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KPMG

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Since: 07.07.2011

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Story by Dan Thomas - Head of Corporates, Member of KPMG Executive Board

29.01.2019 Share

Joining the dots at Davos

I really enjoyed my first Davos experience this week, but simply having one’s intellectual curiosity fed and watered is not enough

Story by Dan Thomas - Head of Corporates, Member of KPMG Executive Board

I really enjoyed my first Davos experience this week - chaotic, fun and above all else: thought-provoking. But simply having one’s intellectual curiosity fed and watered is not enough - we need to act on the privileged access and intelligence that Davos affords us...otherwise it will continue to attract the wrong headlines - all talk and no action etc.

So there were three things (always three!) that stood out for me this week - and I think it is the linkage of these factors that is most interesting:

1) Slowbalisation
Current geopolitical tension (eg US-China protectionism, cross-border data security concerns) and the continued rise of populist politics is acting as a brake on economic progress. I sensed genuine fear in many conversations on this topic throughout this week. 

The previously inexorable march of globalisation is at best slowing and at worst, if tensions escalate, probably reversing - the implications will be broader than just economic malaise. Take the current Brexit impasse as a depressing example here.

2) The Future of Work
Superfast processing power, ubiquitous smartphone connectivity, IoT, 3D Printing, Blockchain, automation and robotics - Industry 4.0 is reducing our dependence on humans to process, or even manage trade flows.

This will have societal implications - not least the type of work we will require our staff to perform in future....the doomsayers predicting work will vanish and universal benefit systems will be required...and others believing that the nature of jobs will change not disappear completely.

I believe much depends on which sector you are working in and what your current role is today. The less repetitive tasks, that rely on customer interaction with high degrees of trust are probably the least likely to change in the near term.

3) Purpose before profit 
Arguably ten or twenty years ago, “sustainability” was one of a long list of boxes that many companies ticked...more of a PR and recruitment exercise than anything too fundamental. Cynics said “sustainability” was for tree-huggers. Today’s reality couldn’t be further from those beginnings:
  • the Energy Transition is real and it is happening faster than many predicted (e.g. more than half of the UK’s energy is already generated from “renewables”)
  • the IMF recently reduced its GDP forecast for Germany, citing concerns over the damage to industrial production on the Rhine, following a summer drought...which many believe to have been caused by global warming
  • plastics (see my article recently published in the Daily Telegraph) and sugar - millennial consumers and policy-makers really care about these items and are voting with their feet (and wallets).
Growing your business sustainably is now considered by many CEOs (publicly and privately I might add) as a license-to-operate, an existential threat...not window-dressing.

So what?
My view is that rising nationalist politics, mega-tech that allows us be to be less reliant on others and increasing public scrutiny on the sustainability of my operations will combine to drive businesses to simplify and localise their (currently global) supply chains over time.

The Chairman of a global industrial company told me that it might take years to achieve this, given the sheer complexity of today’s supply chain, but that these developments leave them with little choice in the longer term.

Consider the implications - repatriation of supply chains would add to input costs at precisely the wrong stage of the economic cycle - with consumer prices rising or profits falling. Relative employment levels, government tax receipts and GDP growth will all be affected as the geographic operations of big business shifts over time. What do you think?

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