Daniel is a member of the Charities SORP Committee, which oversees the financial accounting and reporting rules for charities across the UK and Ireland. He is also Chair of the Institute of Chartered Accountants
in England and Wales (ICAEW) Charity Committee and a member of the Chartered Institute of Public Finance and Accountancy (CIPFA) Charities and Public Benefit Entities Forum.

Daniel volunteers as a Trustee and the Honorary Treasurer of UK Youth, a national youth charity. He also leads PwC’s Charity Trustee Network, an internal community to support people at the firm who hold charity trustee roles or are interested in becoming charity trustees. He is particularly keen to encourage more young people and people from a diverse range of backgrounds to become charity trustees.

What are your views on the current state of the charity sector?

Charities come in all shapes and sizes and work across different parts of our society. While the charity sector is not homogeneous, and each charity has its own context and circumstances, they exist first and foremost for the public benefit.

With an ever-increasing need for charities and no signs of there being any less demand going forward, it is important to recognise the vital role that they play in society. The inspiring work of charities has become more visible and it is important that this continues to be clearly communicated with their stakeholders.

With a challenging funding environment, a higher degree of regulatory oversight and greater scrutiny by the media, there is increased debate about their role, how they are regulated, the services they provide and the trust placed in them. It is critical for charities to be purpose-led, resilient and innovative.

What have charities learned throughout the pandemic?

The pandemic has been challenging for many charities, with some very difficult decisions that have needed to be taken, particularly when faced with higher levels of demand but lower levels of resources.

Charities have shown their agility and ability to adapt which has given greater confidence within charities themselves to successfully deliver change. Many charities are continuing to look at how they can drive greater innovation, internally within the organisation as well as in collaboration and partnership with others. A culture of continuous improvement is healthy for organisations to stay resilient.

Charities - and, in particular, the people involved - have demonstrated immense resilience and resolve to get through the situation together. But, it is recognised that always being in crisis mode is not sustainable and cannot go on indefinitely. There has been an increased focus on looking after their people.

The way in which charities have responded to the pandemic can also be characterised as a period of accelerated change, not least in terms of working practices and the use of technology. Charities have needed to examine their business model to ensure that it is focused on delivering their charitable purpose and fit for the longer term. Some charities have taken this step which has led to strategic organisational change in order for them to focus on and prioritise where they can make the biggest difference, reallocate resources where needed and be innovative in what they do. Connected to this is the importance of clearly defining, measuring and reporting of the impact.

All of this plays to the importance of continuing to do the right thing and reinforcing trust through having a positive impact on beneficiaries and demonstrating this to their stakeholders. Charities should continue to do what they do best: place their charitable purpose at the heart of everything they do, adapt and respond to challenges as they arise, maintain financial resilience, disrupt and innovate, collaborate and partner, challenge and be vocal about their cause.

What are some key issues for charity trustees and leaders?

Charitable purpose, reputation and public trust remains a key area of focus. This is at the heart of what charities do and this needs to remain at the forefront of their minds. A number of charities have refreshed their strategy, and it’s helpful for us to really understand how they plan to deliver for those they exist to serve over the short, medium and longer-term. And the reputation of charities, overall, has seen a bounce during the pandemic through the impact they have had.

Charities have faced different situations with regards to their financial sustainability - some have found it difficult to generate income with rising demand while others have conversely seen incomes hold steady but an inability to spend on their charitable activities due to the impact of the pandemic, and everything in between. And, looking forward, there will continue to be uncertainties in this area - not least pressures from inflation. For many, there is a squeeze on income while costs are expected to increase. More and more charities are specifically reflecting on their liquidity and reserves policies, and what this should look like for them going forward.

People and culture have increasingly been on the radar for charities. The turnover of people in charities is, like for those beyond the charity sector, high - including those who are leaving the labour market altogether - and this results in significant competition for talent. How it feels like to work at a charity is therefore an important element. Key is also the management of volunteers, for which there has been significant interest over the course of the pandemic. Linked to this are discussions around ways of working and use of office space. Some charities fully left their properties during the pandemic and others sub-letting the space they have. There’s a greater focus on how space can be used more effectively, and charities are adopting hybrid working in different ways. There are live discussions over the balance of how often people should come into the office, and this may differ from charity to charity.

Many charities looked much more closely at how they use digital and technology during the pandemic, and there are more charities which are actively considering how investments in this area might help their overall charitable aims. There are also more finance teams seeking to understand how systems can enable greater efficiency.

What about Environmental, Social and Governance (ESG) matters? 

ESG is high up on the agenda. This is about how charities do what they do responsibly, with a holistic lens. There is a role for everyone involved with charities to approach this with an open mind, around whether how we do things is the most responsible way that is true to the charitable purpose.

The ‘S’ in ESG is what charities inherently do. It’s about their impact and charities can be clearer about this - in their strategy, action and communications. This is an area where organisations outside of the sector could learn from charities. It is also about the way in which the charity interacts with its employees, volunteers, beneficiaries, suppliers, and the communities which they are in and support. It includes areas such as its organisational culture, diversity and inclusion and modern slavery. It is often taken for granted that a charity, by virtue of its charitable status, will operate responsibly but it is important that this is at the forefront of how charities operate.

The environmental factors will be core to those charities with this at the heart of their charitable purpose. However, it is not just those charities with charitable objects relating to environmental matters which should take this seriously, particularly with the spotlight on this given by the 2021 United Nations Climate Change Conference (COP26). All charities should be clear on how they have considered environmental factors within their strategy and decision-making. Charities should take time to consider what their impact will be on the environment and how to make positive changes to this. These considerations should also be taken into account when considering their investments, and there are now greater, and often more explicit, emphasis on ESG factors.

It has never been more important for charities to be clear about what they do, why they do it and what difference their work makes.

It is also important for charities to ensure that their governance remains fit for purpose, underpinning its values and enabling decisions to be made effectively in considering these matters. This includes the Charity Governance Code, which was updated in December 2020 with an enhanced focus on the principles of ‘Integrity’ and ‘Equality, Diversity and Inclusion’.

ESG is shifting the landscape for all organisations, bringing with it a complex set of risks, challenges and opportunities.

What should be the key considerations for charities’ financial reporting this year?

At PwC, each year, we review the trustees’ annual reports of charities in the Charity Finance ‘Charity 100 Index’ for our Reporting in Charities Award, as part of the annual PwC Building Public Trust Awards to celebrate those that tell their story in an engaging and effective way.

