‘Don’t get distracted by what you can’t control,’ says PwC’s Global Chairman Bob Moritz

He has seen the India growth story from close quarters. Bob Moritz, who has been visiting the country for more than three decades, remains upbeat about what lies ahead for the country. The 59-year-old Global Chairman of PwC, who joined the professional services network in 1985, likes what is being done on digitisation in India and believes that the country’s talent pool is impressive. That said, the current global uncertainty means a new role for the country in the world order. The PwC veteran says that India has to make a mark for itself in this new global framework. In a freewheeling chat with Business Today’s Krishna Gopalan, Moritz outlines his views on inflation, disruption, China, ESG and, of course, India. Edited excerpts:

Q: You have seen many a phase in your long career. From a global point of view, what is remarkably unique about the period that we are in today? 

A: I would say the biggest moment that we have is the existence of two phenomena. One, the C-suites of governments and corporates are facing an enormity of challenges to deal with. All this is coming with tremendous speed and impact. The question is, are we going to make the right decisions, be agile and move in the right direction, or will we miss the opportunity?  
On the other side, you see the world going through some seismic shifts with the demographics changing dramatically both in terms of size and the rise of those in the lower class and middle class. You see a polarisation of the world as the haves and the have-nots, from a political and economic perspective. You see the implications of technology and climate, plus a combination of this changing the labour force.
 
Q: How much has changed from the past and how much from your earlier experiences can perhaps be adapted today? 

A: Today, we talk about global capital markets and capitalism being dead. No, [they are] not dead. We need each other more than ever before. It has just got a different way of rewiring itself. 
I was fortunate enough to spend some time going through various crises. Those include 9/11 or the global financial crisis or the dotcom story. At times, we reflect too much on what has served us well in the past but that may not be fit for what lies ahead. Our definition of key metrics like GDP is a great example of this. But in today’s environment with zero interest rates or even negative interest rates, a fully employed labour force in some countries or a potential recession [in others], a lot of economic philosophy may be relevant but not absolute.   
There is also a need for leadership to be more engaging, and listening to ensure it can be much more responsive with speed and urgency. That’s going to be a challenge and I think, for the next decade, the question will be on how we move with speed and certainty to take advantage of the opportunities and at the same time, mitigate or minimise the downside risks.
 
 Q: We live in uncertainty coupled with disruption. If those can possibly be dealt with, how does one contend with inflation?

A: The reality is that certain parts of the world have had to deal with inflation for the past two decades and India is one of them. Some of the emerging economies in South America have also faced it.
But let’s go back to the fundamental principles. You can control what you can control, but not get disrupted and distracted by what you can’t control. Your job is to pull the levers of change. And then when things change around you or move fast, you need to adjust. And that’s the leadership challenge now. So, for corporates, the traditional budgeting for the next three to five years is less certain now. It’s more about the scenarios and figuring out what do I do in x-, y- and z scenarios, both financially and economically. Equally important is climate. If I can’t predict the weather, how am I going to get 1.5 degrees of mitigation?

Q: You first visited India in 1992. What do you like about what you see today? 

A: I think there are two things that we have to think about. As a country, you have much more interaction and involvement in the global economies than what it was 30 years ago. Then, it was domestic-focussed and today, the world is seeing India as a much bigger opportunity. The discussion today is about how this country can become a bigger asset to the rest of the world in areas such as supply chain. And clearly, infrastructure has changed tremendously and a lot more needs to be done. 

If you go to the financial side of the equation, the amount of FDI or trade has seen a huge leap. In 10-20 years from now, you have the potential to be right up there with the US and China. So, that is a huge flip. In order for it to secure that place in the world, you need to have trust in the society that you’re interacting with, plus trust in the government policies that have been put forth. It is the trust that you will do things the right way and trust in the numbers—both financial and non-financial—that people will rely on to make a decision on investing.  
I like the labour force that has been created and also the digital assets and the digitisation of the economy that is being leveraged. Those two things are super important to the future of this economy. Now, there are two things that are yet to come. One is the climate aspect and the other is, how will the infrastructure continue to be built out?

