CEOs Adjusting Strategy to Address Risks

CEOs Adjusting Strategy to Address Risks

April 22, 2024
Strategy includes both near-term risks as well as structural changes.

The risks to growth that CEOs are facing include geopolitics and cyber, as well as longer-term structural changes to the U.S. economy, including a tight labor market and new regulations.

According to a new study 2024 KPMG U.S. CEO Outlook Pulse Survey this combination of increased risks -- what they are calling compound volatility -- is leading companies to focus on rapidly deploying generative AI (GenAI) across their enterprises.

The survey found that 67% of companies are currently making significant strategic adjustments (supply chains, investment decisions, tax planning, etc.) in response to geopolitical uncertainty, wars, conflicts and major elections happening around the world. 

Here are some highlights from the survey:

CEOs remain confident in growth prospects of the U.S. economy but are making strategic adjustments to address a combination of near-term risks and structural changes.

  • U.S. CEOs are confident in the growth prospects of the U.S. economy (87%), global economy (78%) and their companies (78%) over the next year.
  • 72% of CEOs expect their organization’s headcount to increase over the next year, with 32% of this group expecting a significant increase in hiring. Only 4% say they expect workforce reductions within their organization over the next year.
  • 87% anticipate rising geopolitical tensions around the world this year will disrupt current positive U.S. economic trends such as inflation cooling.
  • When asked to identify the risks posing the greatest threat to their organization’s growth over the next year, CEOs cited regulatory concerns, operational issues, cyber security and tax.
    • Just 32% say their organization was well prepared for the implementation of Pillar Two (the global minimum tax) at the beginning of 2024, while 71% say it will be a significant compliance burden and that the compliance effort will be costly (73%).
    • The majority (72%) say the expiration of numerous business tax provisions from the Tax Cuts and Jobs Act (TCJA) at the end of 2025 will be felt and have a moderate or significant impact to their overall organization.

The execution of ESG initiatives edged out other areas as CEOs’ top operational priority. The majority expect to see significant returns from their sustainability investments in three-to-five years.

“Sustainability strategies must enhance financial value to be truly sustainable." said Paul Knopp, CEO of KPMG, in a statement. "CEOs are thinking beyond complying with climate disclosure rules and focused on creating long-term value for their companies, ensuring the integration of sustainability into core business practices and operations. They see their sustainability strategy and reporting being supercharged by effective data management and GenAI, which can help their organizations make real-time, data-informed adjustments.”

  • To achieve their growth objectives over the next year, CEOs identified the execution of ESG initiatives as their top operational priority (17%) ahead of inflation proofing capital and input costs (14%), advancing digitization and connectivity across the business (11%), improving supply chain agility and resilience (11%) and improving the customer experience (11%).
  • 55% of CEOs expect to see significant returns from their sustainability investments in the next three-to-five years with 25% predicting five-to-seven years and 19% predicting one-to-three years.
  • Today, CEOs are focusing their sustainability efforts on operations (42%), products (24%) and governance models and transparency protocols such as best practice reporting (16%).

See the full survey for other analysis.


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