Energy Sector CEOs Worried About Interest Rates, Inflation, and Recession

According to KPMG’s Global Energy Sector CEO Survey, interest rates, inflation, and recession are the top three risks CEOs worry about. While 87 percent of CEOs say a recession is possible within the next 12 months, 71 percent predict that the workforce that worked in offices before the pandemic will work from offices regularly again within 3 years. In a turbulent environment caused by geopolitical tensions, the ongoing pandemic, and the uncertain economic climate, KPMG’s 2022 Global Energy Sector CEO Survey revealed the challenges and opportunities awaiting energy CEOs. The results of the survey, conducted with the participation of 138 energy CEOs in the oil, gas, energy, renewable energy, and utilities sectors, were published under 4 main headings: economic outlook, technology, talent, and ESG (environment, social, governance). Commenting on the results, KPMG Turkey Electricity and Infrastructure Sector Leader Orhan Turan said, “In this survey, we collected CEOs’ views and perspectives on the business and economic situation covering the next 3 years. When CEOs were asked about the biggest risks they were worried about, interest rates, inflation, and recession ranked in the top three. However, CEOs also expressed optimism about their companies’ growth prospects. In 2020 and 2021, environmental/climate change risk was seen as the biggest threat to their organizations’ growth. In our 2022 survey, climate change was not among the top risks, with only 9 percent saying it was the most important risk, compared to 35 percent in 2021. This result was another striking result from our survey.” Energy sector CEOs expect a recession According to the survey results, 87 percent of energy sector CEOs say a recession could occur in the next 12 months. While 59 percent of CEOs think this recession will be mild and short-lived, 75 percent believe it will reverse the growth expected in the next 3 years. While energy CEOs are bracing for a recession, many also say they are optimistic about the growth prospects for the economy as a whole, the energy sector, and their own companies over the next 3 years. While 71 percent of CEOs say they are confident or very confident about the growth potential of the global economy, 85 percent say they are confident or very confident about the energy sector and their own organizations. Of the CEOs who have taken measures to mitigate the effects of the economic recession, 41 percent say they will diversify their supply chains to counter supply chain disruptions, and 36 percent say they plan to do so within 6 months. 49 percent of CEOs say they plan to reduce their headcount within the next 6 months. Emerging/disruptive technology tops the list In technology, 16 percent of energy CEOs identify emerging/disruptive technology risk as the top priority for their companies’ 3-year growth expectations in 2022. This rate was 8 percent in 2021. This concern is leading CEOs to step back and think carefully about their digital strategies. In fact, 37 percent of CEOs say they are pausing their digital transformations, citing geopolitical challenges. And 47 percent say they will pause their digital transformations in the next six years. 75 percent of energy CEOs believe a solid cyber strategy is critical to building trust with stakeholders. And 73 percent agree that geopolitical uncertainty, particularly the ongoing war in Ukraine, has increased concerns about a cyberattack at their organization. However, less than half of energy CEOs (44 percent) believe their organization is prepared for a cyberattack, while 31 percent say it is unprepared. Only 2 percent say they are very prepared. That figure was 22 percent two years ago. CEOs plan to increase their workforces While energy sector CEOs plan to reduce their headcount in the next 6 months, 25 percent of CEOs surveyed say that having a strong “Employee Value Proposition” is their top priority in attracting and retaining talent. While 84 percent of oil and gas sector CEOs plan to increase their workforces in the next 3 years, this rate is 46 percent for energy and utilities CEOs. 71 percent of CEOs expect their workforce, which was working in offices before the pandemic, to work from offices regularly again in the next 3 years. As a result, it is expected to become even more difficult to attract talent to their companies. According to the survey, 75 percent of electricity and utilities sector CEOs and 80 percent of oil and natural gas CEOs have decided to end their business ties with Russia due to Russia’s ongoing attack on Ukraine. Twenty percent of CEOs from both sectors who participated in the survey say that managing geopolitical risks is critical to achieving growth targets over the next three years.