Business sentiment: Leaders still confident on three-year outlook

When it comes to business sentiment, business leaders remain confident on three-year outlook though they are now grappling with multiple challenges.

Geopolitics and political uncertainty have become the leading perceived risk this year for senior executives—concerns that didn’t even make the top five in last year’s survey, according to the KPMG 2023 CEO Outlook based on a recent survey of 1,325 CEOs from the world’s largest businesses.

In addition, more than three quarters of CEOs—77%—say rising interest rates and tightening monetary policies could risk or prolong the threat of a global recession while 77% believe that cost of living pressures are likely to negatively impact their organisation's prosperity over the next three years, survey results indicated.

The persistent flux in global politics, trade dynamics and international relations has compelled CEOs to reassess their strategic priorities and demonstrate resilience in navigating the intricate interplay of global political forces, KPMG noted.

But business sentiment about the next three years remains broadly unchanged—73% of respondents are confident versus 71% saying the same last year, KPMG said.

Highlights: Business sentiment and other issues

• The debate over hybrid working and the return-to-office persists.
• CEOs are increasingly steadfast in their support of pre-pandemic ways of working, with 64% predicting a full return to in-office work within the next three years. 
• An overwhelming 87% of CEOs surveyed express a likelihood of linking financial reward and promotion opportunities to a return to in-office working practices. 
• CEOs continue to prioritise ESG despite polarising discourse.
• Despite a year of polarising debate surrounding the term ESG, CEOs recognize that delivering against the environmental, social and governance issues remains an integral part of their business operations and long-term corporate strategies. 
• This is supported by 69% of CEOs who have embedded ESG into their business as a means of value creation.
• Reflecting a shift in awareness and dialogue on ESG, 35% of CEOs have changed the language they use to refer to ESG both internally and externally. 
• This signals a trend towards CEOs getting more specific about each aspect of the acronym and prioritizing their efforts where they can have the most impact.
• However, CEOs believe that they are still a few years away from seeing a return on their ESG investment. 
• Those surveyed believe that ESG will have the greatest impact over the next three years on their customer relationships, brand reputation and M&A strategy.
• CEOs understand that their role continues to be increasingly driven by public and investor pressure, with 64% believing that, as trust in some institutions decline, the public expects business to fill the void of societal changes.
• Ethical challenges surround generative AI but are not stifling investment.
• The findings show that CEOs are continuing to invest heavily in generative AI in search of a competitive edge for the future, listing the technology as a top investment priority in the medium term. 
• 70% of CEOs agree that generative AI remains high on their list of priorities, with most (52%) expecting to see a return on their investment in three to five years.
• Despite a willingness to push forward with their investments, CEOs cited ethical challenges as their number one concern in terms of the implementation of generative AI. 
• The cost of implementation was ranked second (55%) and a lack of regulation and technical capability were jointly third (50%).