October 11, 2023
CEOs are anticipating a period of strong business growth in Singapore during the months ahead, kick-starting market revival efforts despite ongoing geopolitical and economic turmoil.
Such a positive outlook comes amid ongoing uncertainties at global, regional and local levels, in addition to escalating cost-of-living pressures.
According to KPMG 2023 CEO Outlook findings, 92% of executives forecast future company growth in the city-state, with optimism rising 16% from 76% in 2022. This is in addition to out-pacing global counterparts at 77%.
“Singapore CEOs are showcasing exceptional resilience and adaptability in the face of complex geopolitical and economic landscapes,” observed Lee Sze Yeng, Managing Partner at KPMG in Singapore.
Despite encouraging levels of industry enthusiasm, Singapore-based CEOs – mirroring global sentiment – acknowledged geopolitics and broader political uncertainty as the “greatest risks” to business growth.
Senior executives also expressed concerns about ongoing economic challenges, with 68% noting that rising interest rates and tightening monetary policies could prolong any potential or current recession.
More than three in four CEOs globally (77%) also point to cost-of-living pressures impacting profitability levels.
The top threats to growth for CEOs in Singapore in order of severity are:
However, Sze Yeng said CEOs remain undeterred with more than half (56%) already adjusting growth plans to tackle these interconnected challenges – an additional 40% are planning to follow suit.
“Instead, CEOs approach this dynamic and demanding environment with resilience, adopting a purpose-driven, proactive strategy,” Sze Yeng outlined.
This is a strategy primarily focused on technology alongside environmental, social and governance (ESG) and talent management.
“CEOs are strategically preparing their organisations for a future steered by generative AI and ESG initiatives, with human expertise as the foundational pillar,” Sze Yeng said.
As a result, Sze Yeng said a “significant shift” is evident in the market as 52% of CEOs transition from a focus on technology acquisition to prioritising workforce up-skilling in the age of AI and ESG.
“While the global emphasis among CEOs remains on digitalisation and talent retention, these aspects have seen a reduction in priority among Singaporean leaders since 2022,” Sze Yeng shared. “However, it’s important to highlight that a substantial 69% of CEOs worldwide are leveraging generative AI, underscoring its potential as a key driver for competitive advantage and future innovation.”
AI interest heightens despite concerns
Aligned to global peers, most CEOs in Singapore cite ethical challenges (64%) as the leading concern when implementing generative AI within an organisation.
Despite this, the majority of CEOs globally (69%) continue to place generative AI as the top investment priority in the medium-term.
In Singapore, CEOs also acknowledge that disruptive technologies – which includes generative AI, machine learning, blockchain and robotics – could negatively impact the prosperity of an organisation during the next three years. About half (48%) of executives expect to see a return on their investments within three to five years.
According to KPMG findings, CEOs locally are recognising the potential of generative AI in increasing profitability (28%), innovation (20%) and job creation (16%).
“For them to be fully on board however, 68% of Singapore CEOs believe that there is a need to address the lack of current regulations and direction for generative AI in their industry, which has been a barrier to their success,” Sze Yeng explained.
Similar to CEOs in the region and other parts of the world, about three in four Singapore CEOs (76%) agree that the degree of regulations for generative AI should mirror that for climate commitments.
While 64% of Singapore CEOs believe that generative AI could aid their cyber security strategy, executives are also cognisant that it may bring new dangers by providing fresh attack strategies for adversaries.
However, CEO confidence in guarding against future cyber attacks has seen a sharp uptick this year, with 68% now claiming to be “very prepared” compared with only 20% in 2022.
Businesses build workforce skills
As Singapore CEOs navigate uncertainty with growth and transformation objectives in mind, the majority of executives are choosing to prioritise capital investments into developing workforce skills and capabilities.
Slightly more than half (52%) now cite this as a priority, highlighting a sizeable shift in approach compared to a majority focus (56%) on buying new technology in 2022.
Up-skilling and re-skilling current workforces have become a critical strategic priority given that almost a third of executives (32%) anticipate no change to headcount numbers during the next three years. Another third (36%) believe that headcount could fall by up to 5%.
The debate over hybrid working also continues to divide senior executives around the world.
In Singapore, slightly less than half of CEOs (48%) predict a full return to in-office work within the next three years. This contrasts with 64% of CEOs globally who remain steadfast in support of pre-pandemic ways of working.
Correspondingly, only about a third of Singapore CEOs (34%) are likely to link financial reward and promotion opportunities with employees who make an effort return to the office, far lower than the 88% globally.
All-in on ESG but approach changes
Despite the increasingly polarising discourse surrounding ESG, CEOs in Singapore and globally are continuing efforts to embed ESG into core business objectives.
Executives are adopting a more outcomes-based approach to such efforts, while remaining pragmatic about the external environment.
Globally, over a third of CEOs (36%) have changed the language they use to refer to ESG both internally and externally. This is signalling a mindset shift as the boardroom becomes more specific about each aspect of the acronym and prioritises where investments can have the most impact.
Approximately one in two CEOs in Singapore (52%) have fully embedded ESG into the business to create value.
In a period of uncertainty, local CEOs are choosing to focus ESG investments on governance and transparency protocols, such as best practice reporting, with less attention being paid to social and community programmes. This comes even as 96% of city-state executives understand they have responsibility to drive greater social mobility.
Within this context, 72% of executives anticipate that it will take three to seven years for their ESG investments to pay off, with the greatest impact likely placed on capital allocation, partnerships, alliances and mergers and acquisition (M&A) strategies (24%) as well as attracting next-generation talent (24%).
Among the greatest barriers facing Singapore CEOs looking to achieve net-zero or similar climate ambitions is the lack of internal governance and controls to operationalise these goals.
As a result, 40% of executives rank this as the leading challenge, a marked shift from the previous year where the lack of appropriate technology solutions was seen as the biggest obstacle.
Amid rising stakeholder expectations, only 8% of CEOs in Singapore currently have the capability and capacity to meet new reporting standards, compared with 50% in Asia Pacific and 74% globally – showing that there is still some progress to be made.
One of the biggest downsides in failing to meet the ESG expectations of stakeholders continues to be the higher cost of and difficulty in raising finance (32%).
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