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PwC’s The New Equation: Convening leadership to build trust and drive sustainable outcomes

A strategy to replace Vision 2020 and underline everything with trust  

In October TBR met with PwC’s JC Lapierre, chief strategy and communications leader; Shannon Schuyler, chief purpose and inclusion officer leader; and Joe Atkinson, vice chair and chief products and technology officer. In a wide-ranging discussion that built on previous briefings and TBR’s continued analysis of PwC, TBR questioned the three specifically on The New Equation, PwC’s long-term global strategy announced earlier this year. Among the highlights:

  • PwC hopes that after it has fully executed against The New Equation people will consider the firm to be the most significant conveners of those who can lead and are leading to change.
  • The internal organizational changes for the U.S. firm that are necessary to implement The New Equation started years ago and will continue to be refined, but The New Equation does not merely equal organizational change.
  • The newly launched PwC Trust Leadership Institute may prove to be a significant differentiator at a time when the Big Four firms appear to be increasingly alike.
  • PwC’s approach to technology, even with the advent of PwC Products and tighter alliances with technology giants like Microsoft (Nasdaq: MSFT) and Google (Nasdaq: GOOGL), remains rooted in people and business challenges; technology alone cannot transform companies and drive sustainable outcomes.
  • Everything circles back to trust, the most raw and simple value driving PwC’s relationships and underpinning the firm’s purpose.

Chapters, playbooks and constructs: Physical images for The New Equation

Using a five-chapter book as a metaphor, PwC’s leaders said the firm’s new global strategy included choices around trust and sustained outcomes, investments to help the firm better serve clients, a rewiring of the organization and how PwC works to better serve its clients, enhancements to the firm’s people experience, and extensions into the larger community — essentially an explicit understanding of the obligations and responsibilities PwC takes on across its entire ecosystem.

Of these five “chapters,” PwC’s leaders explained that the third and fourth — how PwC works and the employee experience — shifted the most from pre-pandemic plans and idea to their current form in The New Equation strategy. In both areas, the realization that “taking care of people” had to be a fundamental aspect of the firm’s larger purpose became clearer when the pandemic focused attention on employee safety, health and well-being.

‘Get it right, be convincing and do it fast’: PwC’s Risk Proof upends risk assessments

As the New Equation was announced, PwC’s Cyber, Risk & Regulatory practice was ready

When PwC US Chairman Tim Ryan described trust within the firm’s recently unveiled “The New Equation,” he discussed a variety of business issues, including data, compliance, and environmental commitments, that increasingly challenge PwC’s clients and that “all come back to trust.” The firm, in Ryan’s explanation, can help clients build trust not only within their own organization but also as a client’s core characteristic. Ryan’s description of the importance PwC places on trust, highlighted as part of the firm’s US Analyst Day earlier this month, loudly echoed what TBR heard from the firm’s Financial Crimes team earlier this year during a briefing on the firm’s Risk Proof product offering.

Jeff Lavine, PwC’s Global Financial Crimes leader, told TBR in May that PwC’s Cyber, Risk & Regulatory practice helps clients quantify and measure risk; tell their boards, investors and regulators a convincing and compelling story; and move clients from checking the risk box to administering meaningful control over their enterprise’s risks. That extension of trust — from PwC, fully through the client and into the client’s ecosystem — perfectly syncs with the firm’s New Equation and suggests sustained alignment throughout the various parts of PwC, including the new Trust and Consulting organizations, will be critical to making the New Equation the kind of generational change Ryan anticipates.

Lavine and Vikas Agarwal, PwC’s Risk Products and Financial Crimes Unit leader, detailed for TBR the overall Cyber, Risk & Regulatory practice, including several distinct service lines, from strategy, to data analytics, implementation, and managed services. The Strategy service line takes a compliance and licensing perspective into advising clients on opportunities, particularly around financial technology (fintech). Risk and Controls, staffed by former regulators and experienced risk professionals, provides advice, testing and validation for clients’ risk practices. Operations, the largest of the service lines, provides anti-money-laundering and Know Your Customer (KYC) solutions, primarily based on open-source technology, which, according to PwC, helps the firm more rapidly deliver results. According to Lavine, “We go faster because we’re not a platform.” And Technology and Analytics focuses on implementing risk solutions.

With these well-established service lines providing a foundation, PwC — as part of the firmwide recognition of PwC Products — examined the opportunities for developing a robust, scalable and flexible product to bring the firm’s expertise to a wider market. PwC considered feedback from clients across the full spectrum of the firm’s engagements around risk, examined where white space existed in the current market, and analyzed which current risk trends and needs would continue beyond the next few years, ensuring PwC could build — and properly price — a sustainable and profitable product.

