Generative AI is top investment priority despite economic uncertainty: KPMG global survey
A majority of Australian (58%) and global (64%) CEOs say Generative AI (Gen AI) is a top investment priority for their businesses, despite the uncertain economic environment, KPMG International’s annual CEO Outlook survey finds. The major study, now in its 10th year, covers 1,325 CEOs in 11 leading economies, including Australia.
The survey also found that most Australian CEOs are confident in the growth prospects for their companies over the next 3 years, despite growing concerns over an economic slowdown. But CEOs are feeling the growing demands of leading a large organisation keenly, with nearly two-thirds (64%) of Australian leaders and 72% of overseas CEOs saying they feel more under pressure than the previous year to ensure the long-term prosperity of their business.
While three-quarters of CEOs, both globally and in Australia, believe their C-suite leadership has a clear idea on how Gen AI would benefit their companies and create competitive advantage, less than half (42% Australian, 35% global) think they have their data ready to safely and effectively integrate Gen AI.
A substantial majority of CEOs (72% Australian, 76% global) did not believe Gen AI would impact on staff levels in their businesses.
The CEOs’ commitment to Gen AI is strong, despite the majority (60% Australian, 63% global) not expecting to see a return on their AI investments for another 3-5 years. The principal benefit was seen as increased efficiency and productivity through automating routine operations, while the biggest challenge to Artificial Intelligence (AI) was seen as ethical by 52% of Australian and 61% of global CEOs. Other issues named by around half of CEOs included technical capability and skills required to implement AI; lack of regulation; the cost of implementation; and security.
Only a minority (40% Australian, 38% global) believe their employees had the skills to leverage the benefits of the new technology. But on the flip side, 50% of Australian CEOs (57% global) said trying to integrate AI had made them rethink how they train and develop employees. And 69% of Australian CEOs (56% global) said specifically it would make them look at what skills entry-level staff needed.
Andrew Yates, KPMG Australia CEO, said, “I am not surprised to see Gen AI viewed as a top investment priority for CEOs, given its potential to transform business processes. At KPMG, we are also investing heavily in this area.
“I am encouraged to see that business leaders do not view it as a threat to their employees, but on the contrary as a driver of job productivity. It is clearly also going to encourage them to take a fresh look at staff training and development, which is positive.
“Lack of regulation was seen as a challenge to AI adoption by half of CEOs – so we welcome the federal government’s new voluntary AI Safety Standard as an important step in building safe and ethical AI practices and the proposal for mandatory guardrails to be introduced for high-risk AI applications.
“Research we have undertaken with the University of Queensland has shown that many Australians are yet to be convinced that the benefits of AI outweigh the risks, so regulatory action in this area, to promote safety in the deployment of AI, and build public trust, is timely.”
Economy/challenges to growth
A large majority of Australian (86%) and global (76%) CEOs were confident of their organisation’s growth prospects over the next three years; but a sizeable minority (20% Australian, 23% global) revealed the challenging economic environment had seen their revenue decline over the past 12 months.
There were, notably, a minority (12%) of Australian CEOs forecasting strong growth of between 10-20% over the next 3 years (5% global); and another 16% (17% global) saying 6-10%. But half of Australian leaders were more restrained, predicting growth of less than 2.5%, and another 16% saying 2.5-5%.
On headcount, CEOs were generally upbeat with 54% of Australian leaders and 58% of international CEOs forecasting growth in staff levels of up to 5%; and a sizeable minority (36% Australian, 31% global) predicting 6-10% growth in numbers. Only 4% at home and overseas predicted staff cuts, which was a significant shift from last year’s survey when many forecast reductions.
At a macro level, perhaps surprisingly, 88% of Australian CEOs said they were confident about the national economy – a sentiment echoed by 78% of overseas leaders about their own countries. A strong majority (Australian 78%, global 74%) was also optimistic about their industry sector, but there was a smaller majority (62% of Australian and 72% of overseas CEOs) confident about the global economy.
Andrew Yates said, “It is encouraging to see that business leaders in Australia are still generally upbeat, not only for their own companies – which you might expect – but for the country, despite fears being expressed more widely about an economic slowdown. It seems that most are looking beyond what may be a sluggish next few months to a brighter two or three years after that. For example, while the unemployment rate is tipped to rise over the next six months, our respondents are confident that staff levels in their companies will grow over the following two years or so.”
In terms of strategies for achieving growth, there was a notable difference between home and overseas CEOs, with ‘strategic alliances with third parties’ nominated as the top approach (30%) by Australian leaders while it was only third most popular (18%) among their international counterparts. Globally M&A was the top response (3rd in Australia) followed by organic growth (second in both).
