Chief executives of global businesses are confident about the ability of their companies to grow over the next three years and are expressing a fairly optimistic outlook about the prospects for the global economy, according to the findings of a KPMG survey released last week.
However, more so than counterparts in other regions of the world, a significant number of U.S. CEOs are becoming increasingly concerned by the growth impacts of the changing regulatory environment, with 69% questioned by KPMG listing compliance requirements as the second-most important issue that will affect their company in the near-term, trailing only slightly behind global economic growth, which was cited as the top concern by 73%.
“The more intense a regulatory environment, the more CEOs have to think of other ways to grow business, because the cost of regulation is increasing and eating into profits,” according to Jim Low, KPMG's U.S. and Global Leader for Regulatory Change.
The 1,278 CEOs in ten markets (Australia, China, France, Germany, India, Italy, Japan, Spain, UK and U.S.) and nine key industry sectors surveyed indicated an increase in regulation, not just for the highly regulated healthcare and financial services sectors, but across every industry. “The importance of regulation is beginning now to have a pan-industry effect, as CEOs from many industries report increased compliance requirements,” the authors state.
It is noted that in some cases the practices stay the same, and companies do not need to actually transform their manufacturing or other processes in order to comply, but the level or degree of reporting has intensified.
Almost a third of U.S. CEOs ranked “reducing regulatory complexity” as the top issue they want government officials to address in the next three years, with 19% citing “global fair trade” as the next most concerning matter. In terms of the specific areas of regulation that U.S. CEOs were most troubled by, corporate tax and trade regulation tied at 20% each, closely followed by reporting in the areas of environment, labour and corporate finance.
“Regulations need to be approached as a potential for competitive advantage,” the authors of the study conclude, suggesting that “growth and the intensity of regulatory environment are correlated.”