Business leaders regain growth confidence despite possible recession

Despite the situation known worldwide and especially in Mexico, such as the socio-political risks and the threat of a possible recession, the leaders of the companies are regaining confidence in their growth as well as in a good course of events in the next year, since 73% see opportunities amid uncertainty and 86% are confident that the global economy will recover in the next 12 months, reveals the KPMG 2022 CEO Outlook study.

“This survey opens on a positive note about confidence in the global economy, as well as in Mexico’s economic growth, as 85% believe and 76% trust in the organization’s growth over the next three years. Entrepreneurs are seeing certain indicators of economic slowdown but they already have prior preparation to face the challenges that arise”, explained Víctor Esquivel, managing partner of KPMG in Mexico, during the presentation of the study.

He explained that compared to the survey carried out at the beginning of this year, it is observed that companies are no longer focusing on the immediate effects of the pandemic, they are already focusing their attention on other areas such as inflation, sociopolitical risks and interruptions in supply chains, so they are restructuring their strategies. They are also paying more attention to the issue of innovation, talent and digitization.

Proof of this is that 48% of entrepreneurs are thinking of inorganic growth schemes in the next three years, even with the potential recession, which responds to the need of entrepreneurs to resume their growth path more quickly.

Latent but weak recession

The study also refers that 86% of global directors consider that they will be focusing on a recession for the following year, but for 58% this will be mild and short. In Mexico, 32% of the leaders also believe that the impact of the recession in the next 12 months will not be as drastic or long lasting.

Globally, 76% of leaders were already expecting the recession and therefore had already prepared themselves by implementing enterprise risk management strategies, thus enabling them to respond to the crisis. In the case of Mexico, the rate is lower.

One of the actions that have been taken is to curb hiring, 39% globally, while 46% consider doing so if the slowdown occurs. In Mexico, no perceived impact on hiring cutsespecially since the country has a large area of ​​opportunity with the relocation of manufacturing plants, especially those that belong to North America.

“There are opportunities in the local market, in terms of innovation and digitization, which decreases the chances of reducing hiring and considering reducing the workforce in case of reacting to a potential recession.”

Companies task

The confidence and optimism of the employers is on the rise, but they admit that there are tasks in which they must work more. One of them is the faster adoption of digital businesses, which allow us to be at the forefront of changing customer needs.

Likewise, it is worth paying more attention to Environmental, Social and Governance (ESG) strategies, which allow creating greater impact and responding to people’s consumption patterns.

“For 66% of Mexican leaders, external stakeholders request more information and transparency regarding the objectives set by the company and the progress made, as well as its measurement around ESG issuesEsquivel said.

Another key point to work on is talent, which has fled, on a large scale, from different markets and faces the challenge of not finding the right one due to lack of digital skills. Given this, companies have focused on training them in digital skills, especially in technology, applications and software.

The risk landscape

Esquivel highlighted that when analyzing the risks perceived by leaders in their operation, the following five stand out:

• Risks due to disruptive technologies, related to cybersecurity
• Operational, regulatory, environmental and reputational risks of the brand, the last two being the most important for Mexico and representing pressure from third-party internal groups in terms of environmental risks, climate change, ESG, diversity and inclusion, gender equity , look at marginalized groups and the impact that the organization has on communities and society.
• Reputational ones, which have increased due to the use of social networks, for example.
• Operations, on the ability of the organization to have the operational, human, and technological resources, the necessary investment to continue operating and maintaining the quality of products and services that allows it to be closer to the customer.
• The regulatory ones, the constant evolution of operations compliance regulations, which is also a competitive advantage that differentiates the company in the market.

In 2021, the most worrying thing was cybersecurity with remote work, interruptions in the supply chain and environmental issues, especially those related to greenhouse gas, as well as regulatory and technological risks.

Finally, 15% are also concerned about psychological risks such as the stress and anxiety that the pandemic has left behind and that prevent them from having an adequate work-life balance, and 14% about macroeconomic factors such as interest rates and inflation, which input prices have risen.