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Clarity on KPMG Switzer­land

Fostering Innovation. Driving Transformation. Annual Report 2019

Note from the CEO

Stefan Pfister
CEO KPMG Switzerland

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Adaptability as the key to success

At first glance, the big factors driving the Swiss economy may appear to have changed little over the past 12 months, with digital transformation in the business world, historically low interest rates as well as geopolitical uncertainties and unresolved efforts to implement reforms at the state level still topping the list. That’s a bit misleading, though: The transformation currently taking place in the realms of business, politics and our society is so fundamental that we refer to it as disruption for good reason.

This transformation is affecting our clients just as much as it impacts us, which gives us all the more reason to look back with pride on the past financial year: KPMG boosted its net revenues to a new all-time high of CHF 455.3 million (+1.5%). The biggest contributions toward this successful result come from Audit and Tax & Legal, which generated revenues of CHF 259.3 million (+1.9%) and CHF 132.8 million (+2.8%), respectively. Advisory was realigned and brought in CHF 63.2 million (-2.7%). Consulting’s clear focus on digital transformation-related topics means that KPMG is now also extremely well-prepared for the future in this area too.

These generally very encouraging results were partly attributable to company-wide technological innovations. Our innovative strength benefits our clients in many ways: We invested around 6% of our revenues in digitalization last year with the goal of improving the meaningfulness of data analyses even further and making solution proposals even more effective. At the Insights Center, KPMG Switzerland’s Data & Analytics flagship, our clients experience a new dimension of data visualization and analysis that lets them put their own company data to systematic use at a previously unheard-of level of quality.

As a forward-looking company, we offer our people attractive conditions including more flexible working models, lifelong learning initiatives and efforts to promote our employees’ good health and fitness. KPMG invested more than CHF 8 million in training and further education in 2019 and hired around 600 new specialists. Another invigorating development was our move to the firm’s (temporary) new headquarters in Zurich-Binz and Geneva’s new Pont Rouge district, two trendy neighborhoods.

We’re not forgetting the public, either: KPMG is aware of its responsibility to help ensure smoothly functioning, stable, transparent financial markets and a vibrant society. Accordingly, we play an important role every year in positioning Switzerland as an attractive and trustworthy business location.

I would like to take this opportunity to express my gratitude to all our clients, staff and business partners for the success of the past fiscal year.

Clarity on KPMG Switzerland

KPMG continues to grow

Annual result 2018/19

KPMG Switzerland’s performance in the past fiscal year ended 30 September 2019 was very good yet again and represents a new record high. It was shaped greatly by the digital transformation of Swiss companies, persistently low interest rates as well as enormous uncertainties in both the regulatory sphere and on the topic of trade policy.

606.4
Total gross revenue
0.6
Change
455.3
Total net revenue
1.5
Change
Figures in CHF million

Revenue growth
1.5
1.9
2.8
-2.7
Total net revenue 2019 in CHF million 2018 in CHF million Change Share of revenue
Audit 259.3 254.4 1.9% 56.9%
Tax & Legal 132.8 129.2 2.8% 29.2%
Advisory 63.2 64.9 -2.7% 13.9%
Total net revenue 455.3 448.5 1.5% 100%
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Business development

KPMG’s most important driver continues to be disruption of the economy, which, at its heart, is all about managing the opportunities and risks of digitalization. It impacts each and every business area and calls for enormous investments, but it also opens up entirely new possibilities in both Audit and Advisory.

Audit
Tax & Legal
Advisory
Financial Services
Regional markets
Audit
Tax & Legal
Advisory
Financial Services
Regional markets
Audit
259.3
Total net revenue
in CHF million
1.9

Comprehensive data analytics and IPOs

Audit improved its results even further, with net revenues now up to CHF 259.3 million (+1.9%). Increasingly extensive technological innovations, both on the clients’ side and on KPMG’s end, were instrumental in driving this positive development: Not only do they enable financial and leadership processes to be completely redesigned on the clients’ end, but also let KPMG standardize, automate and centralize key audit tasks. This enhances both the reliability of our Audit results as well as the relevance of our reporting even further. Comprehensive data analytics let us offer our clients complementary, innovative assurance services.