From consulting engagements to subscriptions: A better way to assess risk

Risk Proof, PwC’s platform approach to risk assessment, helps clients perform three basic but essential actions: quantify and measure risk; tell a more robust story to boards, investors, employees and clients; and transition from taking an administrative and reactive risk posture to exercising meaningful risk controls. With features common now in many PwC Products, such as customizable dashboards and interactive reporting, the Risk Proof platform also builds on the firm’s trusted brand around data, financial reporting, compliance and, increasingly, technology.

From a functional perspective, Risk Proof appears to be straightforward; from a strategic perspective, Risk Proof addresses what Agarwal described as critical for enterprises in increasingly interconnected and data-intensive ecosystems, stating that “getting a good risk assessment is foundational to a good financial crimes practice, for example.” While Agarwal may have been reflecting views primarily held by financial institutions required to meet financial crimes regulations, the overall sentiment that good risk assessment is foundational to good business practices stretches across every enterprise and all industry segments. And for companies seeking help around risk, PwC’s Risk Proof solution, in Lavine’s words, allows them to “get it right, be convincing and do it fast.”

Risk Proof also helps PwC. Currently, the firm conducts 15 to 20 risk assessments per year, using a methodology that, while thorough and expansive, requires considerable manual processes and runs up against data and audit trail limitations. In place of these risk assessments, clients can now subscribe to Risk Proof and access all the assessment, reporting and decision-making tools at a fraction of the traditional risk assessment engagement costs. While that opens up a wider market for PwC — those enterprises less likely or unable to pay Big Four rates for risk services — Risk Proof also cannibalizes PwC’s risk revenues.

For Lavine, even with that cannibalization, the firm benefits in the long run in three ways. First, PwC is acting upon itself, rather than being disrupted, which gives the firm some control over the pace and damage of any cannibalization. Second, the Risk Proof dashboard helps PwC better understand its clients, allowing the firm to make better-informed recommendations for other consulting or technology-driven work, ultimately boosting the total relationship value. And, third — rather neatly echoing Ryan’s point about trust and the New Equation — reducing a client’s spend on risk while increasing the client’s capabilities to assess, report and manage risk further enhances the trusted relationship between the client and PwC and between the client and its customers.

Be bold and get moving: PwC on risk, digital transformation and embracing data

TBR perspective

With risk permeating every business conversation and PwC accelerating investments in digital-related offerings, including PwC Connected Solutions, which sits within its Risk and Regulatory Platform business, the firm has prepared for the next wave of opportunities. Trading on trust remains at the core, especially as the politics of data continue to disrupt PwC and its clients. Becoming customer zero keeps PwC consistent with peers, while pulling in risk differentiates, particularly against non-Big Four competitors. But the firm creates a good use case for embracing digital when it comes to managing risk. PwC’s broad spectrum of capabilities, including digital risk solutions, internal audit support, cyber and privacy advisory, due diligence, and third-party certification, add necessary dimension to its risk practice. They also help PwC protect its spot in the market as the shift to digital operations elevates the strategic importance of risk and compliance functions.

“By rethinking risk, you create confidence at scale”

Across client panels, which featured risk and IT professionals from various industries and countries, similar themes emerged, including the evolution of understanding the value of smart risk-taking (Being a smarter risk taker through digital transformation, a recent PwC paper). Additionally, panelists, attendees, and PwC risk and consulting specialists spoke of the profound shift from managing and containing risk to leveraging risk processes and profiles to build transparency and confidence in an organization and enhancing trust with customers and partners. The similarities among the professionals’ comments created layers of emphasis, particularly around trust and scale.

One client noted, “Companies that know and manage risk smartly, build trust with their customers [and] move faster themselves.” The client explained that risk management enables his company to build trust with customers faster and react to security issues more quickly than competitors. When a futurist spoke about emerging technologies and their impact on future organizations, he peppered his remarks with comments around the ethics of powerful technologies. The underlying questions: “Is the system trustworthy?” and “Can we trust the people [working those systems?]”

Scale risk management across an organization through developing talent

The PwC client who reintroduced PwC’s tagline, “by rethinking risk, you create confidence at scale” succinctly pulled together two recurring thoughts across this year’s Risk Summit: talent and digital transformation. Multiple clients and PwC professionals spoke of the importance of talent. One client stated, “The first priority is to develop talent,” even as they recognized that decreasing budgets for risk management and increasing competition for skilled IT talent resulted in pressure to expand an appreciation for risk more widely across an organization — or essentially to scale risk management practices through education and analytics-based decision making. Not surprisingly, all of these issues and opportunities fall well within the scope of PwC’s expertise.

For the second year in a row, TBR attended PwC’s annual Risk Summit, a client-centric event geared toward sharing lessons learned among client risk professionals and presenting PwC’s thinking on risk and successes to date to the analyst community. This year the summit featured multiple client panels and created a clear picture of issues most prominent in the Risk space.