A populist tide is rising. What course should business steer?

Dr. Alexis Crow, Lead, Geopolitical Investing practice, PwC US and Andrew Gray, Partner and Global Head of Brexit, PwC UK

The turmoil surrounding the UK’s planned exit from the European Union may be the most visible manifestation of rising populism in Europe and elsewhere, but it is hardly the only one. The electoral successes of populist parties and politicians in Austria, Brazil, Italy and Poland, not to mention the U.S., provide further confirmation of the trend. They are all signs of rising wave of populist sentiment around the globe, which respondents to PwC’s 22nd Annual Global CEO survey identified as one of the top 10 threats their organisations face in 2019. Aggregated and amplified by social media, populist resentment of business and political elites and resistance to immigration have emerged as potent political forces that can destabilise economies and governments and give rise to policies that could disrupt the free movement of goods and people around the world.


Visuals for Populism blog design Facebook v1.0Brexit, and above all the prospect of a ‘no-deal’ Brexit that could cause economic disruption across the Continent of Europe and beyond, is the greatest immediate risk to global financial stability. (Although the UK’s exit date from the EU has been pushed back to 31 October 2019, a ‘no-deal’ Brexit remains a distinct possibility.) But it’s not the only way that rising populist sentiment is making business more difficult and uncertain. Cross-border trade is becoming more expensive and complex. The hunt for talent may become more challenging as countries enact anti-immigration policies and close or tighten their borders. And if, as is widely predicted, populist and nationalist parties take seats from mainstream parties in the upcoming European Parliamentary elections, consensus on key policy issues such as immigration and trade will be harder to achieve. Populist factions could also hamper a unified European response to sudden shocks, such as the meltdown of a national economy or a surge of migrants across the Continent’s southern and eastern borders.

The agendas of the various populist movements, though varied, have strong commonalities rooted in a sense of grievance and victimisation and expressed in demands for tighter immigration controls; greater local control of national economies; and hostility toward political and economic elites. Those attitudes reflect anxieties over rising wealth inequality; declining income and social mobility; and the spread of automation and the fear that job losses may follow in its wake, compounded by the belief that political and economic elites are out of touch with the day-to-day lives of ordinary citizens.

Those beliefs are, somewhat counterintuitively, more pronounced among middle-class than lower-class voters. An exhaustive analysis1 of the 2016 U.S. presidential election by the Gallup polling organisation found that supporters of Donald Trump were more affluent than the average voter, while poorer voters were somewhat more likely to support Hillary Clinton. Those findings suggest that absolute levels of social and economic status drive populist sentiment less than perceived comparative status. As sociologist Arlie Hochschild puts it in her book on the U.S. Tea Party movement, Strangers in the Their Own Land 2, populist supporters see themselves as standing in line on a hill leading to prosperity at the top, while immigrants, minorities and women try to cut in line ahead of them. This perspective, as Christine Lagarde, managing director of the International Monetary Fund, has said, in combination ‘with lower growth, more inequality and much more transparency, [are the] ingredients of what is defined now as a crisis of the middle class in the advanced economies.’3 This crisis is spurring the rise of populist movements and parties, Lagarde suggests.

Business—and here we mean commerce—has a vital role to play in mitigating the negative impacts of populism and counteracting the pull toward extremism. But it will require reversing the trend of recent years, which has seen companies turn away from investing in people and new skills acquisition toward taking on additional debt to fund share buybacks and dividend payments. In the U.S., this decline in investment in the non-financial economy is apparent in a recent business conditions survey conducted by the National Association of Business Economics. It found that 84% of companies surveyed had not changed their hiring or investment plan in the wake of the passage of 2017 Tax Cuts and Jobs Act4. Instead, many companies have been forced to duplicate supply chains amid trade uncertainty and invest heavily in scenario planning, rather than deploy long-term capital to the skills and workforce of the future—an approach that would benefit citizens of every class and age group.

In addition to increased investment, commerce can help to mitigate the threat of populism by actively engaging with governments and the public to help shape policies that address anxieties over automation and declining living standards. The business sector can also do a better job of making the case that diversity, inclusion, environmental responsibility and increased trade add value to national economies and increase individual opportunity. And finally, business can build trust by visibly seeking a balance between the public good and the speed of innovation, between data-driven value and privacy and security, and between local, national, and global markets.

Ultimately, though, the most effective way to build trust is to invest in the real economy, but such investments are unlikely to materialise in the absence of a positive long-term outlook for the future. Right now, with the shadow of populism looming larger even as the odds of a chaotic Brexit have shrunk and the credit cycle nearing maturity, the global outlook is highly uncertain. The only certainty, perhaps, is that low growth driven by low investment in the real economy may only pour more fuel on the fires of populism.



1. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2822059
2. Arlie Hochschild, Strangers in Their Own Land: Anger and Mourning on the American Right, The New Press, New York. 2016
3. From remarks delivered at a panel discussion at the World Economic Forum, Davos, Switzerland, 18 January 2018
4. January 2019 Business Conditions Survey Summary, National Association of Business Economics


Innovation at a crossroads: Restoring trust in technology

By David Sapin, PwC Risk and Regulatory Consulting Leader, PwC US and George Stylianides, PwC Global Risk Consulting Leader, PwC UK


The convergence of advanced digital technologies, the increasing speed of the internet, and the seemingly infinite processing power of cloud computing have unleashed a wave of innovation and change unimaginable only a few years ago. But other counter-currents—public concern over the adequacy of privacy protections and data security, rising regulatory barriers, and growing nationalist sentiment—threaten to slow that wave, if not bring it to a halt. In this, the second instalment of PwC’s blog series on the top business risks of 2019, we look at what threatens to stem the tide of innovation and what business—and government—can do to restore trust in technology and ensure that innovation both thrives and benefits society.


Not long ago, the possibility that anything could slow the breakneck pace of innovation seemed remote. But in the spring of 2018, the public learned that personal data scraped from social media was used to target various voter blocs with advertising and bogus news reports to influence the outcome of the 2016 U.S. presidential election. That news followed reports of data breaches at businesses ranging from credit-reporting agencies to major retailers to financial services companies, fuelling consumer concern about risks to privacy posed by digital technologies.


