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Seismic market and technological shifts, extreme weather and stubborn inflation have created significant headwinds for Canadian businesses during the past year. But despite these challenges, business leaders are feeling more confident about their growth plans over the next three years than the were a year ago. In large part, that’s because they already took steps to prepare for a recession.
KPMG in Canada’s survey of small and medium-sized businesses (SMBs) found that most took action during the past 12 months in response to worries that Canada would enter into a recession with potentially detrimental effects on their growth ambitions. By making their companies better, leaner and more efficient, more than 80 per cent of the 700 leaders surveyed now say their company is in a better position.
However, the findings weren’t all positive. Most still expect a recession is coming, and more than four in five say cost and investment pressures on their businesses keep them awake at night.
The three top concerns for these business leaders are cybersecurity, disruptive technologies, and energy and climate change. Advisors need to understand and discuss with these clients how best to reduce these risks and navigate the way forward.
How to address cybersecurity concerns
Cybersecurity ranked as the top concern with more than 60 per cent of business leaders revealing their business has been the target of a cyberattack. As cyber risks grow, there is a need for smaller businesses, which are feeling increasingly vulnerable to cyber threats, to increase their investments in cybersecurity.
For advisors, having a holistic view of clients’ business now means being more aware of the increasing sophistication of cybercriminals and the elevated risk they pose to company data, operations and reputation.
It also means advising on investments to upgrade company cybersecurity practices and hire the skilled talent needed to help defend from future cyberattacks.
Keeping up with technological disruption
An overwhelming majority of SMBs recognize the benefits of digital transformation to their business and, in turn, their customers. However, the ability to keep pace with the rapid trajectory of transformative technologies is presenting a challenge.
The swift uptake of emerging technologies such as generative artificial intelligence (AI), 5G and the internet of things is disrupting markets and industries. In the past year, generative AI has emerged as a game-changing technology that, when harnessed effectively, can enable innovative companies to become trailblazers in the next industrial revolution.
Many SMB leaders are racing to seize AI’s transformative potential to inform decision-making, increase productivity and become more competitive. However, a pain point for these leaders is having the highly skilled talent needed to reap the benefits of this technological leap forward.
Advisors need to be aware of the capabilities of generative AI and how it could be leveraged to make their clients’ businesses even better to accelerate their growth ambitions. Most SMB leaders are already encouraging their employees to upskill in AI.
In practical terms, advisors can examine a company’s finances and ability to invest in AI and identify ways to afford the highly skilled talent they may need going forward.
Investing in the energy transition
The interrelated challenges from climate change, energy and emissions also rank as big concerns. Emerging from a summer of wildfires and extreme weather events, many SMB leaders report their businesses, people and supply chains were affected. More than half say their costs rose significantly as a result of these events.
Certainly, businesses have always needed affordable, stable energy sources to achieve growth. Today, many leaders are also facing significant cost pressures to decarbonize and reduce emissions, whether by transitioning to cleaner energy or by investing in carbon capture technologies.
As Canada’s clean energy transition ramps up, advisors can play a significant role in helping clients deal with compressed margins, identify the capital investment they need to make, and keep a close eye on their overall energy spend.
Several new federal green tax credits have been announced and will become available to help subsidize these additional costs. It will be important for advisors to monitor the status of these tax measures closely over the coming months and have a good grasp of their eligibility criteria, scope and whether clients can apply for them.
Given recent extreme weather events, many leaders already have a strong interest in government incentives to mitigate their own climate impacts, which they say could shape business and investment plans.
In today’s business climate, entrepreneurs have made it clear they are ready to face challenges by pushing beyond obstacles. Advisors have a unique opportunity to help design comprehensive strategies and workable solutions in their clients’ path to future success.
Dino Infanti is a partner and national leader for private enterprise tax at KPMG in Canada.
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