Australia Markets close in 5 hrs 22 mins

The issue of trust has burned its way into the consciousness of corporate Australia

Chris Pash
  • Australian CEOs now worry a lot about their customers and the issue of trust.
  • The themes emerged in a KPMG survey of 220 Australian C-suite executives.
  • The five top issues were digital transformation, innovation and disruption, regulation, Political paralysis, and customer centricity.

Australia's business leaders, in a key fallout from the financial services royal commission, now see trust as a key issue affecting their businesses.

And the customer, often ignored in the past, is now top of mind among CEOs in Australia.

The themes emerged during a survey by KPMG Acuity, asking 220 Australian C-suite executives to name their top five issues.

While digital transformation and innovation and disruption were the top two issues, broader recurring themes cut across specific concerns, industries and size of business.

"Most marked was a shift in focus on the customer as top of mind, compared to last year," says Gary Wingrove, CEO of KPMG Australia.

"Organisations know they have to genuinely put the customer first heading into 2019. This is no longer an aspirational value, but a hard reality that needs to be baked into any organisation's culture and planning."

The issue that permeated almost every other answer from the CEOs.

And trust was the other key permeating issue this year.

“No longer some woolly discussion point, trust has burned its way into the consciousness of senior leaders and is increasingly being recognised as the license to operate," says KPMG Chairman Alison Kitchen.

"As a result, organisations are asking themselves fundamental questions about their purpose, their culture, and how they present themselves to the world.”

The top five issues identified in the survey:

Digital transformation

Ian Hancock, KPMG National Managing Partner of Management Consulting, says just about every CEO has digital transformation at top of mind but it can mean different things.

"In 2018, the term digital transformation means so many things there is a very real risk that this lack of clarity is causing confusion, leading to diverse agendas and ultimately missed opportunities," he says.

Digital transformation includes investments in digital technologies, but also the modification of an organisation’s functions, its ways of working, its back office technologies and sometimes a new business model.

"True transformation should also include culture, often the poor cousin behind the more visible technology investment," says Hancock.

Innovation and disruption

James Mabbott, Head of KPMG Innovate, says the fear of disruption, at its most elemental level, is straightforward -- the constant worry that the competition will use new tech and methods when you are not.

"But as we look toward 2019, we see the dilemma is actually more immediate, more tangible, and more complex," he says.

“One reason for this is the current global marketplace has made it abundantly clear that the network effects of the innovation race tend toward winner-takes-all.

"There are spectacularly outsized growth opportunities for the lucky few – and the potential to get left in the dust for everyone else. This raises the stakes enormously.”

Regulation

This covered both the sector-specific regulations facing the financial services industry and the broader challenges of business regulation, cutting red tape, and concerns over the capacity and capability of Australia’s regulators.

Astrid Raetze, Partner, KPMG Law, those in the financial services industry are anxious about the prospect of a post-Royal Commission regulatory overload.

The Commission has already suggested the newly-introduced Banking Executive Accountability Regime (BEAR) could be extended and has flagged potential new regulation around mortgages, credit cards, and insurance contracts.

“But the expected regulation avalanche goes well beyond the Royal Commission, and banks," says Raetze.

"ASIC will be given greater enforcement powers as well as riding orders to move away from its existing preference for negotiated outcomes over civil proceedings.

"More prescriptive ASX guidelines will also come into play, including a key change to a company’s obligation to 'act ethically and responsibly' to instead 'instil the desired culture' in the organisation."

Political paralysis

The political log jam in Canberra brings uncertainty over the prospect of significant reforms or necessary changes, and a lack of belief that Australia’s major parties can work cohesively on national agenda items.

Grant Wardell-Johnson, KPMG Partner of Geopolitics and Tax, says business leaders are concerned with growing political polarisation and the difficulty of gaining support for complex reforms.

"In a world where we should be less ideological and more evidence and scientifically based in our public policy processes, the opposite seems to be occurring," he says.

"This leads to less bipartisanship. Now more than ever we need full, frank and fearless advice from senior public servants."

An example, is energy policy and the inability of politicians to deal with price, stability, environment.

Customer centricity

Paul Howes, KPMG Partner-in-Charge of Customer, Brand & Marketing Advisory, says the customer has traditionally occupied a pretty weak bargaining position.

"As a result, most organisations have not considered them first-order priorities. When companies have devised their forward-looking business plans they have often drawn them up in isolation from considerations about the impact on customers," he says.

“This is all changing – organisations know they have to genuinely put customer first. Many will view a huge part of this as digital transformation – but digital is an enabler, not an outcome, and there is a trap of falling into a tech-first approach.

"Successful outcomes put the customer at the centre and respond to a human need. Customers talk about outcomes, not necessarily service delivery models. They want the right mix of face-to-face human interaction and automation.”