New paths to innovation

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It is a key strength of PwC – and a sign of the quality, depth and breadth of our services – that our client relationships span companies ranging from the largest global multinationals to many small and medium-sized enterprises. Our clients are also based in almost every country in the world, each with its own business environment and trends.

Yet, despite this huge diversity, we find that our clients across the globe often face very similar challenges in achieving sustainable growth and delivering value to their stakeholders. Helping companies rise to these challenges and find the growth they are seeking is what PwC does best.

Looking across our worldwide community of clients, we see them grappling with a handful of key issues:

  • As increasing globalisation brings organisations closer together, collaboration between private enterprise, governments and NGOs becomes ever more important
  • In a time of unprecedented volatility, organisations are addresing new ways to build competitive advantage
  • One key to success is finding new ways to harness the talent to deliver growth
  • Now that economic, political and environmental instability have become permanent facts of life, organisations are seeking to improve their own resilience and prepare for what’s around the next corner
  • As expectations of the business community and its role in the development of society grow, companies are increasingly looking at how they can measure, build and sustain trust

We are working with our clients to meet each of these challenges and by doing so, helping them to achieve sustainable growth.

Collaborate to achieve stability

If the global financial crisis has shown us one thing, it’s how close the linkage now is between countries across the world. Local risks soon become global ones. Historic findings from our Annual Global CEO Survey show that CEOs’ confidence in the growth of their businesses moves in much the same way, whether they’re from developed or emerging countries. This year, the respondents globally named over 60 different countries as important for their companies’ future growth.

  Helping our clients to achieve sustainable growth and deliver value to their stakeholders is what PwC does best.
   

But as companies grow overseas, they face a complex patchwork of standards and varying political, tax and regulatory systems. This level of complexity is a major barrier. So, across industries, the need to bring together international standards and best practices – and to collaborate to tackle shared risks and seize mutual opportunities – is clear.

In many cases, this collaboration bridges not just industries but also the public and private sectors, as with our work on the Green Power Development Project in Bhutan.

As such case studies illustrate, collaboration is growing and yielding positive results. But it needs to go much further. And we believe it will – encouraged by the fact that priorities such as workforce development, financial sector stability and infrastructure improvement are important for both businesses and governments worldwide.

These shared needs will drive convergence in areas like accounting and auditing standards, anti-corruption practices, healthcare, international taxation and climate change. The era of convergence and collaboration has only just begun.

Build competitiveness in a time of change

  If the global financial crisis has shown us one thing, it’s how close the linkage now is between countries across the world.
   

As we scan the horizon beyond 2012, the outlook remains dominated by economic volatility and uncertainty. Factors ranging from the eurozone’s rumbling debt crisis to the long-term shift of economic power to emerging economies mean there’s little sign of an end to the current state of flux. A further impact is that the world is becoming an ever-more competitive place, with the internet enabling consumers and business customers to buy from all over the world, compare suppliers and share market knowledge.

So growth is at a premium. To find it, companies are embracing the sheer size of the potential in emerging markets, while keeping a close eye on costs and risks. But they also know they have to do things differently to compete more effectively in the new economy. So companies are putting the ‘local’ in their global growth strategies, building wider and deeper networks, and moving away from selling products towards creating personalised value for customers.

How can companies achieve all this amid such sweeping and radical change? By being ready to transform and innovate to get closer to their markets. This is precisely what we’re helping more and more companies to do. Assisting clients to handle the transition from state-owned entity to customer-centric private sector player, as with Australian telecommunications company, Telstra. Or helping them deal successfully with rapid growth from a small, domestically-focused operation into a major global enterprise, as with China-based Haier Group. Either way, building and sustaining competitiveness in a fast-moving environment provides the bedrock for future success.

Harness talent for future growth

  There have never been so many educated and mobile people in the world – yet businesses in all industries are finding it harder to recruit.
   

