Chairman's interview

Olga Grygier-Siddons caught up with Dennis Nally in Warsaw, Poland, to discuss our performance in FY 2014.

Excerpts from Olga's interview with Dennis

Olga: Before I start asking about how PwC performed in FY 2014, I’d like to hear how the year was for you personally.

Dennis: Well, just like everyone else in PwC, I’ve had a really busy year. I’ve visited many parts of the world, meeting with our clients, meeting with our people, meeting with regulators, hearing about developments first-hand. It’s been fascinating.

It’s also been a really positive year, with several key milestones: for example, we hired 45,000 people this year, a record high. We’ve also had a lot of business opportunities and launched some exciting new products and services in response to client needs. And, of course, we’ve made a number of key acquisitions. So I feel really good about what’s been achieved professionally, but personally as well.

Olga: So how did we perform as PwC during FY 2014?

Dennis: As you know it’s been a tough and very competitive market, but our overall results have been really good. Top-line revenue was up 6%, which I think says an awful lot about what we’re doing across the whole network.

Equally important, looking across our lines of service, again there’s a strong performance by all three, each exceeding FY 2013. Our Assurance practice was up 3%. Given what’s happening with competition and pricing, that’s a really great result. The Advisory business was up 10%, reflecting the demand across the whole network for both Consulting and Deals. And Tax was equally impressive, up 8% in a very challenging marketplace. So it’s a strong performance we can all be proud of.

Olga: Are there any particular bright spots or stars that you’d like to give credit to?

Dennis: One of the key megatrends is the economic shift from the developed to the developing world – and we have some really strong performances in developing markets. Whether you look at China, India, Brazil or Mexico, they all put in great performances this past year. But our successes in developed markets are equally impressive. Take Spain – a very competitive marketplace where our firm grew in double digits. It’s all about the strategy, and about what we’re doing to serve clients and make a difference. When we do that, the results just follow.

Olga: So, a pretty impressive performance. How can we sustain and grow next year?

Dennis: The marketplace will remain incredibly challenging in FY 2015. So we need to stay focused on what we’re doing for our clients to help them deal with their issues. We must also continue to innovate, and make sure we’ve got the right products, services and skills to help our clients be really successful in a challenging marketplace. And, of course, we need to keep enhancing the quality of our work.

We’re looking at a number of new areas that we think can make a further difference. Areas like data analytics, digitisation of our services, cyber security, and in particular new assurance-type services. It’s about focusing on making sure our services stay relevant and responsive to what our clients are seeking.

Olga: Let’s move on to the economic and business environment. Here in Europe, we started 2014 with a lot of optimism, but now things don’t look so promising. What’s your view on the global economy?

Dennis: I definitely think it’s better today than a year ago, despite some ups and downs. In Europe, you’re right that things are slowing down a little, particularly in major economies like France and Germany. But there’s a bright spot in the UK, while in Poland we’re expecting growth of about 3%. The US may not be growing as fast as hoped, but nonetheless it’s making progress.

However, as you say, there are challenges out there. Brazil previously had outstanding GDP growth, but has now slowed down. There are obviously issues in the Middle East as well. So there are pluses and minuses – pointing overall to a period of slower economic growth. That’s going to be the reality for the next several years.

Olga: Alongside economic challenges, we’re facing a lot of regulatory pressure. Here in Europe we’ve seen the regulators being especially active. As a network, are we well prepared for regulatory change?

Dennis: I’ve been in the profession 40 years, and this is probably the most challenging regulatory environment I’ve seen. Coming out of the financial crisis, we see regulators – not just here in Europe, but around the world – focusing on the changes needed to prevent another crisis. So what’s happening is no surprise, and is certainly not unique to our profession.

How well prepared are we? I think we’re on top of it and addressing the issues as best we can, whether around mandatory firm rotation or restriction of services. We’re committed to making the right decisions in the best interests not only of PwC, but also of our clients and stakeholders. It’s really about staying focused on quality and doing the things that make the most sense for the longer term.

Olga: Let’s turn to some of the things we’ve accomplished this year – particularly the acquisition of Booz & Company to create PwC Strategy&. How do you see us operating together?

Dennis: First off, I’m really proud of that acquisition – which was all about talent and responding to our clients’ needs. We could see our clients facing up to challenges stemming from the megatrends, and that they needed help not only in understanding the strategic implications of the megatrends, but also in addressing and dealing with the resulting issues. So that part of our business was being totally redefined, with clients wanting to go all the way from strategy to execution.