Visuals for innovation risk blog 1 v1.0The revelations sparked increased discussions in Washington and other capitals toward increasing regulation of the tech sector, in particular the gathering and use of consumer data—the raw material for innovation the digital economy. Although some regulation, most notably the EU’s General Data Protection Regulation (GDPR) was already scheduled for implementation before the reports of electoral interference; the news and the subsequent public outcry accelerated momentum toward further limits on the amount and type of consumer data that is collected and how it is used. It turns out that the executives who responded to PwC’s 2019 Global CEO Survey had good reason to cite “over-regulation” as the leading threat to the growth of their organisations and the global economy.


The prospect of more stringent regulation is only one of several forces that is threatening to slow the pace of innovation. Eurasia Group’s report, ‘Top Risks 2019’, cites two other prominent trends: security concerns that are ‘leading states to reduce their exposure to foreign suppliers in areas critical to national security’ and economic concerns that are ‘leading countries to put up barriers to protect their emerging tech champions against established market leaders from abroad’[1].


Visuals for innovation risk blog 2 v1.0But companies are not helpless against the forces threatening innovation. Rather than wait for other stakeholders to act, business needs to get out ahead of the push for greater regulation and partner with the public sector to address legitimate concerns about privacy, data collection and use, and the social and economic impacts of technological advances. The more business engages with regulators—and the more successful they are in harmonising data protection regulations across jurisdictions—the more effectively they can guard against the risks of digital technologies without stifling innovation. As part of that engagement, forward-thinking companies are already incorporating data security and privacy protection into everything from corporate strategy to product design. At some software-as-a-service companies, for example, data security engineers are part of every product design team, actively looking for weaknesses in the design, then addressing the flaws; they continue to test the software’s security throughout its lifecycle, often engaging outsiders to probe for vulnerabilities. And some companies have begun to cite their data security safeguards to differentiate themselves from the competition—witness Apple’s advertisements at the 2019 Consumer Electronics Show announcing that “what happens on your iPhone stays on your iPhone.”


Business, government and the public all benefit from harnessing advanced technologies and harmonising data protection regulations to address pressing business and societal problems while guarding against the risks posed by technology’s dark side. Together, they can ensure that data security and privacy protection don’t hamper innovation, but actually advance it.


[1] All quotes in this paragraph are from ‘Top Threats 2019’, Eurasia Group 2019



The uncertainty principle: Current China-U.S. relations test business and government

James Chang, China Financial Services Consulting Leader, PwC China and Jim Woods, Global and China/Hong Kong Risk Assurance Leader, PwC China

Cyber threats and terrorism don’t worry business leaders as much as they used to, judging from the responses to PwC’s 2019 Global CEO survey. But that doesn’t mean that CEOs are breathing easy. The focus of their concerns has shifted from hackers and terrorists to political trends and government policy, with over-regulation, policy uncertainty, geopolitical uncertainty, protectionism, populism and trade conflicts cited among the top 10 threats.

Social media graphics for US-China blog v1.0 FacebookThe most prominent trade conflict is that currently playing out between China and the U.S. As Eurasia Group states in its recent report, 2019 Top Risks, the Trump Administration, ‘determined to force U.S. companies to reduce their reliance on inputs from China and to limit the transfer of intellectual property’, is using ‘non-tariff barriers as a key tool in this push, including investment restrictions, export controls, financial sanctions, and criminal indictments’. China is responding with non-tariff measures ranging from ‘constraints on the transfer of digital information to anti-trust decisions.’ Such tit-for-tat measures, the report says, ‘will disrupt firms and broader industries, increasing costs and decreasing collaboration’.[1]

That disruption is already playing out around the globe, as companies diversify their customer and supplier bases, accelerate procurement schedules, and turn inward in search of growth. Nowhere are these trends more apparent than in China, where, according to the CEO survey, local businesses are shifting their focus to the domestic market, where the middle class is burgeoning, and to markets in Africa, the Middle East and Southeast Asia. Accelerating this movement is the Chinese government’s Belt and Road initiative, which promises to commit multiple trillions of dollars to investment and infrastructure projects across Asia, Africa, and Eastern Europe.


Seeking alternative paths to growth

The ripple effects of the current China-U.S. trade relations are by no means confined to China. Respondents to the CEO survey who reported that they were ‘extremely concerned’ about trade conflicts say that they are adapting to their new environment by adjusting their supply chains and sourcing strategies, targeting growth in alternate territories, delaying capital expenditures, shifting production to alternate locations and delaying foreign direct investment. Strong majorities are also relying on capturing operational efficiencies, emphasising organic growth and launching new products or services to reach their growth targets.

Social media graphics for US-China blog v2.0 FacebookAs companies continue their transformations into digital enterprises, they must also closely monitor changes to data governance laws and regulations enacted as part of the ongoing renegotiation of trade agreements and the rules of international trade. Data is the lifeblood of digital business, and around the world, the debate over data is being framed as a stark choice between data barriers and the free flow of information, and between data localisation and data globalisation. The outcome of that debate will have significant implications for everything from AI to the fast-growing ‘access economy’, which reserves its greatest rewards for digital platforms that arrange rental access to assets such as housing and cars. To prepare for what’s likely to be a patchwork of competing and often conflicting data governance regimes, many global businesses are considering decentralised IT operating models and tiered approaches to data governance that apply global, regional and local templates to country-specific regulations.

Businesses are also taking a new, more holistic approach to risk. Checklists, heat maps and annual risk reviews are no longer adequate to identify and mitigate emerging risks in a volatile marketplace. That’s why many businesses are pivoting to a more dynamic risk posture, aided by analytics that take into account large quantities of structured and unstructured data. Constantly monitoring everything from shipping data to social media chatter to shifting demand patterns, analytics can help business leaders make better-informed decisions and respond with agility and flexibility to rapidly changing trends and events.


