Today’s business environment is like nothing we’ve seen before. Predictions once confidently made are confounded by an increasingly complex geopolitical system that moves at pace and with little certainty.
Meanwhile the potential threats and opportunities provided by technology can seem overwhelming and as always, time to react is limited.
Many current CEOs began their careers at a time when AI and cybersecurity were largely confined to science fiction and issues such as the climate crisis, war in Europe and Brexit were beyond the predictive powers of most leaders.
Now, CEOs are managing a wider set of stakeholders than ever before and have to consider how best to stay abreast of the implications of complex world events. CEOs face new and unfamiliar situations often resulting from geopolitical issues such as the fresh turmoil in the Middle East.
Exposure to this political instability can be particularly relevant for businesses that have expanded into newer markets and emerging countries with potentially weaker institutions, civil unrest and low resilience.
Simultaneously the rise of populism, nationalism and country-first approaches to international trade can turn former ‘stable’ developed markets into politically turbulent problems. For the global CEO, the odds are increasing that it is a geopolitical event that they may need to explain as the root cause of a performance challenge.
The role of government
Unsurprisingly, CEOs believe that the level of complexity facing them is at its highest ever level. In the past, governments in more affluent countries tended to let business get on with it. Now, the post-war era of ever-increasing free trade often seems to be receding.
In many markets government is back centre stage in areas it had typically low involvement. CEOs need to consider the impact of issues such as protectionism, tariffs, export controls on technology and the risk of sanctions. In a time of multiple supply chains these matters have taken on added complexity.
Risk concerns
Globally, our research shows that geopolitics, emerging and disruptive technology and operational risks are the three biggest risk concerns of business leaders worldwide. Closer to home, in terms of the top three risk issues, both emerging and disruptive technology and regulatory concerns occupy the first and second risk issues across the island with reputational risk completing the trio in ROI whilst climate change is the third greatest threat to growth plans in NI.
Meanwhile, the aforementioned perceived threat of emerging and disruptive technology to businesses has increased in the last year (albeit from a low base). In the context of well-publicised rapid advances made in generative AI, it has risen from 8 percent in 2022 to 17 percent this year in ROI, and from 12 percent to 20 percent in NI and we expect this trend to continue.
Adding to this sense of complexity is the reality that due to the explosion in technology, business leaders are managing teams when even some of their more junior people (for example in areas such as technology) have specific knowledge and expertise that they may not have. This situation is quite normal now but relatively unthinkable only a couple of decades ago. Add the impact and implications of AI to the mix and it seems like the pace of change is accelerating exponentially.
Agenda issues such as Brexit aren’t time limited – they have both short-term impacts and longer-term implications.
Board Leadership Centre
For Ryan McCarthy, who heads KPMG’s Board Leadership Centre, this increase in complexity is causing CEOs and their boards to revaluate their own situation, and to assess vital gaps in knowledge and experience. With businesses facing unprecedented levels of complexity, there’s a growing need to test an organisations capabilities. “It’s one thing to talk about change, but you can’t manage risk if you don’t understand what’s happening. I believe we’ll see boards increasingly challenge the skills, expertise and insight that businesses have at their disposal.”
McCarthy says that it is becoming increasingly important for CEOs and their boards to develop multidisciplinary teams of experts, and to critically evaluate how well placed they are to deal with challenges from emerging disruptive technologies to rising geopolitical tensions and economic instability.
Such volatility and the shock of higher costs and dampened consumer demand in many markets has inevitably shifted focus to the immediate future. This is potentially hazardous says McCarthy as boards are “More comfortable with the near term as it can seem easier to understand and manage. It’s the issues from left field driven by what senior people may lack knowledge of that can do the most damage - both in terms of missed opportunities and misunderstood risk.”
Johnny Hanna, KPMG’s Belfast based Partner in Charge in Northern Ireland agrees that businesses are facing heightened levels of complexity. Hanna says that CEOs everywhere are increasingly finding themselves having to become experts on issues such as geopolitics and understanding the implications of issues such as Brexit.
“It’s important to recognise that agenda issues such as Brexit aren’t time limited – they have both short-term impacts and longer-term implications and it’s vital to see such issues as a process and not an event.”
Adapting growth strategies
57 percent of business leaders in ROI and almost two thirds (63 percent) in NI have already adapted their growth strategies as a result of these interrelated challenges as have 64 percent of their peers worldwide.
Roughly half of CEOs globally (48 percent) and in ROI (50 percent) believe micro-level decision making is a requirement for success given how quickly the world is changing. However this sentiment is shared by only 10 percent of respondents in NI.
There is strong consensus however both globally (72 percent) and in ROI (70 percent) and NI (67 percent) that a collaborative leadership style with shared management and operational responsibilities drives greater success.
The average age of a Fortune 500 CEO has been reported as 57.7 years. Yet is the emerging tech revolution edging out the older generation? According to our research, CEOs say they’re altering how they think about succession planning as a result of ongoing uncertainty about the future in a rapidly changing environment. In fact, approximately two thirds of CEOs across the island (ROI 63 percent, NI 67 percent) say that they are reconsidering their approach.
A time for reflection?
CEOs are shifting leadership styles to be more collaborative – internally and externally – to address the complexity and interconnectedness of new and emerging challenges.
Is the emerging tech revolution edging out the older generation? According to our research, CEOs say they’re retiring earlier and activating succession planning sooner as AI and innovation take centre stage.
There is some evidence that on ongoing uncertainty about the future in such a rapidly changing environment is altering the way in which CEOs are thinking about succession planning. In fact, approximately two thirds of CEOs across the island (ROI 63 percent, NI 67 percent) say that they are reconsidering their approach as compared with 73 percent worldwide.
Questions to consider
Have your financial forecasts and business plans been stress-tested for geopolitical disruptions?
What does increased geopolitical uncertainty mean for the availability and cost of capital and resources?
Who in the business is responsible for monitoring, analysing and interpreting geopolitical events?
Is your geopolitical intelligence of comparable quality to your financial and operational data?
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Queries? Get in touch
If you're grappling with complex problems in your business, or thinking about getting the right board in place, we can help.
Please contact our team below; we'd be delighted to hear from you.
Johnny Hanna
Partner-in-charge
KPMG in Northern Ireland
Ryan McCarthy
Audit Partner and Board Leadership Centre Lead
KPMG in Ireland
