Global CEOs are making generative AI a top priority

Gain insight into how global leaders prioritise and view the future in Global CEO Outlook 2023

Gai insight into how global leaders view the future in Global CEO Outlook 2023.

Charting a course through complexity

While CEOs maintain confidence in the future of the global economy, their views on what constitutes a risk to their business have shifted significantly. The persistent flux in global politics, trade dynamics and international relations has required a new level of resilience from CEOs. They are reassessing their strategic priorities, focusing on the rise of generative AI, talent management and high stakeholder expectations in addressing environmental, social and governance (ESG) issues.

A happy man standing outside the office building

Confidence in the global economy remains broadly unchanged year over year, surpassing pre-pandemic levels of confidence. Almost three in four global CEOs (73 percent) are confident about the economy over the next three years, compared to 71 percent last year. It reflects a clear resilience and a collective focus to get the world back on a sustainable, long-term growth trajectory. However, CEOs’ confidence in their own company’s growth prospects are at a three-year low; at the start of 2020, 85 percent of CEOs were confident in their company’s growth prospects, compared to 77 percent this year.

This is accompanied by a significant shift in what CEOs view as risks to growth for their business. CEOs now rank geopolitics and political uncertainty as the greatest risk to the growth of their business — be it navigating a company’s presence in a conflict zone or attempting to navigate disrupted supply chains and manage price fluctuations. This shift indicates CEOs have come to grips with the fact that geopolitical risk is not only a short-term consideration. In a geopolitically fragmented world, CEOs often become de facto political players. Their approach should elevate politics on the boardroom agenda while also creating a strategy around geopolitical risk that includes specialized insights, scenario planning and stress testing.

CEOs face shorter-term barriers to delivering growth over the next 12 months. For example, more than three in four (77 percent) say that rising interest rates and tightening monetary policies could prolong any potential or current recessions, while over the next three years, 77 percent believe cost-of-living pressures will negatively impact their organization’s prosperity.

As CEOs navigate and respond to these challenges, they recognize that demonstrating personal integrity is key to building trust, with a majority (71 percent) saying they are prepared to divest a profitable part of their business if it was damaging their reputation. As geopolitics rise on boardroom agendas, 61 percent of CEOs say they would take a public stance on a politically or socially contentious issue, despite board concerns.

Artificial intelligence (AI) is transforming nearly every field of human endeavor and is embedded in more and more aspects of everyday life, businesses and society. As tools like Bard and ChatGPT have gained prominence, global CEOs increasingly recognize generative AI’s seemingly limitless potential and are keeping their foot on the gas in terms of their investment and exploration of the technology.

Global CEOs are making generative AI a top investment priority. The survey shows that 70 percent are investing heavily in generative AI as their competitive edge for the future, with most (52 percent) expecting to see a return on their investment in three to five years. In fact, increased profitability was cited as the number one benefit of implementing generative AI within an organization (22 percent).

According to our recent KPMG global tech report, 55 percent of organizations said progress toward automation has been delayed because of their concerns about how AI systems make decisions.

Despite a willingness to push forward with their investments, global CEOs recognize that emerging technologies can introduce risks that should be addressed. Fifty-seven percent cite ethical challenges as the top concern when it comes to implementing generative AI, followed closely by a lack of regulation. As scrutiny and regulation of AI increases, organizations may need policies and practices they can articulate and apply with confidence.

CEOs are also grappling with how AI technologies have heightened cyber security risks. Despite how AI may help detect cyber attacks, 82 percent believe it could also bring about new dangers by providing new attack strategies for adversaries. And even with all the attention that has been placed on cyber security in the past few years, more than a quarter (27 percent) of CEOs still are not prepared for a possible cyber attack (up from 24 percent last year) while more than half (53 percent) say they are.

It is essential for CEOs to lead from the front, ensuring their organizations adopt responsible, robust AI frameworks and focus on safeguarding and governance.

This year’s challenging global landscape underscores the pressures CEOs feel to make decisions on a variety of critical issues — and they impact how CEOs plan to support and attract talent over the next three years.

Notably, global CEOs are steadfast in signaling their support of pre-pandemic ways of working, with a majority (64 percent) anticipating a full return to office is only three years away. This remains consistent with their views in the 2022 CEO Outlook. What’s more, 87 percent of CEOs say they are likely to reward employees who make an effort to come into the office with favorable assignments, raises or promotions.

While there is broad alignment on the importance of inclusion, diversity and equity (IDE), there continues to be concern around the pace of progress. Two-thirds of global CEOs (66 percent) maintain that progress on inclusion and diversity has moved too slowly in the business world and a strong majority (72 percent) say that achieving diversity in workplaces requires implementing a change across the senior leadership level.

ESG is increasingly being recognized by CEOs for what it is: an indispensable part of their corporate strategy that helps ensure their business is resilient and can deliver long-term growth — even when faced with numerous geopolitical and economic challenges.

Despite a polarizing debate surrounding the term ESG, CEOs recognize that it remains an integral part of their business operations and corporate strategies — and are taking a more outcomes-based approach. More than two-thirds (69 percent) of global CEOs have fully embedded ESG into their business as a means to create value. It is also important to note that 35 percent of CEOs say they have changed the language they use to refer to ESG both internally and externally, reflecting a shift in the dialogue about ESG and signaling a trend toward prioritizing the areas that make the most sense for their organizations.

While global CEOs believe they are still a few years away from seeing a return on their ESG investments, they recognize the importance it has with their customers and on their brand. Nearly a quarter (24 percent) believe that, over the next three years, ESG will have the greatest impact on their customer relationships, and a further 16 percent believe it will help build their brand reputation.

Global CEOs are keenly attuned to new regulations and shifting politics when it comes to ESG. Despite this, 68 percent indicate that their current ESG progress is not strong enough to withstand potential scrutiny from stakeholders or shareholders. The difficulty in balancing progress with business growth is further supported in our ESG Assurance Maturity Index, where more than half of senior executives that consider themselves ready for ESG assurance said it was a challenge to balance assurance goals with the profit expectations of shareholders.

Exploring opportunities for growth

Technology

Embrace generative AI in a way that is ethical, makes the most sense for your business and keeps the needs of your employees and clients at the forefront.
Stay up to date with cyber-attack strategies so you and your employees do not expose the business to risk.

Talent

Take a long-term view when it comes to employees’ desire for hybrid or remote working to ensure that talent is nurtured and supported.
Set the tone at the top. Senior leadership should make IDE a stated priority, set real targets, fund initiatives and appoint management to lead programs with clear accountability.

ESG

Position ESG as a driver for value creation when it comes to business growth, rather than as a risk to be managed. New avenues open when ESG is considered in the growth conversation.
Stay attuned to shifting ESG regulations to help maintain your business’s brand reputation and client relationships.
Focus ESG investments on areas in line with your values and those of the business.

Methodology

About the KPMG 2023 CEO Outlook

The 9th edition of the KPMG CEO Outlook, conducted with 1,325 CEOs between 15 August and 15 September 2023, provides unique insight into the mindset, strategies and planning tactics of CEOs.

All respondents have annual revenues over US$500M and one-third of the companies surveyed have more than US$10B in annual revenue. The survey included leaders from 11 markets (Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, UK and US) 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 percent due to rounding.