A gap in governance

Actions by individual businesses alone, however, can’t defuse international tensions or construct workable, widely accepted dispute-resolution mechanisms. Those mechanisms are in need of a major overhaul, according to ‘[a] rising chorus [that] is calling out the dangers of an outdated world trade system and laying bare the deficiencies of the World Trade Organisation’, as PwC notes in its recent report Top Policy Trends 2019.[2]

Business can and should contribute to shaping new policies and governance structures to address the conflicts that will inevitably arise during the transition to a digital economy. Business has an opportunity in the current unsettled environment to ‘become the de facto harmonisers of how data is collected, protected and used, at least across philosophically-aligned nations’,[3] as the Top Policy Trends report says. To assume this role, companies will need to make significant investments in data governance, be transparent about the use and storage of data, and increase individuals’ control over their personal information. By disclosing how they collect, store and use data, businesses can position themselves to influence new legislation and standards. And by incorporating data privacy standards and including privacy and cybersecurity expertise in strategy formulation and product design they can establish the trust that earns them a place at the policymaking table.

We believe businesses can best serve themselves and society by actively engaging with policymakers, regulators and the public to balance the need for innovation and the demand for reasonable data safeguards, the desire for robust international commerce and the need for an orderly system of global trade. A new world is forming around us, and it’s in the interest of business to help decide its shape.


[1] All quotes in this paragraph are from ‘2019 Top Risks’, Eurasia Group, 2019

[2] https://www.pwc.com/us/en/library/risk-regulatory/strategic-policy/top-policy-trends-2019.html

[3] Ibid.


Cracks in the façade: What divisive global politics means for business

By George Stylianides, PwC Global Risk Consulting Leader, PwC UK


The ties holding together the international order have frayed badly in recent years. Debates that once seemed settled—around globalisation, trade and the free flow of information, goods and people—have erupted again with a vengeance, threatening to upend everything from global economic growth to corporate supply chains and sourcing strategies. Around the world populism and nationalist sentiment are on the rise, stoked by political leaders whose views and policies threaten to destabilize the pillars of international trade and development. In light of these trends, many business leaders have revised their growth estimates sharply downward, and the organisations they lead have turned inward in search of revenue growth rather than outward toward new markets and alliances. Ironically, those moves may hasten the onset of the recession that many business leaders see over the horizon.

CEO_Survey_Chart_ART_v7_Twitter_3Executives’ newfound sense of caution is apparent in the responses to PwC’s latest Global Annual CEO Survey, which reveal sharp declines in business leaders’ optimism about global GDP growth and their own organisations’ revenue prospects in 2019 and beyond. The main threats to growth, according to CEOs, aren’t terrorism or climate change, both of which tumbled down the survey’s rankings of leading risks. The biggest worry points—over-regulation, trade conflicts and policy uncertainty—relate to the ease of doing business around the world. And just when CEOs are in pressing need of insightful analysis to inform their strategic decisions, they face chronic and growing shortages of skilled talent to extract value from the data inundating their organisations. Those results chime with the conclusions of a recent top risks report from the Eurasia Group, an advisor to investors and business leaders on political risks and opportunities in foreign markets.

The geopolitical crosscurrents discussed in both reports will have wide-ranging impacts on key business priorities. In a new blog series, PwC’s risk specialists examine how political forces are influencing business decisions. In this first instalment, we analyse CEOs’ views of the leading risks they face in 2019. In subsequent posts we’ll consider the state of relations between China and the U.S., the world’s two biggest economies; examine the effects of rising nationalism on supply chains and overseas operations; and review the threats to vitally needed innovation, which depends on the free flow of people and ideas across borders. We hope this blog will be of value to business leaders, helping them navigate today’s treacherous geopolitical seas.


Rising tensions cloud the global outlook

CEO_Survey_Chart_ART_v7_Twitter_2CEOs have seen the discord coming for a while. In recent editions of PwC’s Annual Global CEO survey, large majorities of respondents have consistently said the world is moving toward nationalism and devolved nations and fragmenting into regional trading blocs. Those trends are darkening business leaders’ views of their companies’ growth prospects and those of the overall economy. True, 42% of CEOs believe global economic growth will improve over the next 12 months. But 28% expect growth to decline, up from 5% the previous year—a record increase in the ranks of the pessimists. Their confidence in the growth prospects of their own companies over the next one- and three-year periods has also faded.

Respondents to our latest survey also reordered their rankings of the most significant threats to business. Terrorism, ranked as the second-most severe threat in last year’s survey, has fallen to 23rd, while threats related to government policy and performance have assumed new prominence. Over-regulation, policy uncertainty, trade conflicts, geopolitical uncertainty, protectionism and populism have muscled their way onto the list of the top ten threats that have CEOs feeling “extremely concerned.”

Those concerns are reshaping CEOs’ operating models and growth strategies. A near-majority (45%) of respondents who report they are “extremely concerned” about “trade conflicts” are adjusting their supply chains and sourcing strategies, and 25% are shifting their growth strategies to other territories. An additional 22% are delaying capital expenditures. CEOs of China-based companies have been far more active in making such adjustments than their U.S. counterparts.

CEO_Survey_Chart_ART_v7_Twitter_1Amid all the external turmoil, CEOs are looking inward for growth, with 77% of CEOs surveyed saying that their organisations are planning to reap operational efficiencies to drive revenue improvement; 72% are placing their faith in organic growth. Only 37%, by contrast, are looking to new markets to drive growth; the same percentage are banking on M&A.

Capability and talent gaps threaten to hinder that planned growth. For example, 94% of CEOs said that data about customers’ and clients’ preferences was “critical,” yet only 15% said the data they receive is “comprehensive.” What accounts for that yawning gap? Talent shortages are a key reason. Nearly two-thirds (62%) of CEOs surveyed say that it has become more difficult to hire workers in their industry, up from 42% in 2012, and 55% say that a lack of available talent has impaired their ability to innovate effectively. And 54% of respondents say that a lack of analytical talent is the primary reason that the data they need to make key business decisions is inadequate or that they do not receive that data.


