You can’t be 100% comfortable that something else won’t occur: Deloitte CEO
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Bangalore: Barry Salzberg, global chief executive of Deloitte Touche Tohmatsu Ltd, is optimistic about the US’s economic recovery and expects “2014 will be a reasonably good year”. In an interview on Thursday, Salzberg spoke about the economic situation in Europe, his forecast for 2015, investing in India and learnings from events like the multi-crore accounting fraud at Satyam Computer Services Ltd. Edited excerpts:
Given the current global economic conditions and how a recovery is underway in economies such as the US, what’s your business and economic outlook for 2014?
I’ll use the phrase that I always use, which is “cautious optimism”, but I feel a lot better today than I felt a year ago. There’s strong evidence that things are moving in the right direction. If you look at the US, it’s clearly returning to growth; clearly there’s a sense of optimism and confidence. Business is actually doing well. There are still some issues, not to suggest that growth is robust, but I feel pretty good about not only the impact on US businesses, but the fact that the US has returned to reasonable growth. It’s impacting the rest of the world, no question about that.
Europe is still weak, so we shouldn’t over-emphasize its change, but it has clearly improved. There are parts of Europe that are doing much better, UK being a good example, but other parts such as Continental Europe as well. The combination of the two returning to growth will have a positive longer-term impact on some of the emerging markets, which, at the same time, had started to slow down.
I think 2014 will be a reasonably good year; 2015 will likely be better. I like operating in this environment because there are opportunities, great investment potential, and I see meaningful changes in the way things have been managed by leaders all around the world to make a difference—just take a look at what’s happening in Japan... Overall, I’m reasonably optimistic.
Do you think the US has shrugged off the effects of 2008 completely? Do you foresee a return to pre-recession conditions in the near future?
There’s always going to be lingering concerns about what has occurred—I would expect that. But I don’t expect it to go back to the pre-crisis way of doing business, returns, growth rates—there’s a new norm. And I really do believe in that, so I’m not going to make that comparison. What I can say is that in my view the changes to the system as a result of the crisis (were) meaningful and would likely prevent a similar kind of occurrence. Could there still be turbulence? Of course. Could something else happen that I can’t predict today? Of course. But right now I feel that there’s been meaningful enough change that the uncertainty that people have should be limited. You could never get 100% comfortable that something else won’t occur.
What have been some key learnings for Deloitte in the aftermath of the 2008 crisis? How have things changed since?
I think the most important change at Deloitte has been that you need to be extremely prudent with scenario planning, you need to think about what are the things that could happen to your business and make sure you’re properly planning for that. I think investing in the long-term with clients is a lesson—you need to be side by side with your clients if they’re experiencing difficulties and make sure you’re there to help them get through some of their challenges and walk away because the going gets tough. Also, you need to constantly invest in people— you cannot take your eye off the people because you can’t stop recruiting, you can’t stop developing, you can’t stop creating investments in people because they drive the business. So lesson learnt is that there are some non-negotiables, investments that you make that even if things get tough, you don’t change.
How do you see things playing out in India? How will compliance and governance impact developing markets like India?
First of all, I think it’s very robust and we all know it’s very robust, and firms like Deloitte make decisions to invest in India and things got a little bit tougher but we never said, ‘Ok, now we’re not going to invest’, because the fundamentals, the core of what India’s all about, is still there. You’ve got very high-quality people, a very young, broad demographic, very entrepreneurial and innovative spirit here, you’ve got a reasonable stable regulatory environment here. And some sectors are role-model-ish, like the IT (information technology) sector. These are fundamentally the same today as they were two years ago. So I’m reasonably optimistic with those criteria about India’s future. Look, there are infrastructural challenges, corporate governance challenges, etc.—every country faces them in one form or another. India has its fair share of that, but it hasn’t changed my mind in terms of optimism in investing in India.
What have been some key learnings for a company like Deloitte since an event such as the fraud at Satyam Computer? How has life changed?
I don’t know necessarily that we have changed, other than (the fact) that we are much more aware of the kinds of issues that were created in that environment. The number of broad scandals across the world always causes you to look back at your policies, your approach, the quality of your training, the ways in which you conduct audits—that is an example. So I think if you go back then and look to today, we’ve placed a higher level of attention and commitment to improving our audit policy. I think that’s a profession-wide view, regulators have emerged over this period of time, going back to the 2002 time frame, when a number of these situations have arisen, and regulators put your feet to the fire, properly so, and we’ve learnt how to be regulated; we’ve learnt how to improve on our processes. Maybe the biggest lesson learnt has been to focus on audit quality and improve your performance.