Climate change and disruptive technology top CEOs’ risk agenda in Malaysia

PETALING JAYA, June 10 (Bernama) -- According to the 2019 Global CEO Outlook published by KPMG International, business leaders are optimistic about the future with 94 percent confident about their organization’s growth prospects, an increased from 90 percent and 83 percent from the year 2018 and 2017 respectively.
 
Within Malaysia, CEOs are maintaining a positive outlook with eight out of ten reporting confidence in the growth prospects for their company and the industry they operate in; out of this, 60 percent are projecting cautious top-line revenue growth of up to 2% over the next three years.
 
However, the report also revealed business leaders have growing anxieties about existential threats. The 2019 study revealed that business leaders in Malaysia and around the world ranked environmental and climate change risks as the biggest threat to organizational growth. This threat is followed by the risks caused by disruptive technology, territorialism, cyber security 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.



The jump of climate change to the top of the risk chart did not surprise Datuk Johan Idris, Managing Partner of KPMG in Malaysia, who has been observing how more companies in the region are increasingly adapting their business strategies to address climate related shocks.
 
“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. In October 2016, Malaysia ratified the Paris Agreement and had pledged a 45 percent reduction in its greenhouse emissions by 2030, and to cut 32 million tonnes of carbon emission by 2020[1]. In December 2018, Malaysia’s Ministry of Energy, Science, Technology, Environment and Climate Change had also 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.[2] 

It was reported by the Asian Development Bank that by year 2100, Southeast Asia is expected to suffer an 11 percent decline in gross domestic products (GDP) due to climate change, a rate that is larger than most other areas in the world[3].
 
Globally, over three-quarters of CEOs (76 percent) say that their organization’s growth will depend on their ability to navigate the shift to a low-carbon, clean-technology economy. As well as sustainable business practices being of value to society, they can also unlock growth and transform performance. Sustainable approaches can create opportunities for new products and services and can also improve the efficiency of how the organizations manage their resources and operations.

In pursuit of growth
A proactive M&A strategy is on the agenda for 8 out of 10 CEOs in Malaysia who have a moderate-to-high M&A appetite over the next three years. Driving this appetite are the twin urges to eliminate direct competitors and to reduce costs through economies of scale/synergies.
 
Business leaders in Malaysia are also prioritizing expansion into emerging markets over the next three years, with Central/South America and Middle-East topping their list. KPMG’s study further found half of CEOs in Malaysia prioritize countries and regions that form part of China’s Belt and Road Initiative.