As the big powers face off, nationalism gathers strength

Image 2 - Blog v1.1CEOs will see many of their concerns reflected in the Eurasia Group report titled “Top Risks 2019.” This sobering document declares that “the overwhelming majority of geopolitical developments that matter…are now headed in the wrong direction.”[1] Take the state of U.S.-China relations. Even if the two economic superpowers’ disagreements about trade and economic policy are resolved, the report states, “something more fundamental has broken in the relationship between Washington and Beijing that can’t be put back together.” The misgivings that marks the relationship has intensified as President Donald Trump’s foreign and economic policies have grown more confrontational. China’s response so far has been relatively muted and conciliatory, but with nationalism on the rise at home, President Xi Jinping and his government are under pressure to assume a more aggressive posture.

Meanwhile, Europe’s “populist and protest movements are stronger than ever,” [2] the report asserts. Elections to the European parliament will take place in May, creating “an opportunity for right-wing eurosceptics to become an imposing force in the parliament—perhaps the second-largest group.” Their presence will make it more difficult to reach consensus on key issues such as migration and trade and undermine attempts to react cohesively to economic or political shocks. As individual countries such as Austria, Hungary, Italy and Poland pursue go-it-alone strategies, supply chains could be disrupted, and local business and investment policies could make doing business on the Continent more difficult and complex.

Perhaps most ominously, the report’s authors say the world is headed toward “a global innovation winter—a politically driven reduction in the financial and human capital available to drive the next generation of emerging technologies.”[3] To discourage cyber mischief and industrial espionage, some countries are throttling foreign suppliers’ access to key industry sectors and tightening regulations over the use of consumer data. Protectionist barriers in some territories are rising as governments seek to advance local tech champions at the expense of established global giants. And more stringent immigration policies are inhibiting the flow of talent to key innovation centres. Each of these trends is manageable on its own; in concert they threaten “to cast a pall over global innovation.”

Such is the parlous state of the business world in 2019. In coming posts to this blog, we’ll take a closer look at how these developments will affect how business is done in the coming year and beyond. Hang onto your hats, it’s going to be a bumpy ride.



[1] [2] [3]All quotes in these paragraphs are from “Top Risks 2019,” Eurasia Group


Why today’s CEOs need risk managers who can see around corners

Authors: George Stylianides, Global Risk Consulting Leader, PwC UK, Frank Martens, Global Risk Framework and Methodology Leader, PwC Canada and Hélène Katz, Director, Risk and Regulatory, PwC US

Take a look at the responses to two related questions in PwC’s 21st Annual Global CEO Survey, and you’ll find an odd disconnect—and the possible sources of both the optimism and the anxiety permeating C-Suites around the world. Asked whether the global economy will grow in the coming 12 months, 57% of CEOs said they believed that it would, a big jump from prior years. But when CEOs were asked about their own companies’ prospects in the coming 12 months, only 42% said they were very confident of revenue growth.

What explains the gap between CEOs’ outlook for the global economy and for their own organizations? We suggest that it indicates that CEOs have doubts about their organizations’ ability to anticipate and manage the manifold external risks confronting them. Moreover, we think, based on our own encounters with C-level leaders, that they are painfully aware that the markets are far less forgiving today of failures to anticipate risks than they used to be. It used to be that investors would give companies a pass for, say, supply-chain troubles caused by an erupting volcano or earnings targets missed because of international trade disputes. Today, CEOs tell us, investors expect companies to be prepared for whatever circumstance throws their way, and if they’re not, well, it might be time for a new CEO.

As you’d expect, the most pressing external threats vary from region to region. Concerns over infrastructure are a major worry point in Africa and India, while CEOs in Europe and North America are preoccupied with geopolitical uncertainty, over-regulation, and rising cyber threats. And while cyber was amongst the top-five risks in North America and parts of Central Europe, it did not make the even make the top-ten in parts of Eastern Europe or South America, replaced by concerns over populism.[1]

For all their variance, those threats share a few commonalities, two in particular: the threats are external to the organization, and they can’t be managed adequately via controls and checklists alone. In a world where risks are in near-constant flux, yesterday’s static risk management techniques yield few insights to support strategic decision-making. What companies need in today’s unforgiving environment is a dynamic approach to risk, enabled by tools such as analytics and data modeling, and a focus not on reducing risks to zero but on resilience and the capacity to adapt to changing circumstances, whatever form they take.

That means that risk management professionals now need to view risk through a wide-angle lens and consider how the impact of specific threats might ripple through an entire organization. How should a company respond to, say, large-scale population movements driven by changes in climate? Risk managers will need to engage a wide range of functional and business-unit leaders in comprehensive strategic conversations touching on everything from supply chain redundancies to legal ramifications to workplace-safety concerns to distribution impacts. In simpler times, those conversations would have centered on strengthening controls and risk-mitigation measures. Today, though, those discussions have to focus on identifying and ranking each, as well as on developing the flexibility and resiliency necessary to withstand them.

Risk management professionals must also be prepared to contend with risks that were not even recognized as risks a decade ago. Consider the workforce of the future. Has the company prepared for a new normal of talent scarcities? Can risk managers define clearly what impact a prolonged dearth of key skills would have on business strategy? Can they spell out for the C-Suite (and investors) how the company’s recruitment and strategies are changing to keep pace with the workforce?

Not so long ago, such conversations were rare, if not unheard-of, occurrences. Today, with CEOs seeking reasons to temper their anxiety with optimism, they’re par for the course. Welcome to the new normal, where the ability to see around corners isn’t a special gift, it’s table stakes.

[1] PwC, 2018 Global CEO Survey


In private companies’ search for digital talent, transparency is key

Authors: Saul Plener, National leader for PwC's Private Company Services, PwC Canada, and Penny Partridge, Chief Human Resources Officer, PwC Canada.

It’s an exciting time to be CEO of a private company, but by no means is it easy. According to PwC’s 21st CEO Survey almost three-quarters (74%) of private company CEOs are concerned about the speed of technological change and its effects on their business.

Indeed, new technologies and digital systems are being introduced at a rate never seen before, reshaping the way we all do business. Private companies that currently lag their public counterparts in attracting digital talent need to take note of this deficit if they want to drive innovation, improve decision making, enhance customer experiences, and create better business models. More to the point, they need to take technology seriously.

