Canadian CEOs cleared one hurdle after another over the past five years to make their organizations more sustainably agile and resilient.
Their confidence in their organizations’ growth prospects remained steadfast throughout this extraordinary period of volatility and uncertainty from a global pandemic, surging inflation, strained trade relations, market wobbles and the rise of generative AI. At times, the CEOs helming Corporate Canada’s largest and most-influential organizations were the most optimistic in the world.
Today, their outlook has tempered somewhat, declining six percentage points from last year. The weight of their decisions clearly rests heavily on them, with more than three quarters acknowledging in KPMG International’s latest annual Global CEO Outlook Survey that they feel under more pressure to ensure the long-term prosperity of their business. In our companion KPMG Private Enterprise™ Business survey of Canadian small-and-medium-sized businesses (SMBs)—the backbone of our economy—as many as 86 per cent of owners and C-suite leaders say they are also feeling this pressure.
We interviewed more than 800 business owners and C-suite leaders across Canada on a variety of topics ranging from their top-of-mind concerns to their acquisition plans, the risks and rewards of AI, productivity, the omnipresent threat of cybercrime, and the impact of aging demographics on the workforce.
Our research finds that most Canadian business leaders have tempered their outlook and are turning inward, focusing on how their organization can better withstand or absorb external shocks and shield themselves as much as possible from forces beyond their control. But they aren’t looking back, they’re looking forward, taking control, innovating and investing where they can and where they believe it will have the greatest impact.
Knowing they must up their game to stay competitive, drive economies of scale and create more value, Canadian CEOs are aggressively looking for ways to mitigate external risks and improve their productivity, optimize revenue, take advantage of new technologies (like generative AI) and become cyber-proof, trade-proof and inflation-proof.
Eight years in review: The evolution of key risks to organizational growth in Canada
Economic outlook
While confidence in the Canadian economy remains high, with 83 per cent of CEOs bullish on economic growth over the next three years, it has ebbed 13 points from its 2022 peak and six points from last year amid the backdrop of a housing crisis, sluggish economy and the high cost of living. By comparison, their outlook on the global economy is far less enthusiastic, with only 69 per cent optimistic—an increase, in fact, of three points from 2022 but unchanged from last year.
Similarly, 88 per cent of Canadian SMBs are confident about the country’s economic growth prospects over the next three years. Eighty-four per cent feel optimistic about global economic growth despite geopolitical tensions, trade fragmentation and tariff concerns. As many as 85 per cent think the U.S. economy, productivity and investment will continue to outpace Canada’s, prompting them to espouse a more integrated North American economy as the best way forward.
By comparison, only 78 per cent of the global CEOs surveyed are confident about the growth prospects for their own country, down seven points from 2022 and unchanged from last year. Seventy-two per cent of global CEOs have a positive outlook for the global economy, largely unchanged over the last two years.
Confidence in growth prospects over the next three years
Source: KPMG Canadian CEO Outlook. 2023, 2024.
Top-of-mind worries
Beyond economic uncertainty (59 per cent), the growth prospects or challenges of their organization (44 per cent) is the issue most top-of-mind for CEOs in Corporate Canada today. Geopolitical complexities (41 per cent), the race to embrace and embed generative AI (40 per cent) and the competition for talent (30 per cent) rounded out the top five.
Trade and tariffs hold the greatest concern for SMB leaders. They cited growing protectionist attitudes like economic decoupling and trade relationships (31 per cent) as their top-of-mind issue. Economic uncertainty (26 per cent), embedding generative AI (26 per cent), managing costs and cash flow (24 per cent), and managing cybersecurity risks (24 per cent) were the other current issues keeping them vigilant.
Global CEOs also put economic uncertainty (53 per cent) as their foremost concern, followed closely by the race to embrace generative AI (50 per cent) and geopolitical complexities (47 per cent).
59% of Canadian CEOs say economic uncertainty is most top-of-mind for CEOs in Corporate Canada today
Cyber risk upsetting three-year growth plans
Both CEOs and SMB leaders told us that cybersecurity has reemerged as a top threat to their organizations’ growth over the next three years.
CEOs ranked operational issues as the biggest threat to their three-year growth plans. Cybercrime and cyber insecurity came in at No. 2 and supply chain, environmental and climate change, and reputational risks came in tied at No. 3. The last time cybersecurity ranked this high was in 2020 at a time when cybercrime had skyrocketed after the pandemic compelled workplaces to go virtual.
SMBs put cybersecurity risks first and foremost—with most feeling ill-equipped to defend against a cyberattack and as many as 75 per cent worried that generative AI will make them “even more vulnerable” to a cybersecurity breach—followed by emerging or disruptive technology, and energy security and affordability.
Single most pressing concern for Canadian CEOs
Source: 2024 Canadian CEO Outlook
Dusting off M&A
With inorganic growth a key operational priority for CEOs, further interest rate cuts into 2025 will help rejuvenate the M&A market. Two in five (41 per cent) indicated a high appetite to cut deals within the next three years that will significantly boost their operations.
