Supply chain risks top concern of Asia Pacific CEOs: KPMG survey

PETALING JAYA: A global survey conducted by KPMG International found that 59% of CEOs in Asia Pacific (Apac) are more confident about economic recovery compared with earlier this year, but they are also increasingly concerned about the risk to their supply chains.

The KPMG 2021 CEO Outlook surveyed more than 1,300 global CEOs about their strategies and outlook over a three-year horizon. Among almost 500 CEOs in Asia Pacific, 66% of them stated that their supply chains have been under increasing stress over the past 18 months. It is thus unsurprising that CEOs ranked supply chain risk as their top threat to growth this year.

KPMG Malaysia managing partner Datuk Johan Idris observed that pre-pandemic, risks to the supply chain had been steadily gaining attention due to increasing volatility from trade tensions and climate-driven events but were still considered a low priority for CEOs.

“However, the pandemic brought this issue into sharper focus as organisations struggled to maintain supply chain continuity during worldwide lockdowns.”

Apac CEOs continue to recognise the importance of building resilient, flexible supply chains. Some 36% have stated an intention to monitor deeper into their supply chain to better anticipate potential problems, while 34% will diversify sources of input by adding new locations of inputs to make their supply chain more resilient.

Meanwhile, 14% will prioritise reconfiguring their supply chain to provide greater resiliency and more consistent access to achieve their growth objectives.

Other key findings within Asia Pacific:

Scrutiny on environmental, social and governance (ESG) continues to rise

Some 70% of CEOs face increased demands from stakeholders for more reporting and transparency on ESG issues, with pressures predominantly coming from institutional investors (57%) and regulators (31%). However, 42% stated that a key challenge when communicating their ESG performance to stakeholders is the struggle to create a compelling ESG story.

Reaching net zero with government support

About 81% believe that government stimulus will be required if all businesses are to reach net zero. Roughly the same percentage (80%) agree that large corporations have resources to help governments find solutions to pressing global challenges, which showcases that CEOs recognise that greater public-private partnerships are needed to better address ESG issues.

Changing sentiment on the future of work

Just 18% of CEOs now say they are planning to downsize, or have already downsized, their organisation’s physical footprint. This is a dramatic shift from August 2020 where 75% stated their intention to downsize their space.

CEOs are focused instead on providing increased flexibility for their workforce with 41% looking to invest in shared office spaces. Furthermore, 34% will look to implement a hybrid model of working, where most employees work remotely two to three days a week.

People-powered digital agility

While 68% of CEOs are placing more capital investment in buying new technology, they are also looking to build human capability with 49% planning to invest in digital training, development and upskilling to ensure employees’ skills remain future-focused.

“It is evident that our combined experience over the past years have continued to prepare us in imagining what our new reality would look like. A major lesson is the need to change our ways and work together. Successful CEOs will be those that connect a trusted purpose with digital agility to drive growth and prosperity,” concluded Johan.

The survey was conducted from June 29 to Aug 6, and included leaders from Malaysia and 11 key 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).