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India CEOs realign strategies focussing on digital transformation, supply chain and ESG

As a result of COVID-19, CEOs in India have identified ‘lack of skills and capabilities in IT’ as one of the most significant challenges to growth, and are examining their wider societal contributions and company purpose. In the first study of its kind to measure how CEOs priorities and concerns have changed during the global pandemic, KPMG conducted two surveys, one at the onset of the pandemic in January and another in August 2020

KPMG in India 2020 CEO Outlook: COVID-19 Special Edition report finds that the agenda of leaders has radically shifted since the beginning of the year, as existing trends like cost optimisation strategies, rethinking of supply chain strategy, enhancing ESG programs and aligning with the new work realties have accelerated.

Overall, three key themes emerged from this year’s survey, which we refer to as ‘Propelled by purpose’, ‘Realignment of strategies’ and ‘Accelerated digital transformation’.

Commenting on the findings Arun M. Kumar, Chairman and CEO, KPMG in India said, “The significant shift in CEOs priorities that we have witnessed over the last six months reflect the agility with which CEOs had to deal with the challenges of the pandemic. Looking forward, similar to their global counterparts, CEOs in India are less confident about global and domestic economic growth than they were at the onset of the year. Their earnings outlook is clearly challenged.”

Kumar added, “The crisis is redefining the standards for corporate leadership. Societal impact is high on the agenda; Environmental, Social & Corporate Governance (ESG) has come into focus. In the context of the pandemic, CEOs in India have recognised the importance of accelerated transition to digital business models. They believe that digital technologies are imperative to maintain customer trust and keep remote workforces connected. Consequently, they are prioritising investments in new technologies to pave the way for a more sustainable and resilient future.”

Vikram Hosangady, Partner and Head, Clients and Markets, KPMG in India said, “Whilst we are still sometime away from normalcy, there are some permanent changes to the way businesses will function going forward. The pandemic is another instance of how the new normal is a VUCA world and companies need to be nimble and innovate constantly to succeed.  If anything, COVID-19 has only acted as a catalyst to accelerate digital transformation with companies today spending more than what they originally planned for on digitisation in spite of uncertainty in earnings.”

“Companies will resort to Zero-based budgeting on all discretionary spends for the next two- three years and question the very need for some of these spends. This is likely to make them leaner, meaner and significantly more profitable when growth returns. The importance of liquidity and the need to be moderately leveraged is also a key learning from this pandemic, something that companies should look at etching in their business plans for the future.” added Hosangady.

Below are the some of the key findings from the report:

Propelled by Purpose:

Only 33 per cent CEOs in India are confident of the growth in their domestic economy and only 42 per cent are optimistic about growth prospects of their company, vis-à-vis 78 per cent and 84 per cent at the beginning of the year, respectively. This weakened view on the growth prospects is in line with that of CEOs globally. CEOs in India are also less confident of their companies’ earnings. About 19 per cent CEOs in India expect the earnings of their companies to either remain flat or decline. However, CEOs in India seemed to be better positioned than their global counterparts in terms of growth prospects of their companies’ earnings with 23 per cent CEOs globally foreseeing their companies’ earnings, stagnating or declining. CEOs globally feel a greater need to re-evaluate their purpose amidst COVID-19, than CEOs in India. 79 per cent of CEOs globally have had to re-evaluate their purpose, as compared to only 37 per cent of CEOs in India, highlighting the confidence that CEOs in India are placing on their current leadership approach and purpose.

Realignment of strategies:                                                                                                                                                                 

In India, COVID-19 has led to a dramatic shift in how business leaders are assessing potential risks now, compared to the pre-pandemic times. CEOs in India, while ensuring short-term survival of their companies, are likely to delve deeper into the impact of this crisis to realign strategies for long-term growth.1/3rd  CEOs in India highlight digital disruption as an imminent risk – a three-fold increase since January 2020. CEOs in India also view supply chain risk as a major threat. The number of CEOs highlighting this as a critical risk rose five-fold since the onset of the pandemic. 89 per cent CEOs in India would continue to build on use of digital collaboration and communication tools. With remote working becoming the norm, 77 per cent CEOs in India believe they have access to wider talent pools and 48 per cent will consider downsizing their office spaces. Also 67 per cent CEOs in India want to realise climate change gains made during the pandemic

Accelerated transformation:

CEOs have invested heavily in technology during the lockdown period and they are betting on major dimensions of digital transformation to make their companies more operationally resilient, agile and customer-focused. CEOs in India strongly believe that digital transformation will continue to be a central pillar in defining their company’s future prospects. As a result, companies are likely to strengthen their digital channels to enhance customer outreach.

Given the pressing need to adopt technology across business functions, tackling threats such as cyber security and data privacy will be inevitable.

About 125 CEOs from India participated in a survey conducted by KPMG International in January-February 2020, before many key markets were beginning to feel the full impact of the pandemic. In August- Sep 2020, KPMG in India conducted a follow-up pulse survey of 100 CEOs across the country to understand how CEOs’ priorities have changed since the onset of the crisis.

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