On average, the CEOs who responded to our private company survey appear markedly less concerned than public company CEOs about the acceleration of technological change, and the cyber threats that inevitably come with it. Alarmingly, 22% of private company CEOs are not concerned at all about cyber threats. As such, it’s worth asking whether private companies are taking these digital disruptions as seriously as they should be, and are they acting quickly and strategically to seize opportunities and reduce risks?

Over 60% of private company CEO’s agreed that digital transformation can be disruptive to a business and leaders need to be prepared. Here are some important considerations for private company leaders considering how digital and technological advancements will shape the future of their businesses.

  1. Be transparent with plans for digital adoption

Private companies are just that: private. Many prefer to keep their business strategies and plans strictly confidential, limited to a small and senior circle of trusted individuals. However, being open about your business strategy, specifically your plans for how technology will play a key role in shaping your business, is increasingly important for attracting both customers and top talent.

Like it or not, transparency is the norm in today’s business landscape: anyone can do a quick internet search and learn all about your company. By treating your digital ambitions as a trade secret, you look like you’re lagging behind or avoiding future challenges. Be open about your budget and spending on digital software, your investment in new capabilities, and your specific tech opportunities. After all, the leaders of tomorrow want to know that they’re working for a forward-thinking company committed to innovation and transformation.

  1. Attract and retain talent with digital skills

Private company CEOs are working to attract the talent they need, the survey shows, including doing such things as improving compensation and benefits packages (78%), implementing continuous learning programs (85%), and modernizing the working environment (86%). Still, half of private company CEOs say it is difficult to attract digital talent. As more companies try to recruit these much sought-after professionals, the more challenging they are to find. While colleges and universities continue to ramp up their training in these skills, the reality is that supply doesn’t always keep up with demand. In fact, half of private business CEOs surveyed say it’s somewhat or very difficult to attract digital talent—yet it’s crucial to find that talent in order to fend off cyber threats and keep pace with the breakneck speed of technological change.

The best tech talent can have their pick of employer; they’re looking to find a company committed to tech transformation that will follow through on its plans to invest and evolve in the digital space. Your would-be recruits can tell if your commitment is superficial or transitory—and if that’s the case, they’ll look elsewhere. This makes it even more important for you to share your intentions for evolving your business. It’s not just about being transparent internally with your employees, but externally with the talent pool as well, by demonstrating that you have a robust strategy that you’re ready to put into action.

  1. Re-tool your existing talent for the digital world

At the end of the day, digital and tech skills have to be part of everyone’s role—not just IT. Sourcing and recruiting digital talent may be a daunting task. At the outset, make sure you’re aware of existing talent’s strengths and limitations, and how to effectively leverage team members with the right skills. Do you have people who are natural users of digital programs and platforms, who can push the needle to get others to do the same? Many business leaders are noticing potential in their own offices and helping those with interest and ability to increase their skills. Building your digital talent from the bottom up is becoming more important if you want to keep your business moving forward in all areas.

This doesn’t mean that skills like problem solving, leadership, adaptability, and creativity are no longer important; as a matter of fact, they’re necessary for digital systems to be mobilized as intelligently and as innovatively as possible. A digital-first workplace is one where different departments can collaborate in nimble, flexible, and cross-functional teams. And why not give your up-and-coming digitally-minded talent the opportunity to lead those transformation initiatives, reporting to your leadership team? It gives them a great opportunity to showcase their value and fully engage with the future of your business.

Locating and nurturing the talent you need is never an easy task, but as a private business, you may have an edge. The management teams of private companies tend to be small and tight-knit, unburdened by responsibility to public shareholders; as a result, you can often move more flexibly and decisively than your larger rivals. You can also change course with greater agility as you get a sense of which systems work best for your business, and build on your success by scaling them quickly. Success is contagious—once your strategies, software, and talent are in place, you can execute with speed and efficiency to pile up wins at an accelerating pace.

It’s time for private companies to be transparent with their tech strategies: your digital plan should be clear enough that everyone at your company can articulate it, and it should be public-facing so that the talent pool can see it—and see that you’re acting on it. For private businesses that don’t accept this level of transparency and visibility, the future will be an uphill battle. But companies that can be open about their digital ambitions will be able to compete, and win, for years to come.

About the authors:

Photo-saul-plener-use-this-picture-for-external-website-photo-2Saul Plener
 is the National Leader for PwC's Private Company Services practice in Canada. Based in Toronto, he works with a dedicated team of business advisers in Canada and globally to bring value to owners and leaders of private companies. 


Partridge-penny-18-york-2Penny Partridge is Chief Human Resources Officer at PwC Canada. Based in Toronto, she is responsible for all aspects of talent management, learning and development, and human resources for PwC Canada. She is a partner on the firm’s Extended Leadership Team and also the Human Capital Performance Leader for the firm’s western territory region, US, South America, Mexico and the Caribbean.



Taking the Wide-Angle View: The Changing Role of the Risk Professional

Authors: Dennis Chesley, Global Risk and Regulatory Consulting Leader and global lead for the COSO ERM Framework update, PwC US and Brian Schwartz, US Internal Audit, Compliance and Risk Management - Financial Services Leader, PwC US

What a difference a year makes. In 2017, respondents to PwC’s annual CEO survey identified over-regulation, uncertain economic growth, and exchange-rate volatility as the top threats to their businesses. Of considerably less concern were terrorism, cyber threats, and geopolitical uncertainty.

Pwc-ceo-blog-graphicCEOs see a very different world in 2018, according to PwC's 21st CEO Survey. As their confidence in both the health of the global economy and their own companies’ growth prospects has surged, they have downgraded uncertain economic growth to the 13th most frequently cited threat in 2018, from the most frequently cited in 2017. And with the world’s leading economies growing more or less in sync, exchange-rate volatility has dropped from fifth to tenth. Over-regulation remains one of the top threats, but terrorism has vaulted to the second-most cited threat in 2018 from the 12th most cited threat in 2017. And though concern about exchange-rate fluctuations has waned, geopolitical uncertainty has climbed to third position from fourth over the same period.