IPOs were also a positive driver during the past fiscal year, with KPMG guiding its clients throughout the entire IPO process and assisting them with specific aspects of it, such as the provision of relevant financial information and efforts to restructure their corporate governance systems. One encouraging observation is the fact that the Swiss capital market remains attractive for companies of various sizes, especially for companies reporting in accordance with the Swiss GAAP FER accounting standards.

Sustained appreciation pressure on the Swiss franc and uncertainties as to whether Switzerland will continue to have free access to the European single market (keyword: framework agreement) are prompting some businesses to put larger investment projects on hold. Companies are giving extremely careful consideration to the question of which investments should be made in Switzerland and which should not (or no longer) be made here. As a business location, Switzerland is well advised to adopt a targeted approach toward cultivating its location-specific advantages.

Tax & Legal
132.8
Total net revenue
in CHF million
2.8

Strong focus on employee mobility

Tax & Legal boosted net revenue to CHF 132.8 million (+2.8%). The function’s good results were partly attributable to sustained high demand for Global Mobility services. The firm uses mature technology solutions that enable clients to tackle complex tax challenges involving hundreds or thousands of expats in a legally compliant manner and leverage the benefits of global mobility. The tax advisory business also experienced strong demand for services related to large mergers and acquisitions as well as complex restructuring projects.

In Legal, services connected with employee mobility and within the framework of Swiss labor market regulation were in particularly high demand. Overall, however, various structural changes were needed in Legal, which negatively impacted the result of the function.

Advisory
63.2
Total net revenue
in CHF million
2.7

Boosting numerous M&As and new digital strategies

Deal Advisory & Management Consulting posted net revenue of CHF 63.2 million (-2.7%). This drop in revenue was largely attributable to efforts over the past two years to realign and refocus the function within the consulting industry; this also involved a reduction in capacity. Demand for advisory services to master digital transformation, plan and implement ERP systems, optimize corporate finance functions, establish cyber security and optimize the entire value chain remained high among industry clients. Clients from the life sciences sector, in particular, required an enormous amount of support in their battle against white-collar crime and efforts to ensure all-round compliance with legal requirements in every country.

Deal Advisory, which supports clients through every phase of business (or business unit) acquisitions and sales as well as in the planning and creation of joint ventures, strategic partnerships and restructuring, has continued to develop very positively.

Financial Services
35
Share of revenue

Ongoing transformation process

Numerous clients from the financial sector were focusing on the legally compliant implementation of new regulations, such as MiFID II, and integration of FINMA’s much more stringent corporate governance requirements.

Banks required special advisory services to answer questions on how to transform their risk management systems, which involves modernizing compliance processes and other processes, including new visualization methods, as well as support with M&As and on digitally transforming their companies’ finance functions. Many financial service providers haven’t finished coming to terms with their past, meaning that they need ongoing assistance in their efforts to establish mechanisms for combating money laundering. Preparations to correctly implement upcoming legislative changes, such as FinSA and FinIA, have attracted a great deal of attention – and triggered just as much demand.

Insurance clients, in particular, asked for help on their compliant introduction of the new IFRS 9 and IFRS 17 accounting standards and with cyber security threat mitigation. The trend toward digital business models continues unabated: That includes the automation of processes such as claims handling, the development of personalized products, as well as the use of AI-based algorithms to enable better predictions.

Regional markets
40
Share of revenue

Positive development in the regions

KPMG reported positive business performance in the individual market regions as well. The SME market segment is one of KPMG’s key mainstays that generates around 40% of the firm’s net revenues. Business development in Audit as well as Tax & Legal and Advisory was extremely stable and sustainable. Over the course of the year, KPMG also succeeded in acquiring several high-profile new clients in the regional market.

