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CEOs Eye M&A For Supply Chain Resiliency

September 8, 2021

Many U.S. CEOs plan to undertake mergers and acquisitions (M&A) over the next three years that will significantly impact their organizations, while also transforming their businesses to gain digital and ESG advantages and build cyber and supply chain resiliency, according to a new study released today by KPMG LLP, the U.S. audit, tax, and advisory firm.

“CEOs are striking the delicate balance of driving a growth strategy inclusive of M&A that is aligned with their ESG and digital strategies, while still leading their organizations through uncertainty caused by the ongoing COVID-19 pandemic,” said Paul Knopp, KPMG U.S. Chair and CEO. “These intersecting risks and opportunities provide CEOs the chance to uniquely lead and build trust with their key stakeholders in an environment where nearly all expect to grow.”
 

The 2021 KPMG CEO Outlook features insights from more than 1,300 CEOs at large companies globally, including 400 in the United States, on the key challenges and opportunities in driving business growth over the next three years. Key findings include:
  • Nearly half (49%) of U.S. CEOs indicated they have a high M&A appetite and will likely undertake acquisitions that have a significant impact to their overall organization, while 37% said they have a moderate M&A appetite and will make acquisitions that have a moderate impact to their overall organization.
  • Seventy-seven percent said they have an aggressive digital investment strategy intended to secure first-mover or fast-follower status.
  • The top five risks identified as posing the greatest threats to growth included tax, supply chain, reputational, climate and cyber security.
  • U.S. CEOs are confident in the growth prospects of the domestic economy (83%) and their company (86%), but less confident in the global economy (64%).

Resilience Priorities

  • Seventy-seven percent said the proposed global minimum tax regime is of significant concern to their organization’s growth goals.
  • Only 11% said their organizations are very well-prepared for a cyber attack. Overall, CEOs were split in terms of their organizations’ ability to handle one.
  • While 65% said they have a plan to address a ransomware attack if faced with one, 70% said an industry-wide approach is necessary to properly address ransomware demands.
  • Fifty-nine percent said they will be ensuring their supply chain is resilient in the event of a global lockdown and travel restrictions, while 80% said protecting their partner ecosystem and supply chain is just as important as building their own organization's cyber defenses.

Aggressive Digital Investment

  • Seventy-five percent said they need to be quicker to shift investment to digital opportunities and divest businesses that face digital obsolescence.
  • Seventy-nine percent said the accelerated pace of digital transformation through the pandemic will not be sustainable without first addressing burnout among their workforce.

Corporate Purpose and ESG

  • Sixty-one percent said the principal objective of their organization is embedding purpose into everything they do to create long-term value for all stakeholders.
  • Fifty-two percent said they are seeing significant demand for increased reporting and transparency on ESG issues today from stakeholders.
  • Seventy-four percent believe government stimulus is needed to turbo charge climate investments being made by the business community.
  • Seventy-eight percent said world leaders at COP26 must inject the necessary urgency in the climate change agenda.
  • Seventy-four percent said their organization’s digital and ESG strategic investments are inextricably linked.
  • Eighty-two percent said that the pandemic has caused their focus to shift towards the social component of their ESG program.
  • Seventy-six percent of CEOs are looking to lock in the sustainability and climate change gains they have made during the pandemic.
  • Nearly two times more CEOs (37%) said their companies’ ESG programs improve financial performance than those that said they reduce it (20%).  Forty-four percent were neutral.

Future of Work

  • CEOs identified their employee value proposition as the top operational priority to achieve their growth objectives.
  • When asked about the impact they foresee the pandemic having on their organization in the next three years, CEOs said they will: be looking at shared office spaces to allow employees to work more flexibly (59%); be looking to hire talent that works predominately remotely (53%); have a majority of employees working remotely at least 2 or more days a week (35%); or have downsized their organization’s physical footprint (26%).
  • When asked to identify key success factors to ensuring employees are engaged, motivated and productive in a world where hybrid work is increasingly common, the top responses were: focusing on employees’ mental health and well-being (42%); having a strong voice on the big issues that matter such as climate change and racism (38%); investing in digital training, development and upskilling to ensure employees’ skills remain future-focused (37%); and embedding diversity, equity and inclusion so no individual or group feels disadvantaged or disenfranchised (36%).

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