What we’re looking at here is what you might call a risk realignment. Macroeconomic and direct business risks have receded from the forefront of CEO concerns, while broad, complex political, and social concerns have grown markedly more prominent. The emergence of cyber threats in particular as a leading threat underscores the new challenges that risk professionals face. It also goes a long way toward explaining why their roles have to change in the years ahead.

The rising concern over cyber threats is no surprise, given the proliferation of cyber intrusions, data theft, and malicious manipulation of social media platforms. But the issue isn’t just the number of cyber threats but also their nature. Cyber threats are not a one-off event but continuous and constantly changing. That shape-shifting quality exposes the shortcomings of the traditional approach to risk management, which is to build higher walls, deeper trenches, and thicker doors. Cyberattacks usually impact a wide spread of business activities and functions, from product development to production to marketing, and from compliance obligations and regulatory relationships to reputation management and customer trust. As business grows ever more digital, risks will become ever-present rather than episodic. Senior management will expect risk management professionals to develop a dynamic understanding of cyber threats’ effect on every aspect of business and advise leadership on their potential impact on the organisation’s strategy.

The notion of the risk professional as strategic advisor is not universally accepted in the business world, or indeed even among risk management professionals. This point was driven home to us recently when a client’s chief risk officer told us that she didn’t know the company’s strategy and didn’t need to know it to do her job. That viewpoint is not uncommon, in our experience. It’s also an express ticket to irrelevance. Risk management professionals once spent their days preparing quarterly risk assessments and incident reports and performing internal audits. That’s no longer enough, if it ever was. Today’s CEOs and boards expect risk management professionals to know how various risks affect business performance. If they can’t meet that expectation, leadership takes notice. It’s no coincidence that only 53% of directors responding to PwC’s most recent board member survey said that management effectively communicates the risks of implementing a proposed strategy.

Tomorrow’s boards will expect risk management professionals to understand the links between innovation and risk, particularly those risks associated with artificial intelligence, robotics, and other technologies, and address the strategic ramifications of a failure to innovate. They will be expected to support the entire innovation cycle and offer a perspective on the potential risks and opportunities at every stage. Their work will require them to deploy an array of new skills, competencies, and tools to support innovation and identify and assess exposures and opportunities for the organisation. 

As the findings suggest, there is a growing demand for risk management professionals who can take a wide-angle view of the business and understand how different and increasingly complex risks affect various activities and functions. To take that view they need business acumen and the soft skills necessary to advise their peers and persuade them of the virtues and vulnerabilities of a particular course of action. That’s not to say that risk management professionals don’t need technical skills as well, but those skills alone won’t be sufficient to meet the needs of the board and the CEO. The evolution of the role presents a challenge to risk management professionals, but also an opportunity. Historically, risk management professionals have been regarded within the organisation as wet blankets, forever saying ‘no’ to promising ideas. Now they have a chance to revise that view and demonstrate their value as strategic problem-solvers and enablers, helping the organisation meet its strategic goals and improve business performance. That sounds to us like a chance worth taking.



More information about the changing role of the risk professional can be found in the following publications:

The Global Risk Podcast Series: 10-minute conversations designed to provide you with valuable insight and fresh perspective on how to manage risk in today’s challenging global landscape. Don’t miss an episode at pwc.com/globalriskpodcast.

Do you have the full picture of the potential risks facing your business and the capabilities you need to create advantage? Introducing the Compendium of Examples, a companion document to the COSO ERM Framework. Coming soon – sign up to be notified.

Managing risks and enabling growth in the age of innovation: 2018 Risk in Review Study

Moving at the speed of innovation: 2018 State of the Internal Audit Profession Study

The Anxious Optimist in the Corner Office: PwC’s 21st Annual CEO Survey


The top five trends in corporate responsibility

Author: Jonathan Grant, Director, Climate Change, PwC UK and Kirsty Jennings, PwC Global Corporate Responsibility Leader, PwC Australia

In the lead up to BITC’s Responsible Business week, we asked experts from around the PwC network and beyond for their views on the most significant trends in corporate responsibility (CR). Here are the five trends to watch:

1. There’s increasing social and environmental disruption - and there’s no avoiding it

Dramatic and unexpected changes to the global political, social, economic and environmental landscapes have made it a tough time to be in business.  In the last 12 months, extreme weather events have had a devastating impact on communities with severe floods in Bangladesh, drought, mudslides and wildfires in California, and hurricanes in the Gulf of Mexico.  Scientists are now increasingly confident in the links between this extreme weather and climate change.

Plastics pollution has suddenly hit the headlines, despite the fact that it has been building up in our rivers and oceans for decades.  Elsewhere, companies are under pressure on issues of social inequality, modern slavery, the gender pay gap, and the treatment of staff, contractors and gig workers. While these may be global issues, many demand that corporate responses are relevant at the local or community level.

Dealing with this uncertainty is tricky enough, but companies can no longer sit on the sidelines of these changes. They are expected to speak up and take a stand on issues - even ones unrelated to their business. Two thirds of consumers responding to a recent survey said they want brands to take a stance on difficult issues.  And 64% of respondents in the recent Edelman’s Trust barometer said they want CEOs to take a lead on policy change instead of waiting for government.   

 2. Investors, governments and others are piling on the pressure

Governments expect businesses to play their part in tackling these global challenges – and are not afraid to set ambitious targets. This has been particularly apparent since the Paris Agreement and Sustainable Development Goals were adopted in 2015. Governments starting to implement these agreements realise that they will not hit their targets without a significant contribution from the private sector.

This translates into increasing social and environmental regulation.  It also means softer pressure such as recommendations, guidance and encouragement from governments for businesses to take a lead.  Governments also recognize the power of their purchasing to drive change, with increasing requirements in public sector tenders on social or environmental performance.