We saw that charities took the opportunity of using their reporting to be honest with their stakeholders about the year that they have had and the challenges they have faced. There was a clear differentiation between those charities that embraced openness in conveying the important work of the charity and their direction of travel going forward. They saw their reporting as being genuinely valuable, beyond being a mere ‘finance’ or ‘compliance’ document, as opposed to charities which had cut back on their reporting during this difficult time. There has been continued improvement in the reporting by many charities over recent years, with greater focus being placed on the impact a charity can make, as well as showcasing how good governance and strong financial management can support this purpose.

It has never been more important for charities to be clear about what they do, why they do it and what difference their work makes. It is often hard to compare given the breadth and diversity of the charity sector, particularly among the largest charities, therefore it is vital that charities invest in how they communicate their strategy and impact and demonstrate their value to stakeholders.

Reporting by charities is a key part of a suite of communications - intertwined with and underpinned by, a charity’s accounts for the financial year - to demonstrate their charitable purpose, achievements and future plans, as well as provide greater insights into their financial resilience. However, reporting is not necessarily about saying more - often, less is more - but it is about continuous improvement. If readers can’t see the wood for the trees, that is also a barrier to high-quality reporting.

Reporting that is open, balanced and authentic, and clearly communicates their purpose, strategic priorities and values in the context of the sphere in which they operate, can help to bring what the charity does to life. Charities staying true to their purpose is at the heart of building public trust, and it remains critical for charities to communicate and engage effectively with their key stakeholders in ‘walking the talk’, ‘living their values’ and demonstrating their contribution and impact to their beneficiaries and wider society.

Any final thoughts for charity trustees?

It is an exciting, albeit uncertain, time to be involved in the charity sector. I would encourage all trustees (and those who are interested in becoming trustees) to actively engage with a wide range of areas. In many respects, the issues facing charities are often similar to those in the corporate world, albeit with a different lens. While charities can learn from organisations beyond the sector, charities should also not shy away from being an example to companies in their areas of strength.

Richard Shearer, CEO of Tintra, discusses digital banking’s increased prevalence in the emerging world. 

In the West, Digital banking is now entirely uncontroversial to make payments, transfer money, and communicate with banks entirely through mobile apps and websites. The rise of online-only challenger banks is a testament to the staying power of this trend, as newcomers to the banking scene recognise that physical branches are becoming increasingly unnecessary – an eccentric reminder of an analogue world. And, of course, it goes without saying that the conveniences of digital banking have been thrown into an ever-more flattering light during the course of a pandemic which has demanded a minimum of physical interaction in settings like banks, alongside a reluctance to handle cash.

Though these developments in Western countries are, as I have mentioned, well-established, it may be surprising to learn that emerging economies have also witnessed an enthusiastic embrace of digital banking. This is a broad statement, of course, and one that does need qualifying. Pre-pandemic research from McKinsey suggested that for some emerging Asian countries, digital banking penetration had grown by 300 per cent, but the median was a far more modest 52 per cent.

Even with such caveats in mind, there are clearly developing countries whose digital banking adoption has caught up with that of developed markets – in fact, a 2021 survey from McKinsey found that emerging Asia-Pacific markets saw fintech app and e-wallet penetration reach 54 per cent in 2021, whereas developed Asia-Pacific regions only saw penetration of 43 per cent.

Statistics aside, this relationship between emerging markets and digital banking may – at first glance – appear counter-intuitive. After all, the public imagination tends not to associate such locations with technological advances – and this is reflected in one United Nations report, which notes that tech advances and their associated benefits “remain geographically concentrated, primarily in developed countries.”

On closer inspection, however, there are some clear reasons for digital banking’s increased prevalence in the emerging world.

Modern practices for young populations

On a practical level, emerging markets simply contain young populations. In fact, according to PwC, almost 90 per cent of people under 30 reside in emerging markets. This means, in PwC’s words, that “population trends favour the growth of online transactions.”

Clearly, then, the demographic dominance of digital natives has a part to play in the adoption of digital banking across emerging markets – but this is only one in a string of motivating factors. After all, it’s worth noting that a large proportion of emerging markets are getting wealthier: we’re seeing the emergence of a far bigger middle class in places like India, for example. In fact, according to 2019 estimates from World Data Lab, around 600 million Indians were on the cusp of joining the middle classes at that time.

Similar projections have been made by McKinsey in the context of China, with the firm noting that the Chinese middle class will soon reach something in the region of 550 million. All of this additional wealth comes hand-in-hand with greater demand for convenient banking services, whether that be in the form of savings accounts or the desire to link mobile apps to bank accounts – thus setting the stage for digital banking.

However, these are not the only factors that encourage a shift towards digital banking in emerging economies. It would be facile to suggest that this movement is entirely natural or inevitable when, in fact, many emerging market governments actively encourage any moves which boost financial inclusion – ensuring that individuals and businesses can access financial products and services like bank accounts.

As PwC have recently noted, in fact, “governments’ desire to boost financial inclusion and reduce the use of cash is fuelling rapid growth in electronic payment” – meaning that newer technologies and innovations “make it more economically viable for banks to reach the ‘unbanked’ or ‘underbanked’ populations.” 

Far-reaching benefits

This discussion of the active pursuit of financial inclusion brings us on to another set of reasons for the rise of digital banking: its many economic benefits. It is, perhaps, unsurprising to learn that various emerging market governments have a strong economic motive to encourage financial inclusion through digital banking.

Turning briefly to a final set of statistics, it is worth noting that, according to research from HSBC, digital finance is capable of increasing the GDP of all emerging economies by 6 per cent by 2025. In practical terms, this kind of growth could take the form of 95 million new jobs, while markets could see a flow of as much as $2 trillion in new credit. No wonder, then, that digital banking is so highly prized by emerging economies. But, again, there is more to this phenomenon than the slightly dry terrain of GDP growth.

Digital banking doesn’t just create new credit: it spurs on new levels of innovation.

As emerging markets feel the effects of financial inclusion, we’re seeing what some have described as a ‘leapfrog’ process. Some consumers rocket from no bank account whatsoever to the cutting edge of banking services – and, perhaps crucially, this forward momentum has led to further innovations in online banking and similar payments processes.

PwC’s recent report on payments transformations points, for example, to payments made through social media, advances in NFC technology, use of blockchain, and mobile money. As such, emerging markets’ embrace of digital banking isn’t just a fast track towards parity with the banking systems of the developed world – it can be a catalyst for the adoption of revolutionary banking and payments technology.

