Almost half of CEOs do not believe there will be a return to pre-COVID business operations until 2022 - while a quarter do not ever see a 'return to normal' post-pandemic, a KPMG survey of 500 global CEOs shows.
A higher proportion of Australian respondents believed their business had changed forever than any other of the 11 countries surveyed.
The survey of CEOs with companies over US$500m turnover also finds that the easing of government restrictions would be a more important trigger to return to normal than a successful roll-out of the COVID vaccine. The two major concerns expressed by the leaders about the vaccine distribution were employees in different countries not having access to vaccines at the same time, and staff being put off being vaccinated by misinformation.
Yet despite the 'delayed/if ever' uncertainty about a return to normal, the CEOs are overwhelmingly confident about their company and country's prospects over the next three years. Almost 80 percent are expecting growth of between 2.5-10 percent but fewer than half were optimistic about the prospects for the global economy in that timescale.
Key findings from the report include:
Return to Normal/Vaccinations
- 45 percent believe they will 'return to their normal course of business' sometime in 2022; 31 percent say in 2021.
- 24 percent say their 'business is forever changed'. 60 percent of Australian respondents - a higher proportion than any other country - were in the 'forever changed' camp, and none believed 2021 was possible.
- 76 percent said government encouragement in key markets - by lifting COVID restrictions - would be the key trigger in a return to normal working.
- 61 percent said a successful vaccine roll-out in their key markets would be the key factor - with at least half of the population in those countries being vaccinated.
- 55 percent said geopolitical issues were the biggest concern, with the potential for staff in different countries being vaccinated at different timescales.
- 34 percent said their main concern was that staff won't take the vaccine given misinformation stories.
- While 90 percent of CEOs would expect their staff to tell the company if they've been vaccinated, only 21 percent would expect that of clients/visitors to their premises.
Growth Outlook
- 89 percent globally - and 100 percent of Australians - were confident or very confident of growth prospects over next 3 years.
- M&A appetite was almost universally low to moderate.
Key Risks
- The top three risks were assessed as cyber, regulatory and supply chain.
- But notably Australian CEOs had climate/environmental risk as joint-top risk (along with cyber).
COVID Business Impacts
- In terms of business effects of COVID, 61 percent intend to increase spending on digital; 50 percent will spend more on HR resourcing to look after staff and improve mental health while 42 percent plan more virtual interviews with candidates.
Digitisation
- On digital/IT expenditure, 52 percent expected to invest more on data security; 50 percent on customer-centric technologies like chat bots; and slightly under half on digital communications and artificial intelligence.
- Three-quarters (74 percent) said that in terms of the digitisation of their operations, progress had accelerated by a matter of months during the lockdowns of 2020 - 15 percent said it had progressed sharply in that time, putting them years ahead of where they would have expected to be.
Diversity & Inclusion
- Just over half agreed that progress on diversity & inclusion had been too slow in the corporate world; while 42 percent disagreed.
- 99 percent of CEOs said they felt a greater emotional connection to their company purpose since the COVID era began and 98 percent said purpose had helped them decide best how to meet stakeholder needs during the crisis.
ESG
- Almost half said the US re-entering the Paris Accord would cause their company to have more stringent ESG practices.
- 96 percent said the crisis had led to more focus on the 'S' component of Environmental, Social and Governance.
Dr Brendan Rynne, Chief Economist, KPMG Australia, said: "Many CEOs now doubt if there can be a return to normal, as we previously understood it. A smooth and uniform vaccine roll-out across most countries is clearly key to many multinationals. The risk is that nationalism or other geopolitical issues could prevent that."
"KPMG Australia's own scenario analysis shows there could be a 2.8 percent boost to world GDP if a successful vaccine roll-out happens, and a 1.2 percent drop if it does not. Failure to deliver a comprehensive and timely vaccine program to low- and lower-middle-income countries - which would prevent all countries being able to fully open their borders to international travellers before 2022 - would be a significant blow to the world economy."
"Our survey shows many companies are clearly looking to governments to give them the go-ahead to resume normal business operations but easing of restrictions will largely depend on the vaccine roll-out. There is also a question of whether going 'back to normal' would be a good thing anyway, or whether we should use this once-in-a-lifetime situation to permanently lock in changes."
Dr Rynne said it was encouraging to see that digital transformation has accelerated and technology spend will keep rising. KPMG analysis has shown that wage growth is closely connected to capital spend and increased productivity and this will be crucial looking ahead.
Gary Wingrove, CEO of KPMG Australia said: "ESG has been the big climber in priorities since the COVID era began. Much more focus on staff mental health and employee engagement will continue but business also now has a heightened 'green recovery' agenda. Business has been largely taking the lead on issues like decarbonisation, but they need clear government and regulatory guidance on the road to Net Zero. From our survey, it does seem as if the US re-entering the Paris Accord will give the climate agenda a big push."
Mr Wingrove also said it was notable that almost 100 percent of CEOs surveyed said they felt a greater emotional connection to their company purpose since the COVID era began.
"The fact that 98 percent said purpose had helped them decide best how to meet stakeholder needs during the crisis is significant. It shows leaders are aware of the importance of the human element and the need to understand the impacts of disruptive change such as COVID on emotional wellbeing."