Over half the companies in our 2012 Global CEO Survey said that not being able to find key skills could hurt their ability to grow. This figure rises to 62% in Asia Pacific, home to the world’s largest workforce. The reason? Chronic skill gaps, and a mismatch between supply and demand.

The rise of emerging markets is creating jobs in places where it’s tough to find the right people. International and local competition for those who do have the right skills is intensifying by the day. And new kinds of jobs are being created – in old and new industries – that many unemployed people don’t have the skills for.

In response to such challenges, more companies are starting to take a longer-term, strategic approach to closing the gap between what they have, what they need and what’s out there. This includes making the most of their existing talent, a goal that we helped Swiss Re to achieve through its radical cultural and behavioural change programme in Finance.

And rather than treating resourcing as an afterthought to business planning, companies are putting in place succession plans, mobility strategies and diversity programmes. Overall, the message is clear: recruiting and retaining the right people today means making HR a truly strategic player.

Build resilience in tough times

The risk landscape is changing radically. Throughout the recent economic crisis, improving risk management was a key focus for many organisations. A positive outcome is that companies are now better prepared with their enterprise risk management (ERM) frameworks than before the crisis struck. But increasingly, ERM alone is not enough.

Why? Because the size, speed and nature of risks are changing beyond recognition. Global interconnectivity and communications mean local risks are snowballing rapidly and unpredictably into global ones – and from there into systemic shocks. Traditional ERM processes are geared towards identifying and predicting risk events as a basis for avoiding them or managing their impacts. In an environment where unpredictable events have equally unpredictable effects, this approach will no longer do.

To navigate through this new environment, companies need not just risk management, but risk resilience.

  Risk has changed: we believe businesses need to change with it – by expanding risk management into resilience.
   

This means accepting that disruptions will occur, and gaining the ability to adapt and evolve the organisation while keeping an even keel. That’s evidenced in the way that we helped global travel service company Kuoni to harness the momentum of its merger with Gullivers Travel Associates, to drive transformational change without damaging ‘business as usual’. And in another example, how we are helping one of the world’s leading crop protection companies to take a fresh look at its risk management and internal audit function.

Going forward, businesses can adapt ever more fully to the new risk landscape by integrating risk management with strategic planning, focusing on strategic and systemic risks to strengthen and expand their ERM frameworks, and building a risk-aware culture and behaviour throughout the business.

Risk has changed: we believe businesses need to change with it – by expanding risk management into resilience.

Rebuild and sustain trust

Recent high-profile events have highlighted just how important trust is to businesses today. As a key asset for any business, trust is an economic driver and a performance enhancer. It’s what legitimises business to do what it does, and it’s what gives business a future. Organisations need to actively build and sustain trust or risk going out of business.

During conversations with clients and stakeholder debates on this subject, it’s become clear that trust cannot be bought or enforced, but has to be earned through behaviours based on principles of honesty and integrity. The challenge is for businesses – starting with their leaders – to embed into their corporate culture the values and behaviours that are worthy of people’s trust. Organisations need to achieve authenticity, where what they do is aligned with what they say.

This is all the more critical today, since globalisation and the explosion in social media mean businesses now operate in a global fish bowl. So they have no choice but to be transparent and communicate clearly and openly, whether reporting on their social impact, financial results, or any other area.

Every year, PwC’s UK firm organises the Building Public Trust awards to help raise standards of transparency in measurement and reporting practices for businesses. Now in their tenth year, the awards recognise UK businesses and public sector organisations that have done a particularly good job in building transparency and trust into their reporting.

Today, no business can present one face to the outside world while behaving differently behind closed doors. In fact, there are no closed doors in the digital era. The only way to earn trust is through clarity, honesty – and authenticity.

 

 
Ian Powell, PwC UK senior partner and member of the Network Leadership Team
“Business makes a vast contribution to society, by creating the goods and services which support our well being, by providing people with jobs and a sense of community, and by creating the financial prosperity that pays the taxes which support public services.