Given this shift, the acquisition of PwC Strategy& gives us tremendous capabilities that are a real differentiator. Our vision is around creating a ‘category of one’: no-one else is focused on this. And we’re off to a great start with some tremendous wins, where Strategy& and PwC together have responded to opportunities in ways neither of us could have done alone.

Olga: Consulting is getting a lot of attention and investment from PwC. Are we still paying enough attention to our core business of Assurance?

Dennis: Well, we often talk about Consulting or Advisory, and sure, it’s an important part of what we’re trying to do. But our core businesses of Assurance and Tax are still the largest of their type in the world. And I continue to see tremendous opportunities in both these businesses to keep developing our service offerings, stay responsive and relevant to the needs of our clients and stakeholders, and deliver outstanding growth.

Olga: Turning specifically to tax, there’s been a heated public debate about whether multinationals are paying sufficient tax. Is PwC playing enough of a role in this debate – and could we be doing more around global tax reform?

Dennis: First, we should never underestimate the value we deliver to clients by helping them comply with complex tax rules and regulations worldwide. However, when it comes to international tax reform, the fact is if you reform one country’s tax system, it might be a winner, or might be a loser. But whatever you do on one side, it’s going to impact someone else.

Do we have a point of view on how that could best be done? Absolutely. Is it a huge challenge for governments? Certainly. Are we engaged in the conversation? Most definitely. I’m fascinated to see how it’s all going to play out. But nobody should underestimate the challenges involved.

Olga: We’ve already discussed the changing world, and we see our clients investing to stay ahead. Given PwC’s structure and how we operate, do we invest enough?

Dennis: In terms of investment, I think there are two really important trends that we need to get in front of. The first is the economic rebalancing from the developed to developing world. Today, the developing markets represent 20% of PwC’s total revenues – and we see that rising significantly in the next five years. So we need to target the right investments and develop the talent we’ll need to respond to client opportunities in those markets.

The second trend is technology, which many believe will have a bigger impact than the Industrial Revolution. And, of course, it will affect how PwC makes investments and focuses its business for the future. We’re very much in front of – and actively adapting to – these two trends.

Olga: Staying with emerging markets, which ones – beyond the BRICs – do you think we should focus on going forward?

Dennis: There was a time when the BRICs all moved in a very similar way. Today, that’s not the case: you have growth rates in China very different from those in India. Brazil has been slowing down. Then you have Russia. All very different. In terms of other developing economies with tremendous potential, there are parts of Africa and the Middle East, and places like Indonesia and Vietnam. And of course Central and Eastern Europe. We need to stay focused on all these areas.

Olga: Turning to the future of PwC, I think two things will shape our success: our powerful brand and our people. How can we continue to recruit and keep the best talent?

Dennis: You’re spot on. Our major asset is our people. So continuing to attract, retain and develop the very best talent is vital. And we’re fully focused on that, with our development activities and efforts to create an environment where people can be really successful. One thing I’ve learned over the years is that a one-size-fits-all career model doesn’t work. So we need a lot of flexibility, particularly with the diversity we have today, so people can build their own careers.

Also, as the challenges our clients face become ever more complex, we need people with diverse skills and diverse backgrounds to help solve them. All those diverse individuals should feel they can really contribute as part of the team.

Olga: That brings me to our purpose – to build trust in society and solve important problems. We launched it earlier this year. How are we progressing with it?

Dennis: It was very important to get real clarity on what PwC stands for. And the purpose we’ve highlighted builds on the tremendous foundation of what PwC has been historically, while also differentiating us.

In terms of ‘building trust’, we typically think about trust in the capital markets. But we also have a vital role to play in building trust in society, which is much bigger and more expansive. Equally important is ‘solving important problems’, which extends into societal issues beyond our clients’ immediate challenges. We need to claim a seat at the table, and offer our best thinking on big, critical issues like food safety and the environment, and the challenges around megatrends like urbanisation.

So I’m very excited about our purpose. It’s a guiding light for how we invest and channel our resources. While it’s early days, we’re heading in the right direction. And the best is yet to come.

Olga: So, my final question. For FY 2015 and beyond, what would you like to see us accomplish?

Dennis: As I see it, PwC is all about making a real difference for our clients and our people, whatever the distractions. So, staying very focused on what we do really well, serving our clients, and developing our talented people is what I’d like to see us achieve in FY 2015. And if we do that, we’ll be fine.