KPMG’s recent CEO Outlook survey in Saudi Arabia took the pulse of CEOs across the economy from some of the Kingdom’s largest companies — all 50 surveyed CEOs represent companies with revenues greater than US$500 million and 60% of the companies have revenues greater than US$1 billion. The wide scope of the companies surveyed indicates that the insights could be consequential for many of the Kingdom’s decisionmakers in both business and government.
Achieving long-term value through collaboration
CEOs and government leaders pay close attention to each other’s decisions and strategies. In many cases, they also harmonize their strategies to achieve economic goals and societal development targets.
Saudi Arabia’s national goals depend on a unique mix of the private and public sectors for success. Many of the Kingdom’s biggest projects — in tourism, entertainment, infrastructure and other sectors aimed at economic diversification — are run like private sector companies but are backed by state-owned institutions.
The CEOs running Saudi Arabia’s big development projects have a unique set of goals focused on stakeholder — rather than simply shareholder — value. This is reflected in the survey, with 66% of CEOs in the Kingdom saying the primary objective of their organization is to achieve long-term value for stakeholders.
The quick and robust intervention by the Saudi Arabian government to minimize the societal and economic impact of COVID-19 appears to be bearing fruit. Eighty-four percent of CEOs in Saudi Arabia are confident about the growth prospects of the Kingdom’s economy over the next three years. Given that 92% of respondents in Saudi Arabia plan to increase head count over the next three years (44% saying they will do so by more than 6%), the likelihood of improved prosperity and job security is growing.
However, governments should also take note of the potential risks and blockers that the CEOs have identified. Supply chain risk was among the top three risks cited by Saudi-based CEOs in the survey, highlighting the ongoing impact of trade and logistical disruptions from the pandemic. For its part, the Saudi Arabian government has taken measures aimed at preventing further supply chain disruptions. Late last year, the Ministry of Finance signed supply chain finance agreements with three commercial banks. The agreements will reduce the risk of supply chain disruption by enabling both buyers and suppliers to optimize their working capital.
Also among the top three risks was climate change. Making progress on addressing sustainability issues, including climate change and the decarbonization of the economy, will require contribution from both business and government.
CEOs are looking to devote significant capital to the effort, with 42% of Saudi-based CEOs — and 30% of global CEOs — planning to invest more than 10% of revenues towards becoming more sustainable. From governments, business leaders expect an equally strong commitment, with 84% Saudi-based CEOs say government stimulus is required to turbocharge climate investments being made by the business community.
The government in Saudi Arabia is playing a huge role in transforming the economy around a sustainable vision. At the Saudi Green Initiative Forum in October 2021, Crown Prince Mohammed bin Salman announced that the Kingdom will aim to achieve net carbon neutrality by 2060. Representing the dual missions of the public and private sector to contribute to sustainability, Saudi Aramco laid out its sustainability plans at the Saudi Green Initiative Forum as well. There, the energy giant announced it will become a net-zero carbon energy producer by 2050 — to be achieved in part by replacing crude burning for power with natural gas in ten years.
Cities of the future
With the Saudi Arabian government embarking on plans to redefine what the modern city looks like through projects like NEOM, it should take note of the way business envisions the future. In the survey, only 8% of Saudi-based CEOs plan to downsize (or have already downsized) their physical office space. Thirty-two percent said their organization will have most employees working remotely at least two or more days per week, while 38% are looking to hire talent working predominantly remotely. Despite the more limited scope, these changes will still require adjustments to the footprints of housing, infrastructure and public transport, but potentially less than originally thought.
Still, remote work and cloud technology will play a much larger role in business operations. With this comes increased concern around cybersecurity, not only for individual businesses but their entire supply chain as well. Seventy-four percent of Saudi-based respondents see a strong cyber strategy as key to engendering trust with stakeholders, and 72% believe that protection of their partner ecosystem is just as important as their own cyber defenses. Governments can play an important role in building cyber resilience across the economy. They must also focus on increased security for cloud-delivered government services, given the rapid shift to online delivery during the pandemic.
What does this mean for government?
Through their responses to the CEO Outlook survey, CEOs have illustrated a vital role for government in supporting the world’s transition out of the pandemic. Now is the time for policymakers to engage on these issues and ensure they are proactively addressed as we move beyond pandemic responses and recovery, to a new reality. That includes maintaining a dialogue with the private sector to establish a nuanced approach to supply chain resilience. Some critical elements may require support establish local production capacity, while others can be addressed by more robust planning and capability improvement when working with international vendors. Also important is clear communication about plans to implement global tax agreements. Businesses will need a clear understanding of implementation timelines, regulatory details and reporting requirements in order to prepare for the changes. Lastly, it is important to prioritize engagement with the private sector on developing innovative ways to jointly achieve ESG goals, including through government policy, regulation and demand generation to shift the market.