With a potential recession on the horizon, Canadian CEOs are preparing for some rocky roads ahead. However, they remain optimistic about the growth of their businesses and believe any turbulence will be mild and short lived. This optimism bodes well, but comes with caution over economic challenges, geopolitical turmoil, and technological disruption.
These are among the core themes in the latest KPMG CEO Outlook survey and small and medium-sized business (SMB) poll. Combined, they reveal CEOs and leaders of Canadian businesses both large and small are confident in their ability to prosper over the next three years, but are nonetheless cautious about what the next six months might bring.
Despite a sense of long-term optimism, CEOs are bracing for short-term disruption. A vast majority (92%) believe a recession will emerge over the next 12 months, threatening anticipated growth and their ability to rebound fully from the pandemic. At the same time, most predict this recession will be mild and short, and nearly three-quarters are already adjusting their strategies to brace for this short-term obstacle.
While only two-thirds of SMB leaders share these predictions for an incoming recession, and half believe that such an event would cause disruption, SMB executives remain optimistic with 59% expecting to increase earnings by 2.5% to 10% over the next three years – another 18% see more than 10% growth.
71% of Canadian CEOs have already been adjusting their strategy to focus on boosting productivity in advance of an anticipated recession
50% of SMB leaders have already been adjusting their strategy to focus on boosting productivity in advance of an anticipated recession
96% of Canadian CEOs are confident in the growth of the Canadian economy over the next three years, an increase of 7% from 2021 (85% global)
However, 69% of Canadian CEOs are confident in the resilience of the Canadian economy over the next six months (76% global)
ESG and trusted purpose
CEOs remain committed to expanding their ESG agendas. Even with the challenges in their immediate path, Canadian and global CEOs share a desire to drive progress across all three pillars, be it by taking a stance on divisive political and social issues, increasing ESG governance, establishing a Net Zero strategy, or delivering on actionable inclusion, diversity, and equity strategies.
While investments are being made in environmental and social initiatives across the board, Canadian CEOs are struggling to tell their ESG story. At least, more than they have in the past. Some lack visibility as to where ESG opportunities lie within their organization, while others require a deeper understanding of how the E, S, and G pillars intersect within their operations. And then there are those who are making progress in their ESG strategies but are challenged to tell a compelling story to their stakeholders. These challenges aren't enough to dissuade CEOs from their journey but are important to address.
56% of Canadian CEOs are struggling to tell a compelling ESG story, up 15% since 2021
59% of SMB leaders struggle to articulate a compelling ESG story
85% of CEOs believe corporate purpose is important for shaping capital allocation, partnerships, alliances and M&A
69% of SMB leaders expect greater scrutiny of their ESG diversity performance
On the digital path
It’s not surprising that digital transformation remains high on the C-suite agenda. A majority of Canadian CEOs continue to invest in the strategies and technologies they believe will be necessary to remain competitive, keep speed with customers, and outpace cyber security threats. This is despite a large cohort of business leaders who admit to feeling fatigued from making rapid, large-scale digital upgrades in recent years with regards to remote working, hybrid offices, and growing cyber security threats. And while digital transformation remains a key priority, 72% feel that managing risk and compliance of the transformation is one of the biggest barriers to progression.
56% of Canadian CEOs feel prepared for a cyberattack, down 17% since 2021
85% of CEOs agree that having a strong cyber strategy is critical to building trust with key stakeholders
64% of CEOs believe driving digital transformation at a rapid pace is critical to attracting and retaining talent and customers
73% of SMB leaders feel well prepared for a cyberattack
Perspectives on talent acquisition, management, and retention also get a spotlight in this year’s CEO Outlook. After nearly two years of remote work and hybrid offices, employers have a lot to say about the efficacy and sustainability of emerging workplace models.
For the most part, Canadian CEOs are on board for the work-from-anywhere revolution – at least, for now. Sixty-five percent agree that current hybrid/remote work models have had a positive impact on productivity, collaboration, and innovation; and slightly over half say allowing for remote work arrangements has boosted employee morale and retention, a much more positive experience when compared to global counterparts.
Globally, only 44% indicate hybrid and remote work has positively impacted productivity and 49% indicate a positive impact on collaboration and innovation. However, Canadian CEOs are still amongst the most eager to get back to the office, with 75% expecting employees working in the office full time in three years, and under a quarter anticipating hybrid models to remain a part of our long-term futures. Globally, 65% are looking to bring employees back to the office and 28% believe hybrid is here to stay.
89% of CEOs expect to increase their headcount over the next three years, with 27% anticipating an increase of 6-10%
77% of SMB leaders expect an increase in headcount over the next three years, with 38% anticipating an increase of 6-10% and a further 20% expecting growth of 11% or more
75% of Canadian CEOs are expecting that employees will be back in the office in three years’ time (65% global)
The SMB perspective
Perspectives from Canada's small-and-medium-sized business (SMB) leaders offer a broader view on the business landscape in Canada. Our 2022 SMB poll provides us with insights regarding how SMB leaders’ priorities and outlooks compare with those of Canada’s largest organizations. While their confidence levels and growth predictions are largely consistent, the obstacles they are facing differ. Where CEOs of large Canadian corporations are concerned with an evolving regulatory landscape and disruptive technologies, SMB leaders see economic factors, cyber risks, and talent shortages as their most immediate threats.
Growth is still on the minds of SMB leaders, with many banking on organic growth through innovation and new products to achieve it. Digital and technological evolution, strategic alliances, and attracting fresh capital are also being pursued to drive continued growth. Additionally, like Canadian CEOs, a bulk of SMB leaders are also planning to expand their employee base over the next three years, although attracting and retaining talent remains a key obstacle to growth for SMBs.
Ready to react
While it’s clear that uncertain times lie ahead with global strife, economic strain and industry-wide disruptions, Canadian CEOs continue to express a sense of optimism as they plan for growth. And while more work remains to clearly articulate ESG ambitions, address the talent landscape, and continue to evaluate and evolve technological investment strategies, business leaders are well prepared to rise to the challenges ahead.
Dig deeper into what’s driving – and concerning – today’s leaders in the days and years ahead.
KPMG’s Canadian CEO Outlook and new SMB Survey show business leaders are taking steps to prepare for continued turbulence
KPMG’s CEO Outlook and new SMB Survey show business leaders are taking steps to prepare
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About KPMG’s CEO Outlook survey
The eighth edition of KPMG CEO Outlook, conducted between July 12 and August 24, provides an in-depth three-year outlook from thousands of global executives on corporate and economic growth.
The survey covers 1,325 CEOs in 11 key markets (including Canada) and 11 key industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications).
About the KPMG in Canada 2022 Business Outlook survey
KPMG in Canada surveyed business owners or executive level C-suite decision makers at 503 small and medium-sized Canadian companies between August 16 and September 1, 2022, using Schlesinger Group’s Methodify online research platform. 32% of the companies reported annual gross revenue of over $500 million, 26% between $300-$499 million, 18% between $200-299 million, 16% between $100-$199 million, and 8% below $50 million. The vast majority (85%) of the SMBs surveyed are privately held and the remaining (15%) are publicly traded. 57% of the SMBs are family-owned businesses.