“Building a new consensus around the positive role that business plays is critical to our ability to build trust. Key to achieving this is improving transparency – and this requires businesses to continue to improve the way they report."
 

Developing Green Power in Bhutan


Bhutan

International development isn’t just about aid flowing from rich to poor countries. Private sector investment in infrastructure is stimulating economic growth in low-income countries to benefit the poorest nations. Accordingly, the Asian Development Bank (ADB) is a long-time champion of public-private partnerships, and PwC India has been working with the Bank and its partner governments on power, transport and water projects across South Asia.

One such example is the Green Power Development Project in Bhutan. Ranked 134 on the Human Development Index and among the world’s least urbanised nations, Bhutan needs high levels of investment in order to boost its development. Today, hydropower exports to India account for 40% of Bhutan’s revenue and 25% of its GDP. With only 6% of its hydropower potential currently developed, this form of generation offers Bhutan a real opportunity.

PwC India helped the Royal Government of Bhutan to formulate a Sustainable Hydropower Development Strategy to speed up the development of its hydropower capacity (currently 1,500 MW). PwC India also helped structure the 114 MW Dagachhu Hydropower Project as Bhutan’s first Hydropower public-private partnership. Kameswara Rao of PwC India explains the benefits: “Some of the royalties from power exports to India will be used to cross-subsidise electricity prices for rural households. The rest will help finance health and education projects and infrastructure like bridges and rural roads.”

The next step in Bhutan’s quest to use clean energy sources to finance local development is the Nikachhu hydropower project. PwC India has been asked to help structure the project and work with stakeholders to extend power trading links between Bhutan and India to become a regional grid that will also include Bangladesh. Says Kameswara Rao: “Our assistance to the ADB and Bhutan lays the groundwork for commercial hydropower projects to further improve living standards and quality of life in Bhutan.”

Kaoru Ogino, Principal Energy Specialist, South Asia Department, ADB describes PwC’s contribution: “PwC India is doing commendable work to help us satisfy the region’s energy needs through clean low-carbon energy sources and foster economic cooperation in the South Asia region. This is a fine example of South-South technical cooperation which is moving rapidly up the global development agenda.”

Helping Telstra embrace change in a competitive environment


Telstra

Telstra is Australia’s leading telecommunications and media company, with offerings ranging from fixed and mobile voice to internet access and pay TV services. Following Telstra’s recent privatisation by the Australian government, CEO David Thodey is leading the company through a change programme to become more sales and marketing-led. Telstra is also undergoing structural changes under the government’s National Broadband Network agenda.

In its drive to embrace this new approach, Telstra is facing several internal and external challenges, all against a backdrop of a highly competitive marketplace. To overcome these obstacles, Telstra has launched ‘Project New’, which has three central themes: simplify, serve and save. It aims to touch all parts of the organisation, and takes into account issues such as changes in the company’s costs profile, and the parallel requirements to leverage investments in IT and networks, boost productivity, and match its customer service performance to its network superiority.

PwC Australia enjoys a long-standing relationship with Telstra and has successfully delivered over 35 strategic projects across five of Telstra’s business units. These projects included assisting Telstra with its programme alignment, structural reorganisation, cultural engagement, process establishment, and customer experience and productivity programmes. We’ve also contributed to its simplification drive, and helped improve Telstra’s customer experience in each of the past two years. Going forward, we’re continuing to work in collaboration with Telstra as its trusted adviser and implementation partner.

Robert Nason, Group Managing Director, Business Support and Improvement at Telstra, acknowledges the importance of PwC’s role. “There is probably not a firm that’s more intimately involved in the change programme that Telstra is undertaking than PwC,” he says. “We have a very close working relationship and, more than other firms, PwC does understand how to do the job of managing a centrally driven programme in collaboration with the company, and working with business unit leaders without losing sight of the corporate objectives. I would characterise PwC as being very strong on pragmatic solutions for achieving outcomes and particularly strong in the telecom space using its international network.”