Rethinking our terminology

Reflecting on developments like this is a great way to remind ourselves that, in fact, the term ‘emerging’ isn’t necessarily the most applicable or appropriate way of describing these markets. After all, these new waves of financial inclusion and technological advance clearly show that many of the countries branded as ‘emerging’ have, in fact, emerged, and now find themselves in a position to capitalise on – and potentially pioneer – the future of digital banking services.

According to EY, UK stock market listings in the first three quarters are the highest they’ve been in 20 years, with 14 IPOs raising £2.9bn on the main market and 19 IPOs raising £1.1bn on Alternative Investment Market (AIM). While an IPO is a notable objective for businesses, with a lot of potential benefits, some risks and considerations come with going public. 

Risks Of Going Public 

Not articulating your Equity Story Properly

An equity story is the cornerstone of a successful IPO, so it’s crucial that it’s articulated well. Equity stories help share a business’ vision while offering compelling reasons why investors should buy stocks. Companies only get one chance to tell their story, and if they get this wrong, they risk being incorrectly valued and investors not understanding the business. 

So what elements must be included to construct a powerful equity story? While there is no one-size-fits-all approach, and every business has its own authentic message, a number of components make up a compelling equity story. Firstly, investors should be able to see profit, growth and return clearly. It’s crucial that they understand the business, its purpose, its key drivers, and its plans to capitalise on future opportunities. When drafting an equity story, consider the three Cs. Is it Clear? Is it Concise?, and is it Compelling? Finally, it’s important not to overpromise. Post-IPO, investors will hold businesses accountable for delivering against those future opportunities in full, and even beyond in some cases.

Costs

Companies must have good visibility of costs before going public. An IPO process isn’t cheap. While the cost of going public varies depending on company size, offering proceeds and company readiness, businesses will likely still have to fork out millions across underwriting fees, legal fees, auditor fees and other transaction costs. 

As well as the costs of going public, Board members must consider the additional costs usually incurred once they are a public company. A survey of CFOs, carried out by PWC found that the incremental costs of being public are broadly split across five areas: incremental audit, public/investor relations, financial reporting, legal and regulatory compliance.

Timing & Resources 

CFOs cannot manage an IPO by themselves, so it’s important that organisations have a well-staffed finance department supporting them. An IPO puts an immense strain on finance teams, with high workloads and strict deadlines accompanying it. If they’re not prepared for this, they run the risk of juggling too many tasks and making mistakes. These errors could seriously impact the company’s valuation or disrupt the ‘business as usual’ activity.

As explained in Protiviti’s Guide to Public Company Transformation, “The failure to fully develop sound business processes, controls and infrastructure, particularly those that support financial reporting processes, is one of the most common mistakes companies make in their public company readiness effort.”

Benefits Of Going Public 

Access to Capital 

One of the most appealing reasons for going public is the substantial amounts of capital that can be raised. Many businesses find it expensive and dilutive to raise equity from venture capitalists and other big investors. However, equity investments from the public can help businesses to gain the capital it needs to deliver their vision. This capital can then be invested back into the company, allowing it to grow and innovate. IPOs have helped corporations fund research, develop new products, increase marketing efforts and reduce debt. 

Publicity 

Going public also gives businesses great exposure. As soon as a company announces its IPO, it receives a lot of publicity and media coverage. This public awareness could not only result in more investors, but it could also bring in more suppliers, customers and even future leadership candidates. As Investopedia shares, “A publicly-traded company conveys a positive image (if the business goes well) and attracts high-quality personnel at all levels, including senior management.”

Validation

A listed business has effectively been sold to the general public. People are putting money behind it and believe in its potential. This validation can have a substantial effect on businesses earlier in their journey or companies going through a transformation or releasing new products.

Final Thoughts 

The decision to go public should not be rushed. While there are some exciting benefits for a growing company, the challenges and risks associated with going public could be too demanding if the timing is not considered. It is the responsibility of Board members to evaluate the company’s readiness for an effective transition. This decision should not be taken lightly. 

About the author: Imran Anwar, Chief Financial Officer at Epos Now has 15+ years of cross-industry experience in maximising sustainable company growth, raising capital, initial public offerings (IPO) and strategic business transformation.

Prior to joining Epos Now, Imran served as Deputy Group CFO at The Hut Group (THG PLC). During this time, he built out the finance, governance and risk infrastructure to drive the company through a successful IPO on the London Stock Market, the largest UK initial public offering for 3 years. 

Nonetheless, last month high street retailer Sports Direct pleaded with the Big Four to take over their auditing process, which it said a smaller firm would not be able to handle. Sky News reported that the Shirebrook company, the firm heading up Sports Direct’s insolvency, approached Deloitte, EY, PwC and KPMG to ask them to take on one of the toughest jobs in the profession. But is it actually true that any of these Big Four firms would do a better and more thorough job than a smaller firm?

Challenges faced by Big Four

Following the demise of Carillion and BHS, the Competition and Markets Authority (CMA) recently entertained the possibility of the Big Four being split up, forcing them to work with smaller rivals. However, it instead recommended that government officials hold the Big Four accountable when it comes to the close relationship between their auditing divisions and more lucrative consulting services, in order to avoid a conflict of interest. It also stated that it is open to revisiting the prospect of a breakup in five years if the performance of these firms does not improve.

Splitting up the Big Four would certainly change the dynamic completely, and allow smaller firms to show their worth when it comes to larger Sports Direct level ordeals, but it would also create a much more competitive playing field for smaller firms, leaving large organisations without a go-to solution.

Another challenge the Big Four currently face is the rise in new technologies, especially on the back of digitisation and increased regulation. According to a survey from the Chartered Institute of Internal Auditors (IIA), just under 60% of auditing firms believed these factors to be significant problems ahead in 2019.

According to Christian Wolfe, a regular reporter on the Big Four firms, machine learning, artificial intelligence and blockchain accounting solutions are fair game for all smaller firms, and the way it currently works is that “if you want public financial statements that investors trust, you must use a Big Four accounting firm.” However, he points out that once you’ve eliminated the margin for human error, recording and verifying transactions will be equally as trustworthy regardless of which firm you approach for the job.

That sounds a lot like a level playing field when it comes to accounting and auditing performance.

Spread of audit work

This leads me to discuss why in fact it is not an actual level playing field in the auditing profession. Simply put, the spread of work when it comes to the larger Carillion or BHS situations is too much for a smaller company to handle. In this regard, Sports Direct are correct. The Big Four, individually, never mind put together, have the manpower and resources, on a global level, to confront the largest tasks.

The spread of work when it comes to the larger Carillion or BHS situations is too much for a smaller company to handle.

