Forbes Public Sector

Public sector organizations are slower to respond to business volatility

Executives rank inflation, talent costs/shortages and cyberthreats as their top concerns, according to a Crowe study

Forbes Public Sector

CHICAGO (May 22, 2023) – Despite 67% of respondents in the public sector industry expressing confidence in their people, processes, and technologies to detect business volatility, 47% agreed that their organization was slow to respond, according to the Crowe Executive Outlook Study, a joint research project from Crowe LLP and Forbes. In its debut report, “The Unlikely New Frontier of Enterprise Growth: Why Innovation Leaders Pull Ahead in Times of Volatility,” executives weighed in how their organization is faring against sources of volatility, including overall economic change, geopolitical change, financial risk, regulation and taxation, and supply chain, among others.  
In the study, executives across industries weighed in on current and future challenges they are facing and what their organizations are doing to address them. Feedback was collected from 1,001 C-suite and business leaders in total and focused on eight industry verticals. 127 respondents identified as part of the public sector industry – federal, state and local governments, higher education institutions, and not-for-profit – with 74% of that group identifying as primary decision-makers.  
“Government officials want to ensure that taxpayers’ money is being spent properly, so it does not surprise me that they are slower to respond to business volatility,” said Kevin Smith, managing partner of the Crowe public sector group. “Their processes are not necessarily designed to be nimble because they would rather take more time to evaluate the risk and rewards before making a decision that will impact their constituents.” That said, public sector respondents generally had a more optimistic outlook on areas of volatility than other industries. Smith says the sector likely has a less extreme current view of volatility because many are still benefiting from the influx of federal dollars they received in response to COVID-19.   
Looking ahead to 2025, 57% of public sector respondents expect their organization to undergo a significant business transformation. Smith believes that this is because a lot of people are investing the federal funding they currently have on hand to improve future operations with a focus on increased collaboration. According to the survey, leaders at public sector organizations are taking action to improve their technologies and processes to address volatility, with 68% creating closer collaboration with customers and 62% migrating to the cloud to enable greater data sharing. 
“When it comes to technology and implementing new business processes, governments are roughly five years behind other industries and are just now focusing on areas such as automation and cloud migration. That can be attributed to them being cautious and wanting to wait for corporations to work through flaws and stabilize technology and processes before implementing them at their own organizations,” added Smith. Smith also notes that governments are likely increasing their focus on automation because of workforce shortages, a concern that is clearly top of mind among executives, with 57% identifying talent costs/shortages as one of the top sources of volatility their organization is currently facing.  
Other leading sources of volatility ranked by government/public sector respondents include:

Source of volatility
Extremely volatile
Inflation 35% 23% 58%
Talent costs/shortages 39% 18% 57%
Environmental impacts 38% 17% 55%
Cyberthreats35% 18% 53%
Regional/global conflict 30% 22% 52%
Privacy/information security 29% 23% 52%
Shifting government priorities/administrations 38% 13% 51%
Recession fears and uncertainty 33% 17% 50%
DE&I 26% 17% 43%

Public sector organizations have a wealth of consumer information, so cyberattacks are a prevalent source of volatility to the industry. According to the survey, 55% of leaders in the field are expecting an increase in cyberthreats by 2025. Diversity, equity and inclusion (DE&I) was the source of volatility ranked lowest among government/public sector leaders.  
“The public sector has implemented DE&I initiatives well ahead of other industries,” said Smith. “They have the ability to drive large systemic change to promote diversity and advance equity, which is why I believe these executives don’t view it as a major current challenge since it has been a top priority for many years.”  
For more detailed findings or more information about the Crowe Executive Outlook Study, view the report, “The Unlikely New Frontier of Enterprise Growth: Why Innovation Leaders Pull Ahead in Times of Volatility.”
About the Crowe Executive Outlook Study
In partnership with Crowe LLP, Forbes surveyed 1,001 executives from organizations with at least $500 million in annual revenues. Respondents represent companies across eight industry sectors – banking, government, healthcare, insurance, manufacturing, pharma/biotech, private equity, and technology, media and telecommunications. Most respondents, 71%, are C-suite executives, board members, or partners. Three-quarters (75%) of respondents are primary decision-makers.

About Crowe 
Crowe LLP is a leading public accounting, consulting and technology firm with offices around the world. Crowe uses its deep industry expertise to provide audit services to public and private entities. The firm and its subsidiaries also help clients make smart decisions that lead to lasting value with its tax, advisory and consulting services. Crowe is recognized by many organizations as one of the best places to work in the U.S. As an independent member of Crowe Global, one of the largest global accounting networks in the world, Crowe serves clients worldwide. The network consists of more than 200 independent accounting and advisory services firms in more than 130 countries around the world.

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