Operating in a volatile global economic environment is clearly the ‘new normal’. The shocks to the financial markets seem relentless:  the political turmoil in the Arab world, the earthquake and tsunami in Japan, the response to the sovereign debt crisis in Europe, the political posturing around the US debt ceiling, and the commodity-driven inflation in many countries.

As a result, the anticipated recovery from the worst recession since the Great Depression has been halting, and the ‘two-speed’ economy predicted by analysts has become reality. As many of the most developed nations struggle with increasingly sluggish economic conditions, the rapidly developing economies, while not totally immune, are enjoying steady growth, as they experience increasing demand from both outside and within their borders.

Looking across the world, the PwC network performed well in FY 2011. Overall gross revenues for the 12-month period ending on 30 June 2011 were up by 10% to US$29.2 billion, the biggest annual gain that the network has achieved since the onset of the economic crisis in 2008. At constant exchange rates our growth rate was slightly lower but still healthy, with revenues rising by 8% year-on-year.

This strong revenue growth is the direct result of our commitment to invest in people and businesses across our network throughout the economic downturn, combined with our strategy focused on providing quality, flexibility and value. In formulating and leading that strategy,  I am grateful for the efforts of the PwC Network Leadership Team who also serve as senior partners of PwC firms – namely Bob Moritz (US), Ian Powell (UK), Norbert Winkeljohann (Germany) and Silas Yang (China) – as well as the Territory Senior Partners of all PwC firms worldwide.

Assurance
PwC’s Assurance operations remain the core of our organisation. In FY 2011 our Assurance revenues grew by 7% to US$14.1 billion. This represented a robust performance, particularly in light of the increasingly competitive market for audit and accounting services around the world. The resulting downward pressure on prices masks even stronger underlying growth in PwC’s Assurance business. While competitive pricing is important, we believe that our Assurance operations are – and must continue to be – defined not by their price, but by the quality of the service our firms provide. We continued to invest very heavily in service quality throughout FY 2011, and we will accelerate this investment in FY 2012.

Advisory
Advisory operations continued to grow strongly during the year, with an impressive 20% increase in revenues to US$7.5 billion. Advisory growth was driven by the beginnings of recovery in mergers and acquisitions activity in a number of key markets, the continued high demand for consulting services, and a series of strategic acquisitions. We anticipate continued healthy growth in the Advisory business in the year ahead.

Tax
Tax revenues also returned to solid growth in FY 2011, rising by 8% to US$7.6 billion. The positive upturn was seen across the world.

Geographic
Looking at the results geographically, PwC achieved increases in revenue in all geographic regions. Revenues in Asia rose by 14%, in Australasia by 38%, and in the Middle East and Africa by 20%. PwC firms also delivered significant returns to growth in the Americas, with North American revenues rising by 10% and growth in South and Central America doubling to 23%.

Given the subdued economic conditions and continuing uncertainty around the Eurozone, our revenue growth was more modest in Western Europe at 4%, and in Central and Eastern Europe at 7%. But these growth rates were still impressive in the circumstances.

At a country level there were some very strong performances from our firms in emerging markets, in particular South Africa, Brazil and China. More developed markets such as Australia and the US also enjoyed robust growth.

We’re pleased that we’ve managed to deliver this formidable improvement in our results during tough times. There’s no doubt that this performance is down to the hard work and dedication of PwC people across the world.

Further details of the results can be found in the Facts & figures section towards the end of this Review.

In addition to operating during uncertain economic conditions, our profession is also dealing with a rapidly shifting regulatory environment. Major initiatives that could impact our businesses – either through legislation or direct regulation – are under discussion in jurisdictions including Europe and the US.

The European Commission, for example, has published a wide-ranging discussion paper on auditing, addressing key issues such as independence, competition and governance. In the UK, regulators are examining competition in the audit market to decide whether changes may need to be made in the structure of the profession. And in the US, the Public Company Accounting Oversight Board is considering a number of options to strengthen the objectivity of audit firms.

PwC firms around the world are actively engaged in the debate about these and many other issues affecting our businesses. Reflecting on these developments, there is an opportunity to reassess the role of the audit and how it can best meet the changing needs of the capital markets. We are therefore keen to embrace changes that enable the profession to continue to develop and thrive in the years ahead.

However, it is important to remember that improving audit quality must remain the paramount objective of any soundly based reform. In support of this aim, we’re continually seeking to lead the profession in enhancing audit quality and bolstering its relevance to all participants in the capital markets. With this in mind, we’ve invested heavily in improving audit quality at PwC, and will continue to do so into the future. After all, it is the very essence of our work.

We take very seriously our responsibility to participate in the public debate about the future of the audit. And that is why we seek outcomes that will maintain the strength, independence and sustainability of the profession and serve the public interest.

We believe that we have a responsibility to help create a sustainable future and make our world a better place. These issues are high on the agenda for our people and the communities in which we work. At PwC, our people are not only supported and encouraged to become actively involved in community programmes – they are inspired by them. We have an enviable record in the number of volunteer hours and charitable donations made across the world.

One example is PwC’s involvement with the United Nations Human Rights Commissioner for Refugees (UNHCR). In the desert nation of Chad, the UNHCR and PwC have jointly built seven new primary schools and improved 25 others – bringing hope to over 16,000 refugee children. PwC professionals applied skills in business and project management to create an approach that the UNHCR is now adopting for other refugee camps in Chad.

In addition to our volunteering and donations, many of our people use their core skills with the support of PwC’s resources to benefit the communities in which we operate.  For example, in response to the tragic earthquake and tsunami in Japan, PwC’s Japanese firms, along with disaster recovery experts from PwC firms around the world, formed a Japan Recovery Taskforce to make PwC’s skills, knowledge and experience available in support of rebuilding Japan. Government officials and local and international experts from PwC and other organisations held the first global symposium in July to discuss the issues facing Japan.

As with our work with clients, when it comes to corporate responsibility, we are focused on results. For instance, we are committed to reducing the environmental impact of our businesses by actively integrating principles of good environmental management into our workplaces around the world. To sum up, we look to exhibit responsible behaviour in everything we do, as well as engaging with our stakeholders and communities to have a positive impact in the places where we live and work.

Our goal is clear: we want to be the number one professional services network in the world – defined not only by size, but also from the perspectives of quality, brand, talent and profitability. We’re making good progress in these areas, but it’s about more than a ranking; it’s about being known as the network of firms that does the right thing for clients, people, communities and the capital markets. At our best, we hear and understand the goals of our clients, our people and other stakeholders, and work with them to create value.

From where we stand today, the direction of the global economy is difficult to predict. But what we can see are major trends such as the continuing advance of globalisation, the burgeoning growth of emerging nations, and ongoing rapid shifts in demographics. PwC has sought to keep in step with these changes. For example, we’ve invested for growth in new markets in Asia and Africa where we see great potential. We’ve also made a number of strategic acquisitions in our Advisory businesses, and will continue to undertake more of these as we see opportunities. And, as I said at the start, in order to grow we will continue to adapt human capital policies to attract and motivate talent across all generations. There is a common theme here – we need to be agile and focused to achieve the right results for our clients and ourselves.

As you will see in this document, we are doing just that. We are proud of what has been accomplished this past year. Our focus now, however, is on the opportunities that lie ahead: helping companies navigate through this rocky recovery; developing methodologies and services that deliver even more quality and value; incorporating new technologies that drive efficiencies and collaboration across our network; attracting talented people to start or continue a career at PwC; and much more.

I look forward to updating you on our progress in 2012.

Dennis M. Nally
Chairman, PricewaterhouseCoopers International Limited