FINANCIAL REPORTING AND IR

With the rapid and significant developments in the global geopolitical environment, and their impact on global trade and national economies, we all must be alert to the implications for our own organizations. To help our clients navigate this increasingly complex world, KPMG’s fourth annual survey, 2018 Global CEO Outlook, presents the findings of a survey of 1,300 chief executive officers (CEOs) in 11 of the world’s largest economies. The report aims to highlight some of the highest priority opportunities and challenges the CEOs identify for their businesses.

Survey Findings – realistic growth, areas of concern

While the CEOs are surprisingly consistent in expressing confidence in the growth prospects for their national economies and the global economy, 55% predict annual revenue growth of less than 2% for their own companies.

Asked about the areas of greatest risk, the CEOs identified their principal concerns as follows:

Geopolitical Volatility – Given the changing political and economic environment, CEOs identified the ‘return to territorialism’ as the greatest threat to the growth of their businesses. The United Kingdom’s decision to leave the European Union and the disruption of existing trade agreements suggest movement away from globalization and towards nationalism. This trend, and how it evolves, will greatly impact how organizations conduct business across borders. Companies will increasingly need to incorporate geopolitical analysis and related scenario planning into their risk assessments and decision-making processes. It is important for IROs to understand these risks, their impact on the prospects for their companies and the appropriate corporate response.

Cybersecurity – Technological advances have created significant benefits and efficiencies for companies, adding value to business models and customer experiences. Technology is now integrated into every aspect of a business. However, CEOs indicated that increased connectivity creates vulnerability to cyberattacks, with 49% saying that being attacked is a matter of ‘when’ not ‘if’. With businesses highly dependent on technology, cybersecurity remains a top concern for CEOs. Despite this concern, and notwithstanding significant investments that are being made by many, only 51% of CEOs believe that they are equipped and prepared for a cyberattack.

Investors are also more technologically savvy than ever before and will be asking questions about organizational cyber readiness and response plans. It is important as IROs to understand how the company is addressing this very real and significant risk, including the company’s cyber strategy and the resilience of its defence systems. CEOs underscored the importance of addressing this issue with investors, with 55% stating that a strong cyber defense plan is essential to obtaining stakeholders’ trust.

Demographic Shifts – As the baby boomers age, and Millennials play an ever-bigger role in the economy and investment decision making, they also bring a new set of habits, needs and values. How this generation makes buying and investing decisions is still a challenge for many, with 45% of CEOs stating that they struggle to understand their needs, and specifically how they differ from the older generation. To be successful in winning over this new generation, companies will need to listen and align the company’s values with targeted customers. Thirty-eight percent of CEOs acknowledge this and believe they need to reposition their brands to address the needs of the younger generation.

The CEO Outlook Survey is an interesting read, and reflects clearly the evolving challenges and risks that CEOs have identified for their companies and sectors. This insight into the thinking of leaders in IROs’ markets and sectors can help IR practitioners anticipate issues of concern to their stakeholder communities.

Charmaine Mak, CPA, CA is a Senior Manager, and Rob Brouwer, FCPA, CPA is Canadian Managing Partner, Clients and Markets, for KPMG LLP in Canada.