Alongside the pressure from governments, there has been a surge in interest in CR from mainstream investors far beyond the socially responsible investment community.  In January, Larry Fink, CEO of BlackRock, sent a letter to CEOs calling on companies to explicitly state their strategy for creating long-term societal value. He drew a clear link between positive societal impact and strong long term financial returns.

3. The corporate response - creating wealth worth having?*

In response to mounting pressure from governments and investors, CR is undoubtedly moving higher up the corporate agenda and into the boardroom. This is no longer about charity or philanthropy, but impact and activism. Increasingly, CEOs are getting stuck into CR: sponsoring it internally, championing it externally and inspiring and collaborating with others.  For example, the CEOs of Ericsson, Olam International and Royal DSM are all well known for their positions on sustainable development goals (SDGs), sustainability and carbon pricing respectively.

As CR becomes more mainstream, businesses are reassessing their relationship with it. Leading global corporates are now talking about ‘Corporate Purpose’ and the importance of trust and ‘being trusted’ for business success.  But purpose is meaningless unless it is central to business strategy and backed up through implementation and action in the business. Ultimately, focusing on purpose should ensure the business creates long-term societal value and remains resilient and sustainable.

A purpose helps explain why the business exists and what value it brings. Firms are increasingly looking at their core products and services in the context of purpose: either to articulate how their offerings already contribute societal value, or to innovate new ones that do.

*Creating wealth worth having was the purpose of Climate Change Capital.

4. Technology for good?

The current pace of technological development is being described as the beginning of the fourth industrial revolution (4IR). Companies and corporate foundations are looking at how embracing technology and innovation in their CR programmes can increase their positive impact on society and the environment.  For example, some companies are already using a blockchain ledger to provide full supply chain traceability for diamonds, and more commodities are likely to follow. Artificial intelligence can solve big data problems, which could transform collection and reporting of a broad range of data beyond financials.  This could enhance real-time performance monitoring and management.

There is a vast opportunity for 4IR technology to improve the world with companies expected to take responsibility for their actions and the outcomes.  Our approach to responsible tech is linked here.

Alongside  innovation gains, today’s businesses need to mitigate the downsides, such as the jobs that are lost to AI and automation, the loss of privacy and data security, and the harm to physical and mental wellbeing.  There is also high energy demand associated with cryptocurrency mining. We are likely to see growing pressure on companies to be transparent and demonstrate a responsible approach in their strategies for deploying new technologies and managing the impacts of these changes.  

5. A more rigorous, quantitative approach to CR metrics and targets

CEOs across every region and country recognise that the world is moving away from measuring prosperity primarily through financial measures (e.g. GDP) and towards the use of multifaceted metrics (such as quality-of-life indices).  However, the use of broader metrics in the business environment is still limited.

As companies tackle CR issues, they need to be more rigorous and quantitative in their approach. For example, in the past, emissions targets were, frankly, a bit random. There are now ‘standards’ for climate action, with widespread adoption of science-based targets for greenhouse gas emissions or commitments to 100% renewable energy.

Leading companies are now considering how their other CR targets can also focus on maximising end impact. We think we’ll start to see an acceleration in the use of more comprehensive and integrated performance measures driving strategy and business performance.

When analysing risk, companies are also taking a far more evidence-based and quantitative approach. Following the recommendations of the Taskforce on Climate-related Financial Disclosures, many companies are using climate scenarios to assess the risks that climate change poses to their operations and value chains. Investors are expecting more quantified financial information about climate risks and opportunities, in mainstream financial filings.  This is a significant shift away from the anecdotes and emissions data provided in climate disclosures in the past.

We expect 2018 to be another rollercoaster year. The businesses that will thrive in these conditions will be those that genuinely engage and collaborate with a broad set of stakeholders, set out a clear and genuine purpose that resonates with their business, and back it up with rigorous numbers.

Connect with Jonathan on LinkedIn; Follow him on Twitter

Conntect with Kirsty on LinkedIn


Winning at digital by focusing on culture: Reflections from Romania

Author: Olga Grygier-Siddons, Chief Executive, PwC Central & Eastern Europe Olga

Romanian CEOs are recognising that in order to attract and retain people with the hard technical capabilities their companies need for the digital era, they need to focus on soft skills and corporate culture.

That’s the key lesson that emerged from a panel discussion with three Romanian business leaders that I was privileged to be a part of this week: Sergiu Manea, CEO of Banca Comercială Română; Iulian Stanciu, CEO of Romanian online retailer eMAG; and Elisabeta Moraru, Country Manager of Google Romania.

And it’s a lesson that holds true for companies throughout Central and Eastern Europe.

All of our countries are justly proud of our traditions of technical education, producing legions of outstanding scientists and engineers whom the titans of the global digital economy are eager to recruit. But unfortunately, there are also a few less pleasant things that all of our economies share: old-school, top-down management styles; a lack of emphasis on teamwork and cooperation in the formal education system; and brain drain through emigration.

To compete with the global giants in recruiting the region’s world-class technical talent, we need to match them in offering world-class corporate cultures. I was heartened to see how the Romanian CEOs I spoke with have identified this challenge, and how they have concrete plans for how to address it.

I was in Bucharest to join my colleague Ionut Simion of PwC Romania in presenting the global and CEE regional results of PwC’s annual survey of CEOs, as well as the Romanian version of the report, for which we spoke with 68 business leaders in the country.

In the report, we set out four recommendations for business leaders in our region to address the key findings:

  1. Invest in new ways of retaining and motivating digital talent
  2. Help strengthen and improve the role of technology in society
  3. Work to build an education system for the future
  4. Be part of the conversation as societies rethink measures of prosperity.

The survey clearly showed that difficulty in attracting digital talent is a top concern for business leaders in Romania, as it is across our region as a whole. What are CEOs doing about it? Almost unanimously they see a need to focus on building higher engagement through things like teamwork and communications (97% in CEE, and 99% in Romania).

In addition to working for change within their organisations, all three of the CEOs on the panel pointed out the need for change in Romania’s education system. Mr Manea in particular said the country’s schools and universities need to become more flexible and entrepreneurial, encouraging students’ individual aspirations.