Economia reports that the amount of FTSE 100 clients on retainer between the Big Four has never been closer. In 2005, EY held the least, at 19 FTSE 100 clients, while PwC held the most at 41 FTSE 100 clients. In Q3 2019 the numbers are much closer. EY now holds the least at 22 FTSE clients, while PwC still holds the most at 27 FTSE clients. Clearly, the spread between the Big Four has become more even over the past 15 years, however 100% of FTSE 100 companies are now on the books of a Big Four auditing firm. In September, Steve Smith, research manager at Adviser Rankings Ltd told Bloomberg that “the Big Four have cornered the FTSE 100 market.” And he’s not wrong.

This is not yet the case with FTSE 250, but it’s not far off. According to the figures from Adviser Rankings, the Big Four currently control 95% of the FTSE 250 market in terms of number of clients, and 96% in terms of market capitalisation. The parity between the Big Four and all other auditing firms, based on the number of the UK’s largest companies that contract them, is worrying. The other two firms that control a small share of the auditing of FTSE 250 companies are BDO LLP and Grant Thornton LLP.

These numbers are the real figures on client retention, and should essentially serve as proof that the Big Four are in fact still the best, otherwise, surely the FTSE 100 or 250 would seek auditing services elsewhere?

How much they are paid

As the Big Four are by default considered the best, they of course also cost the most, and partners in these firms are earning figures you can only write on paper. Recent reports indicate Deloitte Partners are due their biggest payday in a decade; the average pay for 699 of Deloitte’s equity partners is $882,000 in 2019, moving up an average of $50,000 from last year.

In addition, Deloitte’s combined member firm revenue has risen a chunky 9.4% to $46.2 billion (£37.4 billion) since last year, and in 2018 this number had already grown 11.3% on the previous year. The growth is volatile, but it is significant growth for the company’s bottom line.

Based on the above, you would figure Deloitte, the largest of the Big Four, is charging its worth in gold, but are the companies that are paying these huge firms getting a fair deal in return?

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Quality Ranking

In terms of quality standards, the Big Four auditing firms are assessed and regulated, often by each other, which in a market of fierce competition between them, is a fair and appropriate method of benchmarking standards. There aren’t rankings available per se, but each of the Big Four has its own strengths and weaknesses; EY, for example, is more Europe centred and therefore by default performs better for European based firms.

On the topic of performance quality, Gennaro Senatore, former Transaction Services AM at KPMG, said on a Quora forum: “…with IFRS and Generally Accepted Audit Standards I can tell you the differences are getting less and less noticeable.” He mentions PwC having an edge, or “at least perceived.” While he says that in terms of advisory, in Europe PwC has the most successful treasury practice, EY is stronger on internal audit and Risk Services, and Deloitte in implementation and IT projects. He concludes that KPMG is very good all-round and has a very strong tax practice. However, the performing results will be different for each client, for each auditing firm, so these opinions are after all highly subjective.

More recently, the UK Financial Reporting Council issued a serious warning about the quality of audits of financial statements in the UK. The watchdog stated that the Big Four have YoY failed to meet the benchmark 90% target of large company audits requiring no more than limited improvements. In 2019, of all auditing firms, 75% of audits reached that level of quality. The consequence was £32 million ($39.5 million) in fines (see above for Deloitte’s bottom line and then think about how this could possibly disincentivize poor performance).

Sir Winfried Bischoff, the outgoing chairman of the FRC, said in the watchdog’s report: “We are not seeing more immediate improvements from the [audit] firms and there is undesirable inconsistency across the market.”

The Big Four have YoY failed to meet the benchmark 90% target of large company audits requiring no more than limited improvements. In 2019, of all auditing firms, 75% of audits reached that level of quality.

Clients Dissatisfied

Despite not improving their performance, the Big Four are set to maintain the top tier stranglehold in the auditing sector, which is strange because a study by Source Global Research found that although over two-thirds (68%) of audit clients still rank a Big Four firm as their go-to external auditor, over half (58%) do not name their current auditor as their first choice.

In the US, there are reports of the Big Four bungling 31% of their most recent audits, as analysed by the Public Company Accounting Oversight Board (PCAOB). The data shows that in 2019, Deloitte bungled 20% of audits examined, PwC bungled 23.6%, EY bungled 27.3%, and KPMG bungled 50%. For what is expected of the Big Four, falling short of near-perfect is a bad image, so missing the mark on 31% of audits could be considered poor performance for the top firms; firms which are paid and are growing as if they were truly the best of the best.

(Source: www.pogo.org/investigation/2019/09/botched-audits-big-four-accounting-firms-fail-many-inspections/)

According to The Independent, Stephen Haddrill, the FRC’s chief executive, said: “At a time when the future of the audit sector is under the microscope, the latest audit quality results are not acceptable.

“Audit firms must identify the causes of their audit shortcomings and take rapid and appropriate action to improve quality. Our latest results suggest that they have failed to achieve this in recent years.”

So are the audits that were surveyed by both the UK and US watchdogs actually botched or bungled, or are the firms simply not as good as everyone thinks they are? Are the Big Four really still the best?

Based on what we’ve looked at, it is apparent that action should be taken, and further regulation implemented, while large companies should start considering the auditing and accounting services of smaller consultancy firms and perhaps then the status quo on the Big Four will change. What are your thoughts?

Many thought it was too good to be true, but was it? Below Karen Wheeler, Vice President and Country Manager UK at Affinion, gives Finance Monthly the rundown.

YouGov research  highlights that 72% of UK adults haven’t heard of Open Banking and according to PwC, only 18% of consumers are currently aware of what it means for them. However, that doesn’t mean the changes aren’t filtering through.

The story so far

The Open Banking Implementation Entity (OBIE) reports there are now 100 regulated providers, of which 17 Third Party Providers (TPPs) are now using Open Banking in the UK. Open Banking technology was used 17.5 million times in November 2018, up from 13.9 million in October and 6.5million in September, with Application Programming Interface (API) calls now having a success rate of 97.7%.

One of the earliest examples was Yolt, by ING Bank. It showcases a customer’s accounts in one place so they can see their spending clearly and budget more effectively. Similarly, Chip aims to help people save more intentionally. Customers give read-only access to their current account and then sophisticated algorithms calculate how much a customer can afford to save, and puts it away automatically into an account with Barclays every few days.

High Street banks have certainly taken inspiration from fintechs. For example, HSBC released an app last year enabling customers to see their current account as well as online savings, mortgages, loans and cards held with any other bank. The app also groups customers’ total spending across 30 categories including grocery shopping and utilities, making it a really helpful budgeting tool.

