By Dr. Abdullah Al Fozan
The global business community grappling with numerous challenges to growth, including geopolitical uncertainty, politicization, and increasing stakeholder expectations regarding environmental, social, and governance (ESG) and generative artificial intelligence (AI).
Mid-term global confidence remains relatively robust despite the current macroeconomic and geopolitical challenges. There appears to be consensus that over time we can return to international, long-term sustainable growth over time.
CEOs can drive a return to a more equitable, prosperous planet. The key to success will be an unrelenting focus on long-term strategic planning and commitment to avoid the pitfalls of short-term, reactive leadership inherent during periods of deep uncertainty.
Global confidence in the economy remains broadly unchanged year over year, surpassing pre-pandemic confidence levels.
Almost three in four global CEOs are confident about the economy over the next three years, compared to 71 percent last year. The optimism reflects a clear resilience and a collective focus to get the world back on a sustainable, long-term growth trajectory.
However, CEOs’ confidence in their own company growth prospects has dipped to a three-year low, with 77 percent expressing confidence this year compared to 85 percent at the beginning of 2020.
The shift in CEOs’ perception of risks to business growth is noteworthy. Geopolitics and political uncertainty now top the list, acknowledging that these are not merely short-term considerations.
In a geopolitically fragmented world, CEOs often become de facto political players. Their approach should elevate politics on the boardroom agenda, while also creating a strategy around geopolitical risks that includes specialized insights, scenario planning, and stress testing.
The top 10 risks this year were geopolitics and political uncertainty, operational issues, emerging/disruptive technology, supply chain, regulatory concerns, environmental/climate change, interest rates, cyber security, Reputational risk, and talent.
As CEOs navigate and respond to these challenges, they recognize that demonstrating personal integrity is key to building trust. Almost 71 percent express willingness to divest a profitable part of their business if it poses a threat to their reputation.
Additionally, 61 percent are prepared to take a public stance on politically or socially contentious issues, despite potential board concerns.
AI is transforming various fields, permeating everyday life, businesses, and society. As tools like Bard and ChatGPT have gained prominence, global CEOs increasingly recognize generative AI’s seemingly limitless potential and are keeping their foot on the gas in terms of their investment and exploration of the technology.
Global CEOs are making generative AI a top investment priority. According to the KPMG 2023 CEO survey, 70 percent are investing heavily in generative AI as their competitive edge for the future, with 52 percent expecting a return on their investment in three to five years.
In KPMG’s recent global tech report, 55 percent of organizations reported progress delays toward automation due to concerns about how AI systems make decisions.
Despite a willingness to push forward with their investments, global CEOs recognize that emerging technologies can introduce risks that should be addressed. Fifty-seven percent cite ethical challenges as the top concern when implementing generative AI, followed closely by a lack of regulation.
As scrutiny and regulation of AI increases, organizations may need policies and practices they can confidently articulate and apply.
However, CEOs acknowledge the risks associated with emerging technologies, particularly ethical challenges (57 percent) and a lack of regulation. Cybersecurity concerns are also heightened, with 82 percent recognizing potential new threats despite AI’s help in detecting cyber-attacks. CEOs must lead by adopting responsible AI frameworks and prioritizing safeguarding and governance.
This year’s challenging global landscape underscores the pressures CEOs feel to make decisions on a variety of critical issues and they impact how CEOs plan to support and attract talent over the next three years.
Notably, global CEOs are steadfast in signaling their support of pre-pandemic ways of working, with 64 percent anticipating a full return to office is only three years away. This remains consistent with their views in the 2022 CEO Outlook. Nearly 87 percent of CEOs say they are likely to reward employees who try to come into the office with favorable assignments, raises or promotions.
This sentiment underscores the persistence of traditional office-centric perspective among CEOs. However, this comes against a backdrop of the debate surrounding hybrid working which has positively impacted productivity over the past three years and has strong employee support, particularly among the younger generation of workers.
As organizations have globally embraced hybrid working models, leaders must take a long-term view that embraces the employee value proposition and encompasses the considerations and needs of employees to ensure that talent is nurtured and supported.
While there is broad agreement on the importance of Inclusion, Diversity, and Equity (IDE), CEOs express concern about the slow pace of progress. Two-thirds (66 percent) believe progress in these areas has been sluggish, emphasizing the need for change across the senior leadership level (72 percent).
ESG is increasingly recognized as an integral part of corporate strategy, ensuring resilience and long-term growth amidst geopolitical and economic challenges.
CEOs recognize that it remains an integral part of their business operations and corporate strategies and are taking a more outcomes-based approach.
More than two-thirds (69 percent) of global CEOs have fully embedded ESG into their business to create value.
While CEOs believe they are a few years away from seeing returns on ESG investments, they recognize its significance with customers and on brand reputation. However, 68 percent admit that their current ESG progress may not withstand potential scrutiny from stakeholders or shareholders. Balancing progress with business growth remains challenging, as indicated by more than half of senior executives in the ESG Assurance Maturity Index.
In conclusion, CEOs play a pivotal role in navigating the complex landscape of challenges, and their decisions have far-reaching implications for the future of business and society.
Chairman & CEO of KPMG in Saudi Arabia and Levant.