The next three years

The next three years

It’s “now or never” for Irish CEOs.

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KPMG in Ireland

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A Changing World

It’s “now or never” for Irish CEOs, 64 percent of whom expect their industry to change more in the next three years than in the previous 50. While the speed of change can often make it difficult to have a long term, or even a medium term view, CEOs understand that they cannot afford to wait for certainty.

More than a third (36 percent) predict that their company will transform into an entirely different entity in the medium term.

Their transformation journey will involve fostering innovation, entering into collaborative partnerships and alliances, spinning off legacy and/or innovative divisions, implementing disruptive technologies, and investing in talent as companies seek to buy in assets and capabilities from elsewhere.

CEO confidence

In the short to medium term, global economic factors, Brexit and geopolitical events make for an uncertain business environment. This is reflected in somewhat cautious sentiment among Irish CEOs about the outlook for the Irish and global economies over the next three years.

Meanwhile, 44 percent of CEOs who participated in our research are confident about Ireland’s growth prospects over the next 12 months with 48 percent confident about prospects for the global economy.

Brexit

Not surprisingly, Irish CEOs are more negative about the impact Brexit will have on their business when compared with their global counterparts with over a third (36 percent) anticipating a negative impact on revenue growth versus 19 percent worldwide.

However, Brexit will affect different sectors in different ways – reflected in the finding that just over half (52 percent) of Irish CEOs anticipate no impact on revenue growth and one in eight (12 percent) predicting a positive impact on revenues.

Meanwhile, a majority of British CEOs surveyed by KPMG in the UK are assessing the possibility of relocating headquarters or operations outside the UK.

Irish CEOs are also divided in their view of the impact that Brexit will have on business confidence in the global economy. Just under a third (32 percent) predict a negative impact, 20 percent think the impact will be somewhat positive and the remainder (48 percent) say that Brexit will have no impact.

According to Shaun Murphy: “Most CEOs I speak to, whilst concerned, are fairly pragmatic about Brexit because the final outcome remains unclear. The preferred result for Ireland is obviously maximum access to the UK market and minimum disruption to trade and freedom of movement. Our role as business advisors is to work through the implications of various scenarios and see what mitigating actions may be put in place to manage issues or indeed take advantage of opportunities.”

Given the aforementioned potential challenges to trade and freedom of movement, it is also no surprise that 48 percent of Irish CEOs predict a negative impact on the complexity of doing business. Furthermore, over half (52 percent) of Irish CEOs expect the impact on access to capital markets to be negative and 44 percent anticipate a negative impact on raising capital.

However, sentiment about the impact of Brexit on supply chain and hiring plans is largely positive. Attitudes towards the impact on operating costs are also relatively benign with four in 10 Irish CEOs expecting no impact and 36 percent anticipating a “somewhat” or “significantly” positive impact.

Company performance

Whether the economy rises or falls over the next three years, more than half (52 percent) of the CEOs who participated in our latest research are confident in their ability to outperform the wider economy.

“By definition CEOs need to be resilient and their confidence is an important factor in business success” says Kieran Wallace, Head of Markets at KPMG. However, Wallace makes the point that the best CEOs also recognise that the factors that help build a successful businesses are not inevitably the same that maintain that success: “Because of the need for speed we see potential, for example, in more collaboration and more assessment of resourcing options that might include ‘rent’ or ‘collaborate’ the resources companies need rather than ‘build’ or ‘buy.’ If CEOs are to deliver on their relative optimism assessing these strategic choices quickly and effectively will be of increasing importance.”

Meanwhile, predicted top line growth levels range from negative growth for 12 percent of companies to more than 5 percent growth for 20 percent of companies.

Leadership

Four in ten Irish CEOs expressed concern about having to take a leadership position on mission-critical issues that they have not grown up with or experienced previously in their careers. Meanwhile almost half worry about the amount of time they have to personally focus on the forces of disruption and innovation shaping their company’s future.

Nevertheless, the majority are confident about their company’s prospects over the next 12 months and beyond. While it’s natural for experienced CEOs to remain calm in the midst of uncertainty, it is notable that 36 percent expect their company to transform into an entirely different entity in the medium term.

Cutting edge technologies, innovation, collaborative alliances and access to talent will be critical tools as forward thinking CEOs implement their transformation plans between now and 2019.

Now or Never | Irish CEO Outlook 2016

Now or Never | Irish CEO Outlook 2016

Now or Never, KPMG’s Irish CEO Outlook for 2016 investigates the strategic dilemmas Irish CEOs are grappling with, and how they plan to respond.

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Now or Never | Irish CEO Outlook 2016

Investigating the strategic dilemmas for Irish CEOs.

 
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