Perhaps, most advanced of all, Starling Bank allows customers access to its “Marketplace” where they can choose from a range of products and services that can be integrated with their account. The offering currently includes digital mortgage broker Habito, digital pension provider PensionBee, travel insurer Kasko, as well as external integrations such as Moneybox, Yoyo Wallet, Yolt, EMMA and MoneyHub.

Open Banking and GDPR

One key question is whether Open Banking puts the needs of financial services companies over those of the consumer. There is a general cynicism regarding the real reasons for encouraging Open Banking and this is exacerbated when most customers aren’t seeing the benefits.

Also, there is confusion caused by the apparent conflict of interest between Open Banking and GDPR.

In this day and age, do consumers really want more organisations to have access to their data? Can they trust the banks? According to PwC, 48% of retail banking customers cite security as their biggest concern with Open Banking and this is a significant barrier to overcome.

The way forward

It’s hard to overcome cynicism and doubt. Perhaps, once customers begin to enjoy the positives, they will be less sceptical about Open Banking, leading to more opportunities to build longer term customer engagement. For example, if products help them avoid going into debt or nudge them when new mortgage rates are on offer, they will see that banks are using the technology to support wise financial management rather than just serve their own marketing purposes.

It’s also hard to change entrenched consumer habits. To encourage consumers to get in the habit of comparing and switching, financial organisations must create truly compelling propositions. They need to focus on delivering intuitive, useful digital products which make a real difference to customers’ daily lives.

They also need to demonstrate how seriously they take their role in the fight against cybercrime while educating the consumer about how Open Banking works and how to protect their data. For example, many may not realise that one of the key tenets of Open Banking is security. Open Banking uses rigorously tested software and security systems and is stringently regulated by the FCA.

Placing the customer at the centre of their finances and giving them complete control directly increases competition and brings a myriad of everyday benefits to the customer. There is huge opportunity for traditional banks, fintechs and disruptors to use Open Banking to pioneer new products that build longer term customer engagement. However, the current priority is communicating the huge advantages and opportunities that Open Banking brings while reiterating that their data will remain secure.

PwC's head of research and analysis of fintech, Aaron Schwartz shares his views on what areas are more likely to attract investors' attention in the future. He talks to The Banker's Silvia Pavoni during Swift Business Forum New York.

PwC has released its 18^th annual Global Entertainment and Media Outlook 2017-2021, an in-depth, five-year outlook for global consumer spending and advertising revenues directly related to entertainment and media (E&M) content. Rapid changes have created a gap between how consumers want to experience and pay for E&M and how companies produce and disseminate their offerings. E&M companies were accustomed to competing and creating differentiation primarily based on two dimensions: content and distribution. Now, they must focus more intensely on a third: user experience (UX).

Global E&M revenues are expected to rise from $1.8 trillion in 2016 to $2.2 trillion in 2021 at a compound annual growth rate (CAGR) of 4.2% – down from the 4.4% CAGR the firm forecast last year. By comparison, PwC's 2017 Outlook expects US E&M revenues to reach $759 billion by 2021, up from $635 billion in 2016, increasing at a CAGR of 3.6% – holding steady at the same CAGR as last year. While there are increases in revenue, E&M is approaching an industry plateau. Traditional, mature segments are in decline; the internet and digital E&M content is growing though at a slowing rate; and the next wave of content and entertainment is in areas, such as e-sports and virtual reality, which are just beginning to accelerate.

"E&M companies are operating amidst a wave of geopolitical turbulence, regulatory changes and technological disruption. Even if the macro context is set aside, these companies are facing significant pressures on growth," said Mark McCaffrey, PwC's US Technology, Media, and Telecommunications Leader. "In order to thrive in the marketplace, PwC suggests that these companies understand and develop sustainable relationships with consumers to advance their UX. Pursuing a growth and investment strategy to enhance and differentiate the UX will help them flourish in an era where a changing value chain is slowing top-line growth from the traditional revenue streams that have nourished the E&M industry to date. Essentially, we've entered The Age of the Consumer. It's no longer sufficient to be 'consumer-centric,' one must be 'consumer-obsessed.'"

PwC has identified eight emerging technologies as having the biggest potential to improve UX: augmented reality (AR)/virtual reality (VR); artificial intelligence (AI); Internet of Things (IoT); Big Data/data analytics; cloud; 3D printing; access, not ownership; and cybersecurity.

"The next era of differentiation in E&M is being defined and propelled by consumers' increased demand for live, immersive, sharable experiences. Consumers want to get closer, more engaged and better connected with the stories they love – both in the physical and digital worlds," said Deborah Bothun, PwC's Global Entertainment & Media Leader. "At the same time, companies can start to empower those experiences through a number of emerging technologies. Perhaps big data and artificial intelligence will create the most dramatic change, redefining how the industry can connect with all stakeholders and drive growth. We're already seeing a number of ways that AI is being used to personalize, customize and curate entertainment content and experiences at scale."

Key US Entertainment & Media Highlights –
A total of 68M Virtual Reality (NEW) headsets will be in use in the US by 2021 with the installed base growing at a CAGR of 69.2% over the forecast period. In fact, the segment is projected to add nearly the same revenue as TV advertising between 2016 to 2021, a total of $4.6B. VR truly started to reach consumers in 2016 and has no legacy issues or false starts to look back on. The downside is a highly immature market with underdeveloped business models, flaky hardware, and lots of experimental or low-quality content. 2017 should at least see major advances in "inside out" movement tracking and lower cost headsets. It's worth noting VR's close relationship with the gaming market, yet many news and content organizations are pinning their hopes on VR to reinvigorate programming and recapture audiences lost to the internet.

Video Gaming continues to be a paradox: at once a large, growing business and yet a market where firms can fail in record time and new business models arise seemingly from nothing. It is this dynamism that both fascinates and concerns financial markets and partners in media, telco and IT spaces. Video games revenue was $21.0B in 2016 and is forecast to grow by a 6.3% CAGR to reach $28.5B in 2021.

The development of E-sports (NEW) has contributed to the video gaming boom. The nascent genre's revenue is forecast to reach $299M in 2021, from $108M in 2016, rising at a 22.6% CAGR. The US is the largest market in revenue terms, having overtaken South Korea in 2015, although the latter will stay far ahead in terms of per-capita revenue. Not only does the ongoing popularization of competitive gaming by broadcasters bring new consumers into the gaming fold, but the games themselves help to boost online/microtransaction revenues on both consoles and PCs.

