U.S. CEOs Preparing for Recession, But Continue to Focus on Growth

Today, I’m proud to announce the launch of the 2022 KPMG U.S. CEO Outlook , which features insights from 400 U.S. CEOs on the key challenges and opportunities in driving business growth. CEOs are dealing with an increasingly uncertain economic future and preparing for a recession. With the Federal Reserve recently voting to raise interest rates by 0.75% in an effort to help curb inflation, CEOs are reading economic signals. 91% of CEOs believe that there will be a recession in the next 12 months, and only one-third believe it will be "mild and short."

What does this mean for CEOs who are constantly looking to find new ways to drive growth for their organizations? A vast majority (79%) of U.S. CEOs have already expected and begun planning for a recession. Right now, these executives are walking a tightrope as they consider a wide range of actions to brace for a potential recession (with 51% considering downsizing their employee base over the next six months) while continuing to manage through the pandemic; deal with supply chain and technology disruption, and numerous other risks; and find ways to drive growth. But despite these uncertain times, 95% of U.S. CEOs remain confident in the growth prospects of their organizations over the next three years (an improvement from last year’s survey result of 86%).?

What else we’re seeing:?

• Transformational growth opportunities. 56% of U.S. CEOs indicated they have a high M&A appetite and will likely undertake acquisitions that have a significant impact on their overall organization over the next three years, while 33% said they have a moderate M&A appetite and will make acquisitions that have a moderate impact on their overall organization. One area that we’ve seen high M&A growth has been in the fintech sector, where during the first half of 2022, the U.S. accounted for $34.9B of fintech investment in the Americas, according to Robert Ruark , KPMG’s Financial Services Strategy and Fintech Lead, in our recent Pulse of Fintech report.
• M&A isn’t the only way that CEOs are looking to achieve growth for their organizations. CEOs identified advancing digitization and connectivity across the business as their top operational priority to achieve their growth objectives over the next three years. 78% said they have an aggressive digital investment strategy, intended to secure first-mover or fast-follower status; 75% said continuing to drive digital transformation at a rapid pace is critical in their competition for talent and customers. At KPMG, we know how insights-led digital transformation leads to new opportunities in the marketplace – take a look at how we worked with BKV, the Denver-based energy company, to help it transform from a start-up to a leading natural gas producer , quadrupling in size over five years.
• Risks to future growth (apart from economy). CEOs are clearly focused on the effects of the economy, but also identified other risks to the growth prospects of their organizations, such as pandemic fatigue, political uncertainty, emerging/disruptive technology and supply chain. The volatility of the global supply chain continues to affect many industries, especially the Engineering and Construction industry , as KPMG U.S. Major Projects Practice Leader Clay Gilge points out.
• On the topic of cybersecurity, 44% of U.S. CEOs said their organizations were under-prepared for a potential cyber-attack despite 81% saying that geopolitical uncertainty was raising concerns of a cyber-attack in their organization. One sector that is on high alert for cyber-attacks is higher education, as covered by KPMG’s David Gagnon , Tony Hubbard and Kathy Cruz in their recent Audit Insights article. Further, as KPMG’s Alex Holt and Mark Gibson state in their article in the Harvard Law School Forum on Corporate Governance publication, an investment in cyber resiliency is also an investment in building stakeholder trust, and CEOs are continuing to reinforce their cybersecurity defenses.?
• ESG commitments may be tested in the near-term, but CEOs will see them through over the long-term. 70% of U.S. CEOs said their company’s ESG programs improve their financial performance, up from 37% last year. One sector embracing the importance of ESG programs and reporting is the consumer and retail (C&R) space. KPMG’s National Consumer and Retail Sector Leader Matt Kramer and KPMG’s Consumer and Retail ESG specialists Scott Kelsey , Erik Oliverson and Julia Wilson recently led a LinkedIn Live conversation on the value that C&R organizations put on ESG and the opportunities for differentiation and return on investment.
• Not only can ESG commitments help improve an organization’s financial performance, but being transparent about ESG also appeals to organization’s various stakeholders, including its employees, customers and investors, as KPMG ESG Leader Rob Fisher recently pointed out in a conversation with Adam Lake , head of Climate Week NYC at the Climate Group. However, more than half (59%) of U.S. CEOs said they plan to pause or reconsider their organization’s ESG efforts in the next six months as they adjust their strategy to prepare for a planned recession. Staying the course on ESG can create a competitive advantage over the long term.
• Talent Imperative. When asked about how they envision the working environment for employees whose roles were traditionally based in the office over the next three years, 45% of U.S. CEOs saw them as hybrid, while 34% saw them as still in-office and 20% saw them as fully remote -- despite U.S. workers returning to the office at the highest rate since the beginning of the pandemic . We will continue to see a debate about the most effective working environment for a long time, but as our Chief Diversity, Equity and Inclusion Officer Elena Richards notes in our latest report, “Diversity and inclusion make hybrid work ,” there is a strong connection between an organization’s hybrid model being a success and the value that DEI initiatives bring to the table – and that should not be overlooked.?
• Final takeaway: In an uncertain economic environment, CEOs are adjusting their business strategies and preparing for a recession, but they are committed to investing in transformational opportunities that will position their organizations for future growth. They face strong headwinds, both from the current state of the economy and numerous other risks, ?but continue to remain optimistic about the resilience of their businesses and long-term growth prospects of their companies and the U.S. economy.?

In the coming weeks, I’ll dive deeper into some of these – and other – key findings from the 2022 U.S. CEO Outlook. Expect to hear from some of the CEOs featured in our report on how these trends have materialized in their businesses, plus further insights from KPMG’s leaders in live conversations on LinkedIn and other social media platforms.?

Please leave your comments below and let me know what you think of the findings from this year’s #CEOoutlook . If you’re not already, subscribe to my newsletter for additional insights, and follow me here and on Twitter .