KPMG Deputy Global Chairman positive on Sri Lanka’s outlook

KPMG Deputy Global Chairman John Scott comes with extensive experience advising multinational clients on how they can drive growth, reduce risk, and anticipate the opportunities presented by a rapidly changing business environment.

He recently sat down with the Daily FT and stressed the need for an enhanced public trust agenda nurtured by the Sri Lankan Government. The secret according to Scott is to adapt and develop according to the environment and global context. His outlook for Sri Lanka is positive as the country forges ahead with political stability, transparency, implementation of corporate governance, developed infrastructure and eradication of corruption.

Scott also spoke on KPMG’s interest to foray into digitisation, as the firm invests heavily in IT infrastructure while building impactful partnerships; specifically in the areas of data analytics and cognitive technology.

Following are excerpts of the interview with Scott on his views about Sri Lanka’s value proposition, potential and the modern day auditor:

KPMG Deputy Global Chairman John Scott  – Pic by Lasantha Kumara

 

By Shehana Dain

Q: What is the purpose of your visit to Sri Lanka?

A: The KPMG Middle Eastern and South Asian Board Meeting will be held in Colombo this week and we are looking at our strategy which we should implement in this area.

Q: Any interesting outcome at the Regional Board Meeting this year?

A: We have these meetings once a quarter under the Chairman of the Board, Abdullah Al Fozan, who is also the Chairman of the Saudi firm. The most interesting thing is that we clearly see an enormous opportunity for us. We think that the environment is changing rapidly, partly because of technology and also due to the geo-politic situation. Therefore, there is no question our clients are transforming their businesses and it is not just about us providing one single service for them; it’s about us accompanying them in the transformation process.

Q: In which areas are KPMG planning on investing this year?

A: We are making very significant investments in technology, especially in data analytics and cognitive technology, which is the latest area we are working on. Recently we signed an agreement with IBM’s Watson which is a very significant alliance for us, because they are very much into cognitive analytics. We also have alliances with Microsoft and McLaren. The key concept here is that KPMG is determined to be at the forefront of our profession, and to do that, we need to have the best technology and the right alliances. 

Q: How important is Sri Lanka to KPMG?

A: Sri Lanka is very important for us as KPMG is one of the leading firms in Sri Lanka. We see that this country has moved forward quite significantly from difficult situations in the past. You have companies here that are absolutely striving to be the leaders in their field, and it is great for us to work with them. What people do not realise is that the Sri Lankan KPMG firm plays a key role within the Middle East and South Asian region and the rest of the network, and have been very successful at it.

Q: What is your outlook on Sri Lanka’s prospects, professionalism and governance?

A: That is undoubtedly something that we are obviously very interested in; the whole public trust agenda is very important. A number of years ago, it was good enough just to comply with the law. This was the case globally. Now you have to comply with the law and comply with what society expects from you. Corporate governance is not just about creating trust with the public at large or your stakeholders. It is about far better and stronger business management and you taking better decisions. While it is important to achieve corporate governance and public trust, it is actually important in a business perspective as well. Those companies who have this on their agenda move ahead faster. Therefore it is something that Sri Lankan companies should seriously consider adopting, to be able to lead in their respective fields.

Q: What is your view on Sri Lanka’s tax system? What sort of reforms do you think will be best fitting at the given time?

A: I am not an expert on the Sri Lankan tax system. However, I think that it is important that all tax systems play their role in making sure that public funds are balanced, and at the same time are fair to the public and business.

Q: How has the world of audit evolved after you took the reigns as the Deputy Chairman in 2013?

A: The key thing is mandatory firm audit rotation has been approved by the European Union and within KPMG we call it the “game changer”. While the reform originated in Europe it is having an impact on business globally, and driving far more frequent audit tenders and changes. That has really changed the way clients are approaching audit and the relationship. We need to be, whatever our clients want us to be in certain situations, this can be as auditors, advisers, etc. But, what is really important is that people understand that ‘firm audit rotation’ is not just the simple case of moving from one firm to another for a few years and then changing again. 

Q: How will you describe Sri Lanka’s investment climate at the moment? Is there hope for increased FDIs at the current pace?

A: Sri Lanka has a number of advantages; it is strategically and geographically well placed. It has a very well qualified and young population. One of the important things is that Sri Lanka should not try to compete on certain things with other larger economies that do not have the same set of skills that Sri Lanka has. It’s very important that the business community together with the Government agrees on what the strategy has to be for any country, not just Sri Lanka.

I do think that it is important to have bilateral agreements. For business, the important thing is confidence. It is very important for a business to operate in an environment where they are confident that they can plan and where there won’t be constant changes in legislation to disrupt the business decisions that have been taken. If that helps Sri Lanka in terms of FDIs or companies making investments abroad, then it is a good opportunity.

Q: Looking at the Asian Region, the economies of India and China are booming. China is slowing down a little. In this light, what plans does KPMG have for Asia in general and more specifically Sri Lanka?  

A: We see enormous opportunity in Asia and in turn in India, China, and also in Sri Lanka. Obviously these are vastly different sizes of economies, and also different skill sets as well. As such, we are investing and we believe that while we are a global business and firm, it’s fundamental that we tailor our strategy to the opportunities in each country. These opportunities may vary from China to India and both are very different from the opportunities that we see in Sri Lanka. 

For us, the key thing is about helping our clients by being good, solid, quality auditors, and give good advice. We are actually a people’s business and we are all about making people get the chance they deserve. The great thing about KPMG is you can join the firm and be in the firm for 30 or 40 years, develop yourself and grow or you can stay for a shorter period and join again when you are more experienced. This open culture is our biggest investment and we need to make sure that we maintain this. The local management team has a specific tailored strategy for the Sri Lankan market place, but that is all in line with KPMG’s general global vision for the future.

Q: If you look at the current situation in Sri Lanka, how does the country compare globally?

A: We believe is that there is an enormous opportunity in Sri Lanka, where there is plenty of potential and well educated people, and an economy that has tremendous potential for growth. It is a country many of our global clients have a keen interest in. I also must highlight that geographically it is very well placed.

Q: In this current context, accountability, transparency and then corporate governance are essential. How can these aspects be improved globally and more specifically in Sri Lanka?

A: You can approach these things like it is a questionnaire and you are ticking the box. Then it would end up as if you have complied, because you have published a transparent report or you have complied because you have done other things. That for me is not corporate governance and transparency; it is actually about doing the right thing for your business within society, which means you make sure that you make good quality decisions coming from strong corporate governance.

Being able to work better within society comes from transparency; there is no point in trying to avoid things articles published. It’s far better to be open about matters to make sure that everything is properly understood.

The important thing is to make sure that there is a proper debate between Government authorities and the private and public sectors, as to what the appropriate solutions are. There never is a 100% perfect solution, but actually dialogue is the most important part of the whole scene. Nothing is ever written on stone; therefore everything should be developed on a constant basis.

Q: Being a veteran in your industry, how do you think the auditor’s role has changed within the years?

A: In the current environment and with the relevance of corporate governance, there are certain situations where the auditor has become the absolutely right person to do things and vice versa. One of the issues that has improved in the past is that there was no dialogue between the audit firm and audit committee, to understand what the right solution to matters are. However, it is happening now. Within the audit profession we work hard to make sure that we not only comply with the law, but we also do the right thing as a social responsibility.