Resilience of CEOs put to the test

Over the past three decades, I’ve worked in the energy and natural resources (ENR) space. The industry has had its fair share of boom-and-bust moments, but resilience is built into energy leadership. It runs through the blood of ENR CEOs as they celebrate the good times, with a constant eye over their shoulders looking out for the next downturn or geopolitical challenge.

In 2022, there are lessons for leadership across all industries. KPMG’s latest CEO Outlook shines a light on the huge scale of challenge facing senior executives. In short, it no longer matters what industry you’re leading — it’s likely that, right now, you’re facing a monumental scale of growth obstacles and uncertainty. The ongoing war in Ukraine, coupled with uncertainty, supply chain challenges and inflationary pressures, has created a perfect storm for boardrooms.

According to 86 percent of global CEOs, we’re entering a recession over the next 12 months — one powered by geopolitics. The data highlights the stark reality of the situation we’re facing. There’s widespread recognition we’re in the midst of a period of great instability, but there are glimmers of hope and reasons for cautious optimism. While nearly nine out of 10 CEOs believe a recession will happen, three out of five (58 percent) feel it will be mild and short. And despite near-term economic challenges, CEOs have a renewed sense of optimism heading into 2023, with global economic confidence over the next 3 years at 71 percent (an increase of 11 percentage points from March 2022), the highest since 2020.

Ahead of taking on my new role as Global Head of Clients & Markets, I recently travelled around the world — from Australia to France — meeting colleagues and business leaders. Their stories were almost identical. Yes, different regions and industries face bespoke challenges, but we’re in a unique moment in history. Geopolitical and economic uncertainty is broadly similar wherever we live and work. There’s a sense we’re in this together and that the business world is prepared to roll up its sleeves and fight its way back to sustainable, long-term growth.

The data on resilience speaks for itself. In our findings, CEOs say they’re ready for a likely recession: 76 percent have planned for one, and 20 percent will be increasing measures to adapt to geopolitical issues in order to achieve their growth objectives over the next 3 years. In some cases, this has forced business leaders to significantly shift priorities and pivot business models to attempt to maintain their growth and confidence as they enter an incredibly challenging period.

Our eyes are on CEOs, who will be looking to guide their organizations through any economic or global uncertainty. In response to geopolitical challenges, senior executives have already taken and plan to take several steps in the next 6 months to adjust their strategies:

• 51 percent of global CEOs have discontinued their working relationship with Russia, and 34 percent plan to do so in the next 6 months 
• 41 percent of global CEOs have adjusted their risk management procedures in light of geopolitical risk, and 39 percent plan to do so in the next 6 months
• 40 percent of global CEOs have paused or reduced their digital transformation strategies in response to geopolitical challenges, and 40 percent plan to do so in the next 6 months

We’ve all seen the headlines on supply chain challenges. CEOs have taken note and are acting. Our survey notes that (as of August 2022) 47 percent of global leaders plan to diversify their supply chains in the next 6 months in response to geopolitical challenges, and 32 percent have already done so.

Global supply chain leaders are also starting to double down on investing in technology — including real-time, end-to-end analytics — to improve visibility across the entire value chain. For those with an eye to the future, they’ll have a more accurate understanding of how products and materials flow through the network and where the carbon, waste and energy issues are in the supply chain. With this insight, leaders can actually do something about it, moving from mere strategic intent to real tangible outcomes.

But this visibility isn’t automatic; it’s going to take time and investment. This is why it’s imperative businesses aren’t reactive during times of uncertainty. CEOs should stay focused and invest in the right digital transformation initiatives that will help drive growth in the years ahead. Such transformations can have a powerful impact on your operations and supply chains.

It goes without saying that business leaders have taken on a profound new role in society. They’re navigating the geopolitical storms rumbling through the world today, trying to tackle their great environmental, social and governance issues, and helping ensure business survival and — ultimately — a return to long-term, sustainable growth.

From the small business owner to the multi-national CEO, the story is the same — and so is the challenge. If it isn’t already, you should embed geopolitical risks and assessments into your overall strategy.

There are many reasons to feel uncertain about what lies ahead, but my time in ENR has taught me a key lesson: there is always light at the end of the tunnel. The findings in our CEO Outlook reflect the growing resilience among CEOs in the world’s major businesses. With strong, purposeful and collaborative leadership, the world can once again focus on a return to sustainable growth that benefits everyone.