Mike McGrath, PwC’s Managing Partner – Markets, and Client Lead Partner, Telstra, adds: “At PwC Australia, we are taking the journey with Telstra, step by step, as they navigate the market and take advantage of the opportunities. We are proud of our efforts and growing relationship with Telstra.”

Working with Haier to achieve long-term value


Haier

Based in China’s Eastern coastal city of Qingdao in Shandong province, Haier Group has grown from a small struggling plant into a global group with more than 80,000 employees. It has approximately 80 overseas entities, including factories, trading companies and R&D centres worldwide, and its strong network accounted for a global turnover of approximately RMB 160 billion (USD$23.3 billion) in FY 2011. For three years running, Haier has been cited as the world’s largest white goods home appliance brand.

While PwC China’s relationship with Haier goes back many years, in 2010 it underwent a step change: Haier Group Chairman and CEO Mr. Zhang Ruimin announced a strategic cooperation agreement with PwC China. From the second half of 2010 to the first half of 2011, PwC China teams worked with Haier on nearly 30 projects, including internal control, tax, risk management, human resources, and mergers and acquisitions.

More recently, PwC China has been working with Haier on a post-merger and acquisition integration project. Consistent with Haier’s position as a global brand, PwC China assisted in the business’s acquisition of Sanyo Electric’s white goods product line in Japan and Southeast Asia, which enhanced Haier’s R&D, manufacturing and marketing capabilities to better serve the needs of local consumers.

PwC China’s global relationship partner Kevin Zhang says: “We take nothing for granted and have worked hard over the years to establish, build and maintain an effective long-term relationship with Haier that brings value to all.” PwC China continues to invest in the client relationship, while introducing best industry practice, taking small projects as pilots, delivering the highest level of service quality and adding value. “A key factor has been close and regular communications at all levels, so that we all respond quickly and effectively in meeting the client’s needs and expectations,” adds Kevin.

The result is summed up by Haier Group Chairman and CEO Mr. Zhang Ruimin: “Haier and PwC are now trusted strategic partners.”

Growth through change at Kuoni


Growth through change at Kuoni

Kuoni, founded in Switzerland more than a century ago, is a leading global travel service company employing more than 12,000 people in over 60 countries. In 2011, Kuoni acquired Gullivers Travel Associates (GTA) for US$720 million and overnight turned the Kuoni Global Travel Services division into a business with a turnover of CHF 2.4 billion.

Unlike most integrations, the main focus was not to consolidate and take out costs. Instead, the drive was to bring a huge new operation together without damaging ‘business as usual’ in either organisation. Once the business was integrated, the goal was to use the momentum of transformational change to focus immediately on propelling rapid and sustainable growth.

PwC UK partner Cameron Roberts, one of a team consisting of travel and integration specialists from PwC firms in the UK, Switzerland and Japan, explains: “We were initially asked to help with the combined financial, commercial and operational due diligence before the deal was signed, and continued to support Kuoni through to ‘Day One’ and beyond. Key to our success was our knowledge and experience of the travel sector, our tried and tested merger and acquisition integration methodology, our extensive experience of integration projects, and our ability to field a global team."

The efforts were recognised by Kuoni. “PwC supported us on two levels,” says Rolf Schafroth, CEO Kuoni Global Travel Services Division. “Strategically they provided structure and direction and prevented us from going down blind alleys. And practically, they rolled their sleeves up, immersed themselves in our business and worked incredibly hard to complete the integration planning process within an aggressive timescale, leaving us in great shape."

Taking a fresh look at risk and internal audit at Nufarm


Taking a fresh look at risk and internal audit at Nufarm

Nufarm is one of the world’s leading crop protection companies. Its products help farmers protect against damage caused by weeds, pests and disease. Headquartered in Australia, Nufarm has manufacturing and marketing operations throughout Australia, New Zealand, Asia, the Americas and Europe.

