singapore CEOs looking to grow faster with M&A appetite at a three-year high
With Singapore CEOs feeling bullish, 84 per cent of them say they are viewing technological disruption as more of an opportunity than a threat. Rather than waiting to be disrupted by competitors, a greater number of them (88 per cent) are looking to actively disrupt the sector they operate in, up from the 76 per cent last year and the 68 per cent in 2019. This is also higher than global figures of 73 per cent of CEOs who are looking to disrupt their sectors.
Alongside these ambitions, Singapore CEOs are capitalising on M&As with majority (36 per cent) calling it the most important strategy in achieving their organisation’s growth objectives. However, other strategies are still being used: organic growth through R&D, innovation, capital investments, recruitment etc (28 per cent), strategic alliances with third parties (28 per cent), joint ventures (4 per cent) and outsourcing (4 per cent). This can be contrasted with 2020, where CEOs here chose joint ventures (32 per cent) and strategic alliances with third parties (28 per cent) as their top two strategies; or in 2019, when organic growth (40 per cent) and M&A (32 per cent) took the top two spots.
In fact, Singapore CEOs’ M&A appetite has surged to a three-year high this year, with a total of 92 per cent of respondents saying they will make acquisitions that have moderate to significant impact on their overall organisations in the next three years. This surpasses the 74 per cent reported last year and the 60 per cent in 2019 in Singapore. It is also higher than the 87 per cent of CEOs globally who are planning to make such acquisitions this year.
In terms of their digital transformation strategy, 96 per cent of Singapore CEOs said they will need to be quicker to shift investment to opportunities and divest businesses that are becoming digitally obsolete, an increase from the 80 per cent seen last year. 80 per cent of Singapore CEOs also had an aggressive digital investment strategy to secure first-mover or fast-follower status, higher than last year’s 64 per cent.
About 4 in 5 Singapore CEOs feel well prepared to deal with a cyber-attack if it were to occur. This is a 40 per cent increase from the 60 per cent of CEOs who said so in both 2019 and 2020. It is also a higher number than the 58 per cent of CEOs globally this year who said they are prepared for a cyber-attack.
CEOs in Singapore are also carefully managing supply chain risks. 76 per cent of Singapore CEOs said their supply chains were under stress over the past 18 months, compared to 56 per cent of leaders globally. Hence, 47 per cent of Singapore CEOs have instituted deep monitoring of supply chains to anticipate demand better while 42 per cent of them have diversified sources to make their supply chains more resilient. These priorities to manage supply chain risks are similar to those of their peers’ globally.
Singapore CEOs looking to external assurance and government stimulus for ESG
The climate agenda has grown in importance for CEOs worldwide. However, this is particularly pronounced in Singapore with 80 per cent of CEOs here saying there is significant demand from stakeholders for increasing reporting and transparency on ESG issues, as compared to 58 per cent globally and 70 per cent in the Asia Pacific region.
The pressure is on for CEOs with 94 per cent of Singapore CEOs expecting to be increasingly held personally responsible for driving progress in addressing social issues, as compared to 71 per cent of CEOs globally. 68 per cent of Singapore CEOs and 84 per cent of CEOs globally still do not believe that their pay should be based on performance against ESG goals on top of financial performance goals. However, 63 per cent of Singapore CEOs reported that their pay is already tied to ESG outcomes as compared to just 30 per cent globally who said the same. Specifically, 80 per cent from Singapore shared that their annual bonus is tied significantly to ESG performance, while 40 per cent said ESG is tied to their base salary and long-term incentives plans. In contrast, 76 per cent globally have their annual bonus linked to ESG performance, and 53 per cent to long term incentive plans; but only 15 per cent have ESG performance tied to base salary.
The challenges for ESG are not unique. Globally and locally, what CEOs struggle with are in articulating a compelling ESG story (Global: 42 per cent; Singapore: 40 per cent), bringing up the rigour of ESG performance reporting to match their current financial reporting quality (Global: 19 per cent; Singapore: 32 per cent), and also in addressing the varying ESG reporting needs of different investors and stakeholders (Global: 23 per cent; Singapore: 16 per cent). Furthermore, 56 per cent of Singapore CEOs said that ESG programmes have reduced their financial performance, compared to 24 per cent of CEOs globally that said so. Majority of CEOs globally (40 per cent) also state that ESG programmes have neutral/negligible impact on their financial performance, as compared to 4 per cent of Singapore CEOs that feel this way.
As such, to meet stakeholder expectations around robust sustainability reporting, 88 per cent of Singapore CEOs expect to increasingly rely more on external assurance of their ESG data, as compared to just 55 per cent of CEOs globally. The pressure for better reporting comes largely from regulators (50 per cent) followed by institutional investors (45 per cent) in Singapore. Globally, this is flipped, with 52 per cent of CEOs pointing at institutional investors and 29 per cent of CEOs saying it is regulators.
That said, 96 per cent of Singapore CEOs (and 74 per cent globally) believe that large corporations, like their own, have the ability and resources, both financial and people, to help governments find solutions to pressing global challenges. But majority of CEOs (52 per cent of Singapore CEOs and 44 per cent globally) are only willing to invest one to five per cent of their revenue in sustainability-related programmes. Hence, 96 per cent of Singapore CEOs (and 77 per cent globally) are looking towards the government to provide the stimulus to help turbo charge climate change investments they have made.
About the KPMG 2021 CEO Outlook Survey
1The KPMG CEO Outlook provides an in-depth 3-year outlook from thousands of global executives on enterprise and economic growth.
The KPMG 2021 CEO Outlook asked 1,325 CEOs from among the world’s most influential companies to provide their 3-year outlook on the economic and business landscape, as well the impact that the on-going COVID-19 pandemic will have on their organisations’ future. All respondents have annual revenue over US$500M and a third of the companies surveyed have more than US$10B in annual revenue.
The survey was conducted June 29 to August 6 2021 and included leaders from Asia-Pacific (ASPAC) countries such as Singapore, Malaysia, Indonesia, Cambodia among others in the region, as well as global key markets such as Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, UK and US. The CEOs came from 11 key industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications).
- Some figures may not add up to 100 percent due to rounding.
KPMG in Singapore is part of a global network of independent professional services firms providing Audit, Tax and Advisory services. We operate in 146 countries and territories and in FY20 had close to 227,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.