KPMG CEO Outlook: Key challenges and opportunities Technology, Media & Telecommunications CEOs face

As we enter the final quarter of 2022, and Tech and Telecommunications CEOs look ahead to 2023 and beyond, what are some of the key challenges and opportunities their businesses face? KPMG recently issued the findings of 2022 CEO Outlook Survey drawing on the perspectives of 110 tech CEOs and 75 telecommunications CEOs.

Here are 4 key takeaways:

1.     Recession fears loom

The prospect of recession continues to cast a long shadow with 85% of tech and telco CEOs seeing a recession as likely, and most of them now asking themselves, “How do I prepare?”

Seventy-four percent of Tech CEOs and 77% of Telco CEOs agreed that a recession would cause further disruption to their business, making it even more difficult to rebound from the pandemic. As a result, half of tech CEOs and 33% of telco CEOs are considering downsizing their employee base to plan for an anticipated recession.

For the companies considering their options and making tough decisions, I would encourage them to look no further than to the Great Resignation. Its acute impact on the tech sector further proved that talent is an organization’s greatest asset and making short-term decisions to let talent go can have negative long-term consequences.

2.     Cyber remains critical

Seventy-five percent of Tech CEOs and 73% of Telecommunications CEOs agree geopolitical uncertainty is raising concerns of a cyber-attack in their organizations. In this new normal of heightened cyber vigilance, cybersecurity can no longer exclusively be an IT issue. It must be a strategic priority embedded throughout an organization’s culture, technology, and operations.

3.     A case for prioritizing ESG

Seventy-seven percent of tech CEOs, and 80% of Telco CEOs said they’re seeing significant demand from stakeholders such as investors, regulators and customers for increased reporting and transparency on ESG issues. Further, over half (55%) of both Tech and Telco CEOs agreed that ESG programs improve their overall financial performance.

However, even with strong stakeholder pressure and over half of TMT CEOs connecting ESG with improved financial performance, if faced with a potential recession over the next six months, 47% of Tech CEOs and 51% of Telco CEOs indicated they’d pause or reconsider their existing or planned ESG efforts.

As other leaders look to cut spending on ESG, now is the time to take a long-term approach and double down on ESG efforts. The CEOs that keep their foot on the gas stand not only improve financial performance, but gain greater trust with their talent, investors, customers, and other stakeholders.

4. M&A appetites remain strong for now; future of work less clear

It's clear that both skyrocketing inflation and recession fears forced 2022 M&A outlooks back down to earth, after both the media and telecom sectors experienced a banner year for M&A in 2021. In recent quarters, we’ve seen a decline in M&A activity as noted in our most recent M&A report. However, despite the headwinds facing CEOs, our Tech respondents remain bullish with more than half (54%) expressing a strong appetite for M&A. Actual deals however may depend on the macroeconomic environment, with M&A becoming far more challenging in contractionary periods.

The future of work also appears slightly unclear. Fifty-two percent of Tech CEOs and 56% of Telco CEOs agree that hybrid work has had a positive impact on collaboration and innovation. However, about half of the tech CEOs surveyed now view the future of work as more of a hybrid model. Meanwhile, more than half (53%) of the telecommunications CEOs surveyed think their employees will be fully in the office over the next three years.

Fears of recession, cyber risk, increasing stakeholder pressure, a redefined workplace – it’s clear technology, media, and telecommunications CEOs, often the pace setters for transformation, are performing a delicate balancing act of managing short-term risks without sacrificing long-term growth. However, whether through M&A, strategic partnerships, or other avenues, the companies that make a concerted effort to hold onto their people and that continue to drive value by investing in cyber and ESG stand to gain the most over the long-term.