Much has changed since the planned economy, when we were trained for a job for life – but the education system in our part of the world has not changed that much since those times, as Mr Stanciu said.

Ms Moraru said these changes need to happen not only at the university level, but starting in primary schools. She also pointed out that Romanians need to embrace lifelong learning after they’ve left the academy gates. In addition to being last in the European Union in terms of technology infrastructure, Romania is last when it comes to the percentage of people engaged in continuing education after leaving university. Mr Manea said he hopes to work with the education system (both public and private) to create curricula on subjects including entrepreneurship, digital literacy and digital ethics.

Digital technologies naturally upset the old order of top-down management by providing opportunities for collaboration across various levels of an organisation and making it possible for everyone to have instant access to information. And companies have a responsibility to help engage employees in building a more collaborative, more open culture.

Mr Manea put this extremely well when talking about the two sides of digitalisation. In addition to the “digital outside” of new products, services and delivery systems that clients see, each company also has a “digital inside”: a new culture and mindset that involves more collaboration and less strict hierarchy. “The second aspect is even more important than the first,” he said.

A big part of the cultural shift is encouraging risk-taking: making sure people at lower levels aren’t afraid to fail, and putting an emphasis on learning from mistakes, as Mr Stanciu pointed out.

Members of the Millennial generation in our region are almost identical to their counterparts around the globe in terms of what they want to get out of their jobs: they’re not interested just in salaries, but in engagement and a sense of purpose. That’s something that global companies are able to offer them, so for our region to avoid falling behind, we need to compete not just on money, but on culture.

If companies around CEE listen closely to what our Romanian colleagues have to say, and take it to heart, I’m confident that we’ll meet that challenge.

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Olga Grygier-Siddons is the Chief Executive Officer of PricewaterhouseCoopers Central and Eastern Europe (CEE) which comprises 29 Member Firms of the Global PwC Network. Olga is a member of the PwC Global Strategy Council which comprises the Territory Senior Partners from the largest 21 territories in the PwC Network.


Doing Deals in 2018: will the good times continue to roll?

Author: Malcolm Lloyd, Global Deals Leader, PwC Spain Malcolm-lloyd-deals.jpg.pwcimage.200.252

Do sky–high levels of global growth confidence reported at Davos last month, and record levels of capital available mean a vintage year for deals?  Malcolm Lloyd, PwC Global Deals leader looks at the prospects.

Talk about starting a new year on a high:  2017 for the deals market, was one to remember.

The overall dynamic for the market last year was one of oversupply of capital and cheap financing: a fantastic year for divestments in terms of being able to realise and optimise gains, and across all deal-making activity there were some notable headline grabbers such as Amazon/Whole Foods.

Private Equity (PE) raised more capital than at any time since the financial crisis. The total amount of dry powder – available funding yet to be invested – was reported at over $960bn in Q3 of 2017, with estimates at the close of the year likely to hit all-time record highs again. Also, US corporates alone were projected to have over $1.9 trn of cash on their balance sheets at the end of 2017.

In brief, as we start 2018, there is no shortage of access to capital and financing. As my PwC economist colleagues put it, ‘let the good times roll’. Does it translate to business leaders’ confidence? This is the critical test for the deals environment in 2018.

57% of CEOs in this year’s PwC CEO Survey are optimistic about the prospect of the global economy improving in the year ahead - almost twice the level of last year (29%).

In many ways, the sky-high confidence in the global economy being reported mirrors the dynamic of the deals market. Throughout 2017, despite rising levels of geopolitical uncertainty, the level of deal activity has been maintained.

With such an amount of dry powder available, there is increasing pressure on PEs to put that money to work: with even more intense activity around finding opportunities.

For business leaders, M&A and divestments remain important strategies for growth. Particularly when you consider the more conservative levels of CEO confidence about businesses’ own growth prospects. 42% percent of CEOs said they are “very confident” in their own organisation’s growth prospects over the next 12 months, up from 38% last year.

42% of CEOs are considering M&A as part of their growth strategy in the year ahead, higher in Spain and China (48%), Australia (49%) and the US (69%). Technology (46%) and healthcare (44%) are amongst those sectors outpacing the global outlook. A quarter of CEOs in China (26%), and one in five of Australian and American CEOs are considering divestments, higher than the global average (16%). 

Technology disruption continues to be a key driver. In fact, the speed of technological change remains a top ten threat to growth for 38% of CEOs, up from 29% last year. In the Banking & Capital markets (42%) and Insurance sectors (51%), concern is higher, as it is in China (60%).

Few companies are doing deals now without an eye on innovation, and tackling where their business is experiencing disruption driven by technology. There’s much higher levels of interest in testing the hypothesis of a deal’s value in terms of technological transformation - skills, products, services, business models.

January was the first anniversary of the Dow Jones reaching above the 20,000 milestone for the first time in its history. There’s no doubt that the context – of stock market highs and oversupply of capital – is pushing up valuations; the question is how long the high valuations can be sustained, and whether the promised value can be delivered. We expect to see much more application of data analytics to validate underlying assumptions in the deals ahead.

More traditional questions remain for business leaders too. Over-regulation and an increasing tax burden remain key threats to growth identified by CEOs. How they could impact the deals environment, and the value they are creating is a key question for 2018.

The threat of over-regulation remains the top concern for CEOs (42% extremely concerned), particularly in China (52% extremely concerned) and the US (55%). Emerging too is CEOs’ concern on activist investors. The levels in the US (53% very or somewhat concerned) and China (87% very or somewhat concerned) stand out vs the global average of 42% (somewhat or very concerned).

Despite all this, the positive sentiment around deal-making in 2017 continues into 2018. Our CEO survey underlines the message of the World Economic Forum in Davos this year –achieving growth in a fractured world.

This is not the traditional deals market as many would have known it - leveraging equity, multiple arbitrage plays. It’s all about value creation, increasing revenue, optimising costs and improving overall strategic positioning. Deals are increasingly premised on value creation plays. Moves in the markets and sectors highlighted here will be closely watched in 2018 as businesses and deal makers get out to make hay while the sun shines. 

Find out more about PwC Global Deals Advisory services here