Data Consumption (NEW) is forecast to reach 290.7T MB by 2021, up from 117.9T MB in 2016 and representing a 19.8% CAGR. The US will remain the largest market in the world in terms of data traffic in 2021, ahead of China despite the latter's faster growth. The single biggest driver of growth is the increased adoption of smartphones, and in particular the rise of video streaming on smartphones. Video represents 83.4% of all data traffic in 2016, ahead of other digital content (7.8%), and music (3.1%). By 2021, video will account for more than 247T MB of data in the US, some 85% of total traffic.

The US Internet Video (NEW) market is by far the largest and most established in the world, accounting for 47% of global revenue in 2016. This percentage is expected to fall to 43% by 2021 as internet video becomes more established in others regions, although international growth will be driven by US companies' expansion overseas. Internet video will grow at a 9.6% CAGR – the fourth largest US E&M segment CAGR, following Virtual Reality, E-sports and Internet Advertising, respectively – to produce revenues of $18.8B in 2021. Nearly 75% of revenue at this time will be attributable to subscription video-on-demand (VOD) services, with transactional VOD platforms accounting for the remainder.

Internet Advertising revenue in the US reached $72.5B in 2016, comfortably the largest market in the world. This figure is forecast to reach $116.2B in 2021, rising at a CAGR of 9.9%. While it was previously predicted that internet advertising would overtake TV advertising in 2017, the former actually surpassed the latter by the close of 2016. New tech innovations, especially around AI, will create both challenges and opportunities for incumbent players. The introduction of new screens, such as those in connected cars; the rollout of new content formats, like VR; and changes in the way we interact with technology, such as voice-activated search, create opportunities for new ways of engaging with and advertising to audiences. However, all require innovation and investment in order to meet their potential. Separately, the dominant force that is mobile advertising comprised 50.5% of total internet advertising revenue in 2016, rising from 34.7% the previous year and besting the contribution from wired internet advertising in the process. By 2021, PwC expects mobile to account for 74.4% of all US internet advertising.

Cinema revenue will grow over the forecast period by a 1.3% CAGR. Specifically, box office revenue will rise from $10.6B in 2016 – the biggest box office year in all of American history – to $11.2B in 2021, a CAGR of 1.2%. PwC had expected China to overtake the US in box office revenue in 2017, which would have marked this as the first time the US has not held the leading position in an E&M segment. However, the second half of 2016 and the first half of 2017 were much softer at the Chinese box office than had been expected. That said, Chinese cinema revenue is still the most lucrative and the fastest-growing in the world. The big studio blockbusters remain the driving force, but the perennial debate about the three-month exclusive "window" for films in cinemas is intensifying – especially faced with intensifying competition from disruptors.

The Music industry has continued to turn the corner on nearly two decades of decline. The market was worth $17.2B in 2016. Total music revenue is forecast to increase at a 5.6% CAGR to reach $22.6B in 2021. The ongoing growth of digital music streaming – up an astonishing 99.1% year-over-year in 2016 to total $3B – was THE music story of last year as consumers turned in huge numbers to on-demand services. Competition for new subscribers will likely be fierce in 2017. In addition to the uptick in streaming, the live music sector continues to deliver, with fans appearing to have a nearly insatiable appetite for music events and festival brands eager to franchise overseas.

Additional Industry Segment Data Points –

• Book revenue is expected to go from $36.6B in 2016 to $38.3B in 2021 (1% CAGR)
• Business-to-Business revenue is expected to grow from $88.5B in 2016 to $103.0B in 2021 (3.1% CAGR)
• Internet Access revenue is expected to rise from $140.3B in 2016 to $189.8B in 2021 (6.2% CAGR)
• Magazine revenue is expected to go from $30.2B in 2016 to $30.5B in 2021 (0.2% CAGR)
• Newspaper revenue is expected to decline from $29.6B in 2016 to $23.9B in 2021 (-4.1% CAGR)
• Out-of-Home advertising revenue is expected to rise from $9.2B in 2016 to $11B by 2021 (3.7% CAGR)
• Radio revenue is expected to rise from $22B in 2016 to $24.1B in 2021 (1.9% CAGR)
• Traditional TV and Home Video revenue is expected to contract from $109B in 2016 to $105B in 2021 (-0.7% CAGR)
• TV Advertising revenue is expected to grow from $70.6B in 2016 to $75.2B in 2021 (1.3% CAGR)

(Source: PwC)

Kunj Vaidya has been recently given the responsibility for Price Waterhouse & Co.’s transfer pricing practice. Prior to taking over this mantle, he had been involved in setting up and establishing transfer pricing practices in Chennai and Sri Lanka, where PWC is  now established as a market leader.

Kunj has practiced transfer pricing in the USA, Australia and India. Since relocating back to India in early 2010, his primary focus has been to help clients plan well in advance and thereafter, provide certainty using various dispute resolution mechanisms. A large part of his role as the national leader will include ideating new solutions and strategies for their clients including significant use of technology, to deliver value to clients. Here Kunj tells Finance Monthly more about his new role and sheds some light on transfer pricing in India.

What is your take on Indian transfer pricing compliance? How are you advising clients on approaching this?

Traditionally, transfer pricing compliance was aimed at providing specific and largely one-sided pieces of information along with certification of reported numbers.

In October 2015, three-layered transfer pricing documentation requirements have been recommended, as part of the final reports on Base Erosion and Profit Shifting (BEPS) initiative of the OECD and G-20 countries. Most countries, including India, have adopted these requirements.

Global corporations are now required to document and present information regarding the ownership and operational structures, key transaction flows and pricing policies within the group. This documentation necessitates a holistic view to be considered by corporations, requiring involvement of their business teams.

Corporations need to consider transfer pricing while taking strategic decisions, and not as a post facto compliance exercise.

How have transfer pricing audits evolved in India?

In the last 15 years or so, the audit focus has matured from routine issues, such as requirement of high mark-ups for services and disallowances of royalties/ service charges to also complex issues like re-characterisation of transactions, valuation of intangibles, location savings, compensation for advertisement, marketing and brand promotion spends, etc.

In early 2016, the procedure for selecting cases for audits was overhauled to focus on cases with high potential of transfer pricing risk.

We are experiencing a different undertone in TP audit approach across the country. Taking guidance from the BEPS Reports, the audit approach is increasingly leaning towards understanding the business of taxpayers – including meeting with business teams. Another area is active exchange of information with overseas tax authorities.

How should the audit approach evolve from here on?

We believe that audits should happen in a more cooperative and amicable manner.