Andrew Yates said, “Strategic alliances are increasingly seen as the way ahead to build growth. It is not possible for any business to have all the capabilities in-house and so building trusted partnerships with third party organisations offering complementary skill sets makes sense.”
Some of the key threats to growth included supply chain, cyber-security and emerging/disruptive technology. Other major issues which could adversely impact their companies included inflation, geopolitical conflicts, regulatory demands, talent, reputational risk and climate change/natural disasters.
Despite the costs of living being a concern, fewer Australian CEOs (35%) than global (62%) believed organisations should take action to help their customers, in order to safeguard future economic growth.
Return to office/talent
82% of Australian and 83% of overseas CEOs said that in 3 years’ time traditional white-collar roles would be fully based back in the office. This has risen from two-thirds (66%) in last year’s survey. Only a minority (27%) thought roles would be hybrid while no Australian leaders said they would be fully remote.
A large majority (78% Australian, 87% global) also said they were likely to reward employees who made the effort to come into the office (in terms of raises and promotions, and better projects) – around the same percentage as last year.
While the focus remains on the workplace debate, CEOs acknowledge there are other talent-related issues that could affect their future growth. More than a third of Australian CEOs (36%, globally 31%) say they are concerned about labor market shifts – specifically the number of employees that will soon retire and the lack of skilled workers available to replace them. In response to a perceived talent shortage, 84% of Australian CEOs (80% global) agree that organisations should be investing in skills development and lifelong learning within local communities to safeguard access to future talent.
ESG and Climate
Australian leaders have become notably more sensitive to the impact ESG issues can have on trust and the reputation of their organisations, with a large rise in the number (82% up from 54% last year) who said they would divest a profitable part of business if it was damaging the company’s reputation. 76% globally agreed. There was a similar rise (82% – last year was 46%) in Australian CEOs saying they would take a stand on a politically or socially contentious issue to demonstrate integrity, even if their board had concerns.
But the rise of ESG in the corporate agenda has also heightened the risks for CEOs – over a quarter of Australian CEOs (26%) said failure to meet ESG expectations would represent a threat to their continued tenure. A large minority of Australian CEOs (43%) and fully two-thirds of overseas CEOs say they “aren’t prepared” to withstand the potential scrutiny of failure to meet stakeholder expectations.
The threat is far from theoretical, the survey revealed. Around half of respondents (46% Australian, 55% global) admitted that stakeholders’ expectations “change quicker than we can keep up with or adapt our strategy”. A third of Australian CEOs said not keeping up meant competitors gaining an edge on them.
Operationally, 80% of Australian CEOs and 65% globally say they have fully embedded ESG into their business operations to increase value. ESG strategy still has the biggest impact in building customer relationships and positive brand – this was a long way ahead of driving financial performance or shaping capital allocation. As with Gen AI, the general view is that ESG investments would take 3-5 years to pay dividends.
On climate, 70% of Australian and 51% of global CEOs believed they would meet their companies’ net zero goals by 2030. The biggest two obstacles were complexity of decarbonising supply chains; and the lack of skills and expertise to implement solutions. Most CEOs (Australian 80%, global 76%) felt confident they had the capability to meet new sustainability and climate reporting standards.
Andrew Yates said, “Most CEOs feel their companies have stepped up to the demands of the new ESG era, although there are still clearly some concerns about withstanding scrutiny and ongoing societal expectations. The extent to which ESG has moved from a ‘nice to have’ to an ‘essential’ in recent years is shown by some leaders fearing the consequences of not meeting stakeholder expectations.
“KPMG still believes many companies face challenges when it comes to detailed preparations for Australia’s new mandatory reporting regimes, which will shed more light on how deep ESG has really become embedded in business operations.”
Inclusion, Diversity and Equity
Both at home and overseas, a majority (62% Australian,60% global) agreed that as trust in governments fall, businesses were expected to take the lead on issues such as Inclusion, Diversity and Equity (IDE). This was an increase for Australian CEOs from last year (44%) although slightly fewer Australian CEOs than globally (50%/58%) believed IDE has moved too slowly in corporate world.
A large majority expected more scrutiny of IDE in the next 3 years and agreed business had a responsibility to help increase social mobility. A key way of doing this was investment in skills development and life-long learning in communities to safeguard flow of future talent, all leaders agreed.
Specifically on gender, a large majority of CEOs (80% Australian,79% global) said that achieving gender equality in C-suite will help achieve their goals; while fewer Australian (20%) than overseas (31%) leaders said they had concerns regarding mandated quotas and targets in order to drive diversity.