For their part, a third (34 per cent) of SMBs expect to undertake acquisitions over the next three years that will have a significant impact to their overall company—whereas most SMBs (80 per cent) are looking for a long-term investor with patient capital and advice who can help them scale up and grow, with nearly half strongly indicating that finding this partner was a priority. Seventy-eight per cent of privately held SMBs say they would seriously consider going public if the compliance and governance burden of being publicly traded was lessened.
90% of Canadian CEOs have a combined high or moderate appetite for M&A over the next three years
34% of SMB leaders expect to undertake acquisitions over the next three years
80% of SMB leaders are looking for a long-term investor with patient capital and advice who can help them scale up and grow
ESG and generative AI take centre stage
Although it’s become a regular part of doing business, environmental, social and governance (ESG) best practices are not yet fully embedded into the DNA of most organizations. Given that CEOs in Corporate Canada named ESG as their biggest operational priority, it’s clear that business leaders recognize that a well-conceived and well-executed ESG strategy can give them a competitive edge, keep them onside with new legislation and earn them positive cachet from customers and stakeholders.
While ESG is also high among their operational priorities, SMBs are more focused on understanding and implementing generative AI, including upskilling their workforce and streamlining their business processes. After taking a wait-and-see approach last year, they’ve made generative AI their top operational priority going into 2025. Nearly nine in 10 (86 per cent) acknowledged they are trying to address their productivity gaps by ramping up automation and adopting new technologies like AI. But, as with so many things, there are hurdles here, too: 81 per cent say they lack the skilled talent necessary to put the full benefits of AI to work.
Interestingly, Canadian CEOs are out of sync on operational priorities with their global and Canadian SMB peers. Global CEOs and Canadian SMBs share the same top four priorities; they are both focused on advancing digitization and new technologies like generative AI. While Canadian CEOs made digitization a higher priority in recent years, it is now tied with generative AI at No. 5—a much lower focus than for global CEOs and Canadian SMBs.
While our research shows that SMBs believe the top benefit of implementing generative AI is increased efficiency and productivity, Canadian CEOs regard the top benefit as increased profitability. Canadian CEOs also expect their investment will pay off within the next three-to-five years, whereas SMBs expect this to take only one-to-three years.
Only 37 per cent of CEOs and 27 per cent of SMBs said their employees have the right skills to fully leverage the benefits of generative AI, and 60 per cent of CEOs and nearly 90 per cent of SMBs agree that generative AI integration has made them rethink the skills required for entry-level roles.
Top operational priorities for Canadian CEOs to achieve three-year growth objectives
Source: 2024 Canadian CEO Outlook
Back to the future
As part of their focus on corporate culture and talent development, CEOs are keen to get employees back into the office full time.
This year’s survey shows that 83 per cent of Canadian CEOs now expect a full return-to-office within the next three years—up significantly from 55 per cent in 2023. Further, 90 per cent say they are likely to reward employees “who make an effort to come into the office with favourable assignments, pay raises or promotions,” up from 77 per cent last year.
SMB leaders aren’t convinced, with only 20 per cent expecting a full return-to-office within the next three years. Even though they’d like people back in the workplace—85 per cent agree they’d offer rewards to entice a return—nearly two thirds (65 per cent) fully expect a hybrid workforce in three years, acknowledging that flexibility may prove essential to attracting and retaining the diverse talent they need to drive growth and productivity.
83% of Canadian CEOs now expect a full return-to-office within the next three years, up from 55 per cent in 2023
20% of SMB leaders expect a full return-to-office within the next three years, with 65 per cent expecting a hybrid workforce
With the skills shortage a perennial concern, 84 per cent of SMBs expect their organization to be impacted by labour market shifts—specifically, the number of employees who will retire and the lack of skilled workers available to replace them. By contrast, only about a third (28 per cent) of CEOs are concerned, although 79 per cent agree that organizations should be investing in skills development and lifelong learning within local communities to safeguard access to future talent.
Explore more insights from the CEO Outlook series
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About our surveys
The 10th edition of the KPMG CEO Outlook, conducted with 1,325 CEOs between July 25 and August 29, 2024, provides unique insight into the mindset, strategies, and planning tactics of CEOs. All respondents oversee companies with more than US$500 million in annual revenue and a third of the companies surveyed have more than US$10 billion in annual revenue. The survey by KPMG International included CEOs from 11 key markets (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, the U.K. and the U.S.) and 11 key industry sectors (asset management, automotive, banking, consumer and retail, energy, infrastructure, insurance, life sciences, manufacturing, technology, and telecommunications). NOTE: Some figures may not add up to 100 per cent due to rounding.
KPMG Private Enterprise™ surveyed 735 business owners or executive level C-suite decision makers at small-and-medium-sized Canadian companies between August 13 and Sept. 4, 2024, using Sago's premier business research panel. Thirty-seven per cent helm companies with more than C$500 million and less than C$1 billion in annual revenue, a quarter have more than C$300 million and less than $500 million in annual revenue, 26 per cent have between C$100 million and C$300 million in annual revenue, and 13 per cent have between C$10 million and C$50 million in annual revenue. No companies were surveyed under C$10 million.