A change of CFO and General Manager, Global Risk & Assurance, gave the Board an ideal time to take a fresh look at their risk management and internal audit function. They sought a greater emphasis on enterprise-wide risk management and a more strategic approach to internal audit. For Nufarm, delivering the change meant selecting a risk and internal audit provider with a global footprint with whom they could work to transform their function.

Following a competitive tender, PwC Australia was selected to co-source Nufarm’s internal audit function for three years. Melbourne-based partner Jason Agnoletto toured Nufarm’s global operational sites with Dean van Straaten, Nufarm General Manager, Global Risk and Assurance. The aim was to gain a better understanding of senior business stakeholders’ expectations and the challenges they face across all aspects of their organisation.

Jason Agnoletto says of Nufarm: “As a large, decentralised organisation, each local site has its own processes and own way of doing things. We knew we couldn’t demonstrate our understanding of their situation from behind a computer – we needed to get out and see their business first-hand. This showed our commitment to understand their business so we could deliver greater value through our internal audit relationship."

Because Nufarm has operations in emerging markets, PwC Australia Managing Partner – Reputation, Regulation and Risk, and lead partner for Nufarm Mary Waldron says: “They were comforted by both our global footprint and our team of specialists in the internal audit space. Moreover, our approach reflects our commitment to working with them in attaining their business goals, rather than simply providing a service.

For Nufarm, Dean van Straaten comments: “The initial 60 days, post the appointment of PwC, focused on building a revised strategy and vision for the risk management and internal audit function at Nufarm. Feedback from key stakeholders across the group reflected a need for the function to be a visible and valued business partner. Jason has demonstrated a keen commitment to jointly own this vision and the global PwC team is an integral part of achieving our goal.”

Transforming Finance at Swiss Re


Transforming Finance at Swiss Re

In 2008, Swiss Re – the world’s second-largest reinsurance company – faced some significant challenges, heightened by the global financial crisis. In response, the group undertook an extensive reorganisation, creating major change across the whole business. Finance staff experienced some of the heaviest impacts, as operations shifted to shared service centres. Teams of many years’ standing were redeployed or restructured. This led to a breakdown in communication, less collaboration across teams, and declining employee engagement.

Working with a carefully selected team from Finance and HR at Swiss Re, an engagement team drawn from PwC UK and PwC Switzerland set about designing and implementing ‘Finance as One’, a groundbreaking cultural and behavioural change programme covering the whole Finance function – 33 offices in 21 countries – and every one of the department’s 1,060 employees. The programme set out to change the way people behaved at critical times for both the individual and the organisation. Small changes and strong leadership had a big effect.

The programme has been recognised nationally and internationally, winning several top awards.

The initiative promoted a clear vision and values, helping teams to develop working practices that translated those values into their everyday working routines, and encouraging a set of consistent behaviours. The team also developed a series of ‘people initiatives’ to boost capabilities and development opportunities for Finance employees.

Whatever they do and wherever they are, Swiss Re’s Finance people now have a common vision and a shared understanding of strategy and values. What’s more, they understand the role they need to play in bringing Finance’s vision and strategy to life. As a result, Finance has seen a drop in operational, risk-related errors, an improvement in employee engagement and retention, and a more collaborative working environment across departments and functions.

The programme has been recognised nationally and internationally, winning the Association of Management Consulting Firm’s (AMCF) Excellence in Management Consulting award for Human Capital, and the Management Consulting Association’s (MCA) award for Finance and Risk Management.

George Quinn, Swiss Re’s Group Chief Financial Officer comments: “Behavioural change initiatives are challenging because of the often personal and therefore awkward nature of the issues that must be confronted, especially in a very technical environment like Swiss Re. I really needed that moment of inspiration to see the way forward and PwC provided it.”

Mark Stephen, PwC UK consulting partner adds: “To refine and promote Finance’s vision is one thing, to change the way people work and behave on a sustainable basis to live up to Swiss Re’s values is quite another. Only with a committed team and a visionary client leader could we have hoped to achieve it. The success of the programme is a credit both to the diversity of skills the PwC network of firms has built and to the dedication of the team."