According to the 2019 Global CEO Outlook published by KPMG International, business leaders in the oil & gas sector are optimistic about the future with 91% confident about their organization’s growth prospects. A high percentage (86%) also recorded confidence in the growth prospects of their industry.
The survey found that over half (55%) of CEOs in the oil & gas sector projected top-line revenue growth of up to two percent over the next three years, while an optimistic 39% projected their revenue will grow between two to five percent.
However, the report also revealed business leaders have growing anxieties about existential threats. The 2019 study revealed that oil & gas CEOs ranked cyber security as the biggest threat to organizational growth. This threat is followed by the risks caused by environmental and climate change, disruptive technology, territorialism, and operations. With only a small margin between each of the risks identified, it can be deduced that CEOs are focused on building the organizational resilience needed to master disruption and maintain growth momentum.
Source: 2019 Global CEO Outlook, KPMG International
The risk posed by cyber threats is real, with slightly over half (51%) of CEOs in the oil & gas sector believing that becoming a victim of a cyberattack is now a case of ‘when’, not ‘if’. In the same vein, 66% believe that a strong cyber strategy is critical to engender trust with their key stakeholders. Interestingly, KPMG’s study found that over two third (63%) of oil & gas CEOs believe their organizations are prepared for a future cyberattack.
According to Datuk Johan Idris, Managing Partner of KPMG in Malaysia, the gravity attached to the cyber security agenda is a positive indication that CEOs in the sector are serious about ensuring business resilience.
He added: “Business leaders must remain vigilant and avoid complacency when it comes to governance in cyber space. We operate in a digital world today where breaches can happen anytime. Complacency will only increase the risks across the business, with lasting impacts not just to the company’s financial performance but also to their reputation. Ultimately, smart leaders are those who are making cyber preparedness a board priority, stress-testing the resilience of their systems and people to withstand an attack.”
Addressing the climate crisis
Also high on the list of threats to organizational growth is environmental and climate change risk, so much so that 63% of CEOs in the oil & gas sector say that their organization’s growth will depend on their ability to navigate the shift to a low-carbon, clean-technology economy.
“Businesses are now operating in a globally connected market. Climate change is impacting the business landscape through economic and infrastructure damage, resource scarcity, disruption in plantation output and supply chain, and changing consumer sentiments and behaviour in support of ethical businesses – all of these will consequently affect the costs of doing business,” said Datuk Johan.
He added: “We’ve personally seen the impact of climate change on our rich coral reefs through KPMG’s Eco Dive program, where we’ve been working with Reef Check Malaysia to monitor the health of our adopted coral reefs since 2007. A learning point we can draw from this program is that when one part of the ecosystem is undermined, the rest of the ecosystem will be compromised if actions go unchecked. Similarly, businesses work in an ecosystem of partners, suppliers, and complementary services that require each component to work efficiently and effectively. Thus, CEOs must look into developing sustainable business plans and policies in order to achieve organizational resilience.”
In Malaysia, the focus on climate change has gained intensity within the corporate sector and also from the policymakers, leading to increasing forays into renewable energy. Just recently, the Government announced that it is working on a Renewable Energy Transition Roadmap (RETR) through to 2035 that will include strategies and action plans to reach a renewable energy target of 20% by 2025. Furthermore, in December 2018, the Energy, Science, Technology, Environment and Climate Change Ministry announced a plan to draft the Climate Change Act, and aims to complete a national climate change adaptation and mitigation plan by the end of 2019.
By prioritizing sustainable business practices, companies in the oil and gas sector can unlock growth and transform performance. Sustainable approaches can create opportunities for new products and services and can also improve the efficiency of how companies manage their resources and operations.
In pursuit of growth
Strategic alliances with third parties are on the agenda for majority of the CEOs in the oil & gas sector as this is seen to be the most important strategy for achieving their organization’s growth objectives over the next 3 years.
KPMG’s study also found that 64% of CEOs intend to expand into emerging markets over the next three years, with North America and Asia Pacific topping their list. Out of this, 61% prioritize countries and regions that form part of China’s Belt and Road Initiative.
CEOs in the oil & gas sector appear to take a proactive approach on the technology agenda with 73% claiming they are personally leading the technology strategy for their organization. Furthermore, a majority (69%) are increasing capital investments in buying more new technology to improve their organization’s resilience.
These business leaders have also revealed that modernizing their workforce is the strategy they rely on the most to ensure their organization is future-ready. On a similarly positive note, 67% of CEOs anticipate to increase their headcount by up to 5% over the next three years.