Q: Much has been said about China and about China-plus one. What is your view? 

A: First, in the case of China, you had a country that developed very, very fast, and had a huge impact on the world and took a role that some would argue is equal to a leading country like the US. And in doing so, it created alternatives. Other than the US from a dependency perspective, it did that by enhancing the growth in the local domestic economy that’s creating 20-30 million new jobs a year. 

Now the difference between China and India is that in the case of China, you had uniformity relevant to how government and business interacted. In India, you’ve got the federal-like level and the state-like level and not as much alignment as necessary to drive that speed, certainty and scalability. Having said that, where India now has a big advantage is that it is seen as that second source or that third source. If it delivers an affordable supply chain, manufacturing and goods and services and labour—if all this can be delivered in a climate-friendly way with the right digitisation and the right data connection points, people will see that as a benefit [to the world].

Q: There is a lot going on around ESG. But it is also a situation where one has to deal with the conflicting objective of meeting current energy requirements. It is a difficult situation to be in… 

A: Not necessarily. We have a slowing economy and institutions need to survive the next two to three years to thrive in the next 10-20 years. To make it in the immediate future, you actually have to deliver the bottom-line results and start to make progress on the non-financial results. It’s not that hard. What one needs to do on the ESG agenda is to start to make a commitment, bring about a behavioural change and then measure oneself to demonstrate progress.

If you want to move away from coal or oil or any other carbon-intensive energy or supply chain source, and if you want to say ‘stop that tomorrow’, I’ve got issues related to cost, security and availability. And that’s what you’re dealing with right now in Europe, as we think about the energy crisis.   
Now what I can do, though, is to say I will be greener. I will make progress over the next couple of years and do that in a fair and equitable way such that I don’t assert the negative attributes, while at the same time make the change the world needs. To me, these things go hand in hand. It’s an end statement and not one or the other. If any organisation is developing a strategy or re-articulating or refining it, you cannot do it without ESG.  

Coming to behavioural change, this is where governance bodies become really important. The fact is, if I do a good job on climate, I should have a better brand. If I do a better job on climate, more employees will work for me. And if I do a better job on climate, I should have more consumers. I will also be cost-beneficial and deliver a better RoI [return on investment]. All these things are very much linked together.

Q: It looks like a challenging year ahead globally. How can countries stand up to face what looks like a turbulent period? 

A: You are in a difficult economy, but you are going to see winners and losers. The winners will be the ones that move with speed. They’ll continuously refine their balance sheets and operating cost structure for better short-term returns and also make faster, better decisions. They will deploy financial and people capital in the right places and take risk as much as they will minimise it. And the organisations that do that well will emerge stronger. 

Q: Are we then going to see valuations correcting themselves? 

A: You’re already starting to see valuations come down on a sustained basis. But let’s recognise that the system we have today has put a premium on revenue growth amid a stagnant economy. Now you’re going to see revenue growth that should be equating the inflationary pressures. So, let’s make sure [that] we’re recognising the value for product innovation, bottom line contribution or gaining market share.

Q: In that case, the composition of M&A activity, too, will be different, right? 

A: Very much so. You’re going to see organisations now being more diligent and probably take a little more time in analysing why am I buying/potentially buying these assets. The other question will be: what comes with them, including the market, the margins, IP and the ESG agenda. 

Q: What is your economic outlook for the different parts of the world from where we are now? 

A: Europe today probably has the most concerns in terms of economic uncertainty that goes straight to the inflationary pressures and the energy price issues. I do think Europe is going to have a much more acute time of dealing with the severity of this. On the other side of the equation, India, and APAC more broadly, has a lot more upside potential, which organisations will want to take advantage of. And it’s not only the domestic organisations in these countries—it’s going to be the rest of the world saying that there is an opportunity to deploy capital and to actually get a return from it. 

The US is placed smack in the middle. You’ve got an economy that is still strong, as is the labour market; plus, you have a consumer that is still confident on spending power. The question is going to be, ‘How do we manage our way through some of the monetary policy changes that are in place; what will be the effect of that and the speed of that effect?’   

@krishnagopalan