With the introduction of three-layered documentation, the ‘big picture’ of a corporation will be available to tax authorities, It is hoped that selected parts of this documentation are not used against taxpayers without appreciating the entirety of surrounding facts and circumstances.

In our ongoing recommendations to the Government, we have recommended audits to be conducted in a block of say 2-3 years to consider business life-cycles, this would provide a larger picture of the business to the authorities and would also reduce audit efforts for taxpayers.

How have outcomes been for taxpayers at higher levels in appeals?

First level appellate forums are from within the tax administration, and success rate for taxpayers at these levels has been rather low.

The second level appellate authority - the Tribunal is outside of the tax administration. Tribunal rulings have been rather rational and success rate for taxpayers across the country has been relatively very high.

How do you help companies manage transfer pricing issues and what strategies do you implement in the tax risk analysis to assist your clients effectively?

With the ever increasing focus of tax authorities globally on transfer pricing, companies need to plan transfer pricing approaches upfront, We have helped several companies in setting up transfer pricing policies to meet their business objectives, at the same time prepare them adequately from possible challenges in future.

In cases where we foresee potential risks, we believe that transparency is the best strategy. Our advice to clients has been to disclose pertinent facts and discuss relevant issues upfront with tax authorities. This is where I believe the Indian APA program has also been very helpful!

Has the Government taken any initiatives to ease transfer pricing burden on corporations? How satisfied are you with these efforts?

The Government is acutely aware of the challenging transfer pricing scenario in India, and how it has been impeding foreign investment into the country. The Government has been consciously bringing global best practices to India.

One key measure which has received resounding success in India is the APA program. The feedback from the taxpayer community for the program has been extremely positive (including Bilateral agreements with Japan, UK, US).

India also introduced safe harbour rules a few years back, but the program has had little success. However, I understand that the safe harbour rules are being revisited and rules with a more rational outlook may be issued sometime soon!

What changes do you see in the importance companies attach to transfer pricing?

We have witnessed a sea change here – from being seen as a compliance burden, increasingly, transfer pricing issues have even caught the attention of the CXO suites. In fact, corporations are increasingly realising that transfer pricing is also a reputation and governance issue for them.

What role does technology play in transfer pricing and how feasible is this for corporations to adopt?

Technology will increasingly play an important role in transfer pricing. Corporations will need to be able to use technology to build and manage frameworks to ensure that transfer pricing policies are followed, ensure compliance with terms and critical assumptions agreed in an APA, identify red flags or exceptions, and to report key indicators to the management and other stakeholders.

Use of technology in transfer pricing in the above areas could be fairly new but corporations will need to find a way to integrate technology and transfer pricing,

Another way of looking at technology is how it will play a role in the value chain of companies including those operating in traditional businesses.

As a national leader in transfer pricing - how are you developing new strategies and ways to help your clients?

Our endeavour is to help clients look around the corner and prepare them for what is to come!

In recent times, our key focus areas have been the following:

• Conceptualising and developing technology tools to help clients manage their transfer pricing function. We also help clients assess risk in their existing operations using our internally developed data analysis tools.
• Facilitating dialogue between taxpayer fraternity and the Government on transfer pricing matters.
• Helping clients understand the implications of ever-evolving legislative developments on their transfer prices, including, for instance, aligning GST and transfer pricing, understanding transfer pricing implications of migrating to Ind-AS (Indian IFRS equivalent) reporting environment, leveraging transfer pricing compliances for corporate law requirements around related party transactions, implications under General Anti Avoidance Rules (GAAR), etc.
• Strategizing transfer pricing dispute management – including litigation strategy; and proactive dispute resolution options.

What do you see as potential innovative solutions by the Government for some of the transfer pricing issues corporations are facing?

The Government is keen to improve ease of doing business in India, and give a push to some of its pet programs such as ‘Make in India’.

The Government may consider some solutions such as joint customs and transfer pricing audits for imports; joint audits by different Governments and their agreement on pricing; audits for a block of years together; settlement options for transfer pricing disputes etc. Another area, which is beginning to find acceptance in EU is the use of arbitration to resolve transfer pricing and international tax disputes!

One of the thrust areas of the BEPS initiative is effective dispute resolution. The Government should consider providing bilateral transfer pricing dispute resolution window to residents of all tax treaty partners, rather than only few countries currently.

What do you see as the future of transfer pricing?

Going forward, Governments will increasingly use technology for transfer pricing risk assessments and risk management. We have also started seeing increasing cooperation and exchange of information between Governments. There will be increased emphasis and reliance on value chain analysis and insistence on use of profit split methods, as more global information becomes readily available.

The future of transfer pricing lies somewhere in being proactive, better relationships, more transparency and cooperation between Government and taxpayers.

The updated lodging forecast released  by PwC US notes that strong industry performance in the fourth quarter of 2016, including encouraging trends in demand and average daily rate (ADR), coupled with a post-election surge in consumer and business sentiment that contributed to improving economic conditions, sets the stage for continued revenue per available room (RevPAR) growth in 2017.

PwC expects the increase in supply of hotel rooms to marginally outpace growth in demand, resulting in a decline in occupancy to 65.3%. Aided by an expected increase in corporate transient demand, growth in average daily rate is expected to drive a RevPAR increase of 2.3%, according to the report.

PwC's outlook is based on an economic forecast from IHS Markit, which expects real GDP to increase 2.3 percent in 2017, measured on a fourth-quarter-over-fourth-quarter basis, approximately 50 basis points higher than in PwC's November forecast. Improving economic conditions are driven by a number of factors, including improving business and consumer confidence, and surging financial markets, as well as potential policy decisions related to tax cuts and changes to trade regulations.

The updated estimates from PwC are based on a quarterly econometric analysis of the US lodging sector, using an updated forecast released by IHS Markit and historical statistics supplied by STR and other data providers.

"Based on a strong fourth quarter, we are encouraged by the trends we are seeing as we head into 2017," said Scott D. Berman, principal and U.S. industry leader, hospitality & leisure, PwC. "However, we remain cautiously optimistic, as higher-than-previously anticipated increase in demand is still expected to be offset by increasing supply through the year."

(Source: PwC US)

New figures published by City of London Corporation show that the total tax contribution for the financial services sector reached £71.4 billion in the year to 31^st March 2016. This was a 7.4% increase on the previous year’s figures and the highest in the nine years that the report has been produced.

The contribution, which is the last set of financial services tax data to be published before Brexit negotiations commence, is 11.5% of total UK government tax receipts. It also shows that for every £1 of corporation tax paid – one of the largest direct taxes - there is another £3.83 paid in other direct taxes.

