CEOs increasingly concerned about reputational risk
- Published: Tuesday, 11 October 2022 09:05
KPMG has published its 2022 CEO Outlook, which asked more than 1,300 CEOs at the world’s largest businesses about their strategies and outlook. The survey identified the areas that CEOs see as the top medium term risks.
‘Emerging and disruptive technology’ is seen by CEOs as the top risk to business growth over the next three years. Other top risks to growth are reputation, regulatory and operational issues, and climate change.
Reputational risk - such as a misalignment with customer or public sentiment - is raising more concern among CEOs compared to early 2022 (10 percent in August vs. 3 percent in February). In response to geopolitical challenges, 51 percent of organizations have discontinued working with Russia and 34 percent plan to do so over the next six months.
CEOs have become less focussed on cyber security
Cyber security has dropped from the top five risks to growth over the past year, with only six percent of CEOs naming it as their top risk (compared to 17 percent in February 2022). However, the cyber environment is evolving with 77 percent saying their organization views information security as a strategic function and as a potential source of competitive advantage. Geopolitical uncertainty is also raising concerns of corporate cyber attacks, according to 7 of 10 CEOs (73 percent).
Nearly three-quarters of organizations (72 percent) have a plan to handle ransomware attacks. However, more CEOs recognize that they are under-prepared for a cyber attack with nearly a quarter (24 percent) admitting so in 2022, compared to 13 percent in 2021.
When asked what their top challenge in communicating ESG performance to stakeholders was, nearly one-fifth (17 percent) of CEOs indicated it was stakeholder scepticism around greenwashing, up from 8 percent in 2021. More than one-third (38 percent) of CEOs say their organizations struggle to articulate a compelling ESG story. Nearly three-quarters of respondents (72 percent) also believe that stakeholder scrutiny of ESG issues - gender equality, climate impacts etc. - will continue to accelerate.
CEOs recognize the importance of ESG initiatives to their businesses, especially when it comes to improving financial performance and driving growth. In fact, 69 percent of senior executives noted greater demand from stakeholders for increased reporting and transparency on ESG – this was 58 percent in 2021.
Nearly half (45 percent) of CEOs agree that progress on ESG improves corporate financial performance, an increase from 37 percent just 1 year ago. However, as economic uncertainty continues, half are pausing or reconsidering their existing or planned ESG efforts in the next 6 months, and 34 percent have already done so.