Digitalisation has the potential to reduce costs, improve efficiency and unlock new areas of value. It may also come with new risk and new costs. In a new survey of CEOs, a trend towards increased digitalisation is marked, while concerns around cyber security risks too come to light.
In its latest Global CEO Outlook, titled ‘Now or never’, professional services firm KPMG explores the opinions of almost 1,300 CEOs about the outlook for their businesses in the mid-terms. The CEOs are from businesses across ten countries and stem from 11 industries, with the majority of companies generating revenues in excess of $1 billion.
Top CEO concerns
When asked about the top concerns CEOs have for the coming three years, customer loyalty and the impact of the global economy on their company are both cited by 88% of respondents. 86% of CEOs also cite concern about lacking the time to think strategically about the forces of disruption and innovation shaping the future of their companies, with a range of new challenges – from cross-border activity from tech giants to startups that come to cause industry wide disruption. Businesses also face challenges (say 86% of respondents) from changing wants/needs of millennials, both as consumers and as employees, whose personal values come to challenge business values. The fifth most cited concern from respondents comes from the direct competition finding ways to take market share.
In terms of the top five strategic priorities for companies over the coming three years, fostering innovation comes in at number one cited by 21% of respondents. A strong focus on clients takes the second spot, cited by 19% of respondents, while implementing disruptive technology was seen as the top priority for 18% of respondents. Talent development and management is cited by 18% of respondents, while a strong focus on marketing, branding and communications came in fifth at 17%.
The top five areas of investment over the next 3 years, includes a number of digital and technology related areas. Top of the list is increasing data analysis capabilities, cited by 25% of respondents, followed by new product development, cited by 24% of respondents. Cyber security solutions is cited by 22% of respondents, while the measurement and analysis of customer experience and needs is cited as important by 21% of respondents. Geographic expansion within the home country was seen as important by 20% of respondents.
According to respondents, one of the main reasons (cited by 44% of respondents) for leveraging data and analytics (D&A) technology, is to drive process and cost efficiencies. Driving strategy and change too rated highly (by 44% of respondents), while finding new customers comes in third at 43% of respondents. Developing new products and services is cited by 43% as the reason to leverage D&A.
Increased focus on digital technologies, from data collection to its analysis, as well as digital transformations of processes, comes with risks – 30% of respondents note that cyber security risks rank in their top five concerns. Regulatory risks come in second, at 28% of respondents. Emerging technology risks are cited by 26% of respondents, while 25% of respondents are concerned about strategic risks. Geopolitical risks are cited as a concern by 24% of respondents.
In terms of actual risks, related to respondents from different global regions, a mixed bag was disclosed by the study. In ASEAN countries the biggest cited risk (by 34% of respondents) are related to operational risk. In Brazil, East Africa, Mexico and South Africa cyber security risks are cited as a problem by 40%, 50%, 38% and 32% of respondents respectively. In Ireland and South Africa, regulatory risk feature at 35% and 32% respectively, while in Canada and Mexico, environmental risk is cited as the top risk by 32% and 38% respectively.
The rise of cyber security risks, with more than 500,000 incidents per day and up to $400 billion per year in damages, sees companies scramble to defend their respective (and ever expanding) digital frontiers. Digital transformations, while sold as creating a host of opportunities, from acquiring new customers to delivering cost savings, also come with addition costs – particularly in terms of cyber security risks, cyber insurance and the cost post of hiring external or internal teams to secure – in so far as that is possible – the businesses digital domain. When asked about how prepared companies are for a cyber event, a mixed bag of responses were recorded across regions.
In ASEAN and Switzerland the fewest respondents state that they are not prepared for a cyber event, at 58% and 50% respectively. In East Africa the largest number of respondents say they are not prepared for a cyber event, at 98%, followed by Taiwan, at 92%. 87% of Canadian respondents say that they are not prepared, while 84% of Irish respondents say that they are not prepared.
Related recently released CEO studies:
- CEOs with outsider mind-sets more likely to make better decisions (by McKinsey & Company)
- CEO turnover at a record high, outsider executives gaining terrain (by Strategy&)
- PwC: CEO confidence in business growth drops slightly (by PwC)