The report, which was produced by PwC, shows banks and insurance firms were the highest overall tax-paying sub-sectors, due to reforms in corporation tax and the bank levy. The analysis shows financial firms paid £8.4 billion in corporation tax, up from £7.6 billion (10.5%) on the year before, whilst the bank levy saw foreign and UK based banks contribute £3.4 billion in the last financial year – an increase of more than 25%.

Data from the report shows that the equivalent of almost a quarter (23.3%) of financial services’ turnover in the last financial year went straight to the public coffers.

For the first time since the data has been collected, the analysis compares the sector’s highest tax contributors - banks and insurers. Other than highlighting sector-specific levies and tax measures, the comparison shows that employment taxes make up over half of the contribution from banks but are less significant for insurers, where they make up less than a third of the contribution.

Overall, employment generates the largest amounts of tax paid into the public finances, accounting for 47.8% of total receipts. Financial services employs 1.1million people across the UK (3.4% of the workforce), while the study found average employment taxes per employee were over £32,000. Reforms on pension drawdowns, which came into force in April this year, are also represented in employees’ tax totals but is expected to level out in next year’s data.

Mark Boleat, Policy Chairman at the City of London Corporation said: “As the last set of data on financial services’ tax contribution before the Brexit negotiations begin, it is hugely important.

“In light of the UK’s decision to leave the EU, these new findings not only demonstrate the significant contribution made to Government revenues, but are also key in helping us to understand the potential impact of Brexit on different sub-sectors within financial services.

“As one of the UK’s biggest service exporters, it’s understandable the sector also contributes a considerable amount of tax. Despite this, the sector arguably stands most to lose as negotiations loom. It makes it clear the argument that Government should be engaging with firms as it approaches talks with the remaining EU 27, and the pulling of the political trigger.”

Andrew Kail, Head of Financial Services at PwC, said: "The City of London Corporation report shows the continued importance of the financial services sector to the UK Exchequer and the wider economy.

"Specifically, the report highlights an increasing reliance on tax receipts from banking and insurance firms. This is balanced against a backdrop of downward pressure affecting return on equity for the banks in particular, resulting from regulatory changes and the low interest rate environment.

"With the added potential adverse impacts of Brexit on the sector, the question arises as to whether the current levels of tax contribution are sustainable."

Indirect taxes – which companies collect on behalf of others, such as income tax collected under PAYE, employee tax and national insurance contributions – are 1.27 times the size of direct taxes, such as corporation tax and the bank levy. For every £1 of corporation tax paid by financial services companies there is another £6.01 in taxes collected. Employees’ income tax and NIC deducted under PAYE are the largest taxes collected, and together represent on average 65.4% of the total taxes collected.

(Source: City of London Corporation)

Hours after the EU Referundum results were revealed, UK Head of Banking and Capital Markets at PwC Simon Hunt comments on the impact that Brexit will have on the banking sector in the country.

The UK is one of the world’s leading financial centres. The banking sector plays a major part in generating exports of £23bn to the EU, which helps to drive an overall trade surplus in financial services of £20bn. Retaining this position is the challenge that banks and all stakeholders may now have to consider.
One of the most significant benefits of EU membership to the banking sector is the ability to access the Single Market via the passporting regime and the loss of passporting benefits would have an impact on the ability of banks authorised in the UK to offer products and services for EU clients.

This impact will not be limited to the UK headquartered banks but will also impact non-EU headquartered banks who have used the UK as a base for their European operations.

Overseas banks currently using the UK as a base for accessing the EU market and employing an estimated 115000 staff are likely to be looking closely at their operations in the UK in the context of the leave vote. Find the best PIA Reservation from Pakistan to anywhere in the World with Malik Express.

The result of the vote does not represent the end of the debate that has impacted markets in recent months. Months, and possibly years, of negotiation will now follow before banking organisations will have clarity on what access UK-based FS organisations will have to EU countries or the rules they must comply with to secure this access.

We are already starting to see the short-term impact on the market as efforts are made to reinforce confidence in the UK banking sector. However, history has taught us that UK business is adaptable and the banking sector is one of our strongest industries and will continue to make a major contribution to the UK economy.  Collectively, the financial services sector accounts for 8% of total UK economic activity and directly employs 1.1 million people - around 3.6% of the total UK workforce, generating income, investment and exports.

This result could be taken as a major opportunity for banks to work with regulators, investors and clients in order to shape a new rulebook fit for the new climate.

(Source: PwC)

Deepak Kapoor, Chairman, PwC India

CEOs in India continue to be more confident about the growth prospects of their business than their global peers, according to PwC’s 18th Annual Global CEO Survey

CEOs in other growth markets, unlike those in India, are much less confident now as against last year’s survey, PwC’s data finds.

According to PwC’s 18th Annual Global CEO Survey (India report), 62% CEOs are very confident of their growth prospects in the short term (12 months) as compared to 49% last year. Further, 71% of CEOs are very confident of growth in the next three years.

CEOs in India see more opportunities than threats. The PwC data found that 84% of CEOs in India see more opportunities while only 41 % see more threats as against what they perceived three years ago.

CEOs increasingly becoming concerned about multiple potential threats. The focal point of concern for CEOs in India continues to be inadequate basic infrastructure. The global CEO is more concerned about over-regulation, increasing tax burden, geopolitical uncertainty and government response to fiscal deficit and debt burden. The only threat common to both global as well as CEOs in India is the unavailability of key skills.

Deepak Kapoor, Chairman, PwC India said, “While the world economy rebalances post-recession, we see demographics and technology reshaping the market. CEOs in India seem to be benefitting on both counts - developments within and outside the country. Our survey reflects this exuberance of CEOs about growth of their businesses as also of the economy.”

CEOs in India are less concerned about disruption. Fewer CEOs in India believe that trends such as changes in industry regulation, customer behaviour, competition, distribution channels or core technologies will disrupt their industry over the next five years. While CEOs in China and Africa seem most sensitive to the disruptive nature of these trends, CEOs in India are below the global average across all these parameters. According to PwC, this raises a pertinent question, whether this indicates a lower degree of preparedness among CEOs in India.

Over the last few years, business focus of corporations seems to be shifting to what customers want. In India, 50% of the CEOs surveyed think it is likely that companies will increasingly compete in new industries over the next three years. Thirty-eight percent have already entered a new industry, while 11% have considered doing it within the previous three years. Expectedly, technology stands out as the industry from which CEOs, across the board, expect significant competition.