CEOs will face numerous challenges in 2023 including geopolitical uncertainty, the future of work, increasing cyberattacks, and more. These challenges will take place in a more difficult macroeconomic environment. In fact, 79% of CEOs are planning for an economic recession, according to KPMG’s recent survey of 400 U.S. CEOs from large companies.
The multitude of challenges may create paralysis, but CEOs who lean forward with precision will carve out a path for their organizations’ future growth.
Here are three ways they can do so in the year ahead.
Talent will remain scarce
Some headlines suggest the balance of power may be shifting back from employees to employers as the economy slows. However, CEOs should heed the lessons learned from the Great Resignation and understand the structural workforce imbalances that will drive a tight labor market for an extended period. Layoffs in the technology sector are providing an opportunity for other organizations to recruit the talent needed to accelerate digital transformation and other strategic initiatives.
Tackling burnout, refocusing learning and development opportunities, and tending to company culture should be top of the agenda. On the third point, 45% of CEOs see the future of work as hybrid. Flexibility will be the key, as hybrid work will look different for every organization, but listening and engaging to formulate an effective bottom-up strategy will increase buy-in and credibility with employees.
Transform your business with M&A
Mergers and acquisitions are clearly a part of the 2023 playbook. Over the next three years, 56% of CEOs indicated they’ll likely undertake acquisitions with a significant impact on their organizations.
Valuations are declining, and for companies that have sufficient cash on hand, this is the moment to make a transformative acquisition.
Opportunities are rich across all industries, especially in the energy, life sciences, and technology sectors. Due diligence and value capture will increase in importance for leaders, who will have to demonstrate to boards that their acquisition target is sound in the face of a potential recession.
Digital transformation serves as a complementary focus. Having identified digitization and connectivity as the top operational priority to achieve growth, 75% of respondents also said continuing to drive digital transformation at a rapid pace is critical in their competition for talent and customers.
Focus ESG engagement on financial value
With a recession on the horizon, corporate ESG commitments made during boom times will face near-term tests amidst heightened scrutiny.
The backdrop: 70% of the business leaders we surveyed said that their company’s ESG programs improve their financial performance–significantly up from 37%in our previous survey. ESG engagement reduces costs of capital, enhances employee and customer retention, and improves resilience of key assets. Yet, 59% of CEOs are pausing or reconsidering their existing or planned ESG efforts in the face of economic uncertainty.
The short-term-versus-long-term tension creates a clear opportunity for leaders who can stay the course on ESG to harness a competitive edge. At the same time, CEOs must continue to listen to their stakeholders. Aligning ESG strategy to deliver financial value and actively telling that story will help sustain momentum across the organization.
CEOs will also need to continue addressing the ongoing risks to their enterprises, such as the increase in cyberattacks. Persistent investment in security infrastructure is a must in 2023.
This year promises to be one full of opportunities and challenges for CEOs, but those who lean forward successfully will continue to position their organizations for a bright future.
Paul Knopp is KPMG U.S. Chair and CEO.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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