KPMG invested heavily in this market again in 2019, not only in targeted measures to promote its young talent at the individual sites, but also in efficient, automated, digitalized processes and the development of multidisciplinary services from one source aimed at benefiting regional clients.

The main drivers and changes affecting regional clients are the challenges presented by current uncertainties on the market, including those stemming from ongoing efforts to negotiate bilateral relationships between Switzerland and both the EU and the UK, as well as numerous geopolitical uncertainties in key growth markets. Additional challenges include the implementation of the corporate tax reform in the cantons, digital transformation, the huge regulatory burden in areas like data protection and the struggle to recruit qualified employees.

KPMG is actively involved in the region in a number of different ways: through cooperative efforts with key networks and local companies on specific topics like cyber security and taxes as well as through its participation in trade associations and chambers of commerce.

  • 08
    Develop your network by attending symposiums, talks and business events, asking questions and making a name for yourself through publications.
    Daniel Zuberbühler
    Former Vice President Board of FINMA, KPMG Alumni
  • 07
    Connections need to be cultivated – that’s how doors open to exciting new opportunities.
    André Zemp
    Hospital Director, Waid and Triemli municipal hospitals, KPMG Alumni
  • 06
    It’s important to have a small, trusted circle of people you can exchange openly with.
    Giorgio Behr
    Prof. em. Dr. & Honorary Professor at the University of St. Gallen, attorney-at-law & Swiss Certified Auditor, Chairman of the BoD & owner of the BBC Group, KPMG Alumni
  • 05

    How do you engage and exchange with various stakeholders, e.g. alumni?

    Our culture of open and honest communication extends to our people, our clients and our wider communities Our experience shows that there are many advantages – on both sides – to staying in touch when people retire or leave KPMG. Events and closed-user groups on social media are excellent platforms for exchange. Enabling informal discussion helps us keep our finger on the pulse. Many business ideas or opportunities have emerged from this setting.

  • 04

    Why is public discourse important for KPMG?

    At KPMG, we pride ourselves on actively contributing to the public discourse in our fields of expertise. With representatives in various professional bodies, universities and think tanks, we follow developments as they happen – and in the process, we help shape a better future economy. By developing thought leadership, engaging with the media and offering our position on economic topics, we develop our relationship with a broader public. In doing so we share our knowledge and underline our commitment to integrity and qualified expertise for generations to come.

  • 03

    How do you cultivate market proximity and the right expertise?

    Listening and talking to our clients is key in order to understand their business – and to enable our own business. Collectively, we know Switzerland’s sectors, regions and political landscape inside out. We anticipate issues and concerns before they even arise. And we adopt a forward-looking approach to help our clients navigate challenges and transform successfully. Talking – and listening – to the market is a key way that we’re able to do all this. The “market”, of course, is largely about the people who work and make decisions for their organizations every day. Business leaders are on the front line of the economy. We value every exchange with clients because these conversations inform our deep understanding of the macroeconomic environment.

  • 02

    How important is it to maintain good connections?

    Ethics and integrity and a strong sense for independence and compliance underpin everything we do and guide us in all our business dealings. At the same time, strong links to other stakeholders in our ecosystem are critical to our work. We believe that good relationships offer a solid basis for trust and confidence to develop. And these are assets that benefit everyone.

  • 01
    By connecting with our clients, people and the general public, we develop a deeper understanding of the markets and can support better outcomes.
    Hélène Béguin
    Head of the Western Switzerland Market Region, Member of the Board
  • Cultivating connections

    Hélène Béguin talks about the role of dialog and networking in the business world.

    Building trust

    Practice meets theory: Philipp Hallauer and Prof. Dr. Peter Leibfried discuss expectations and reality in audit.

  • 01
    Balance sheet readers put their faith in the fact that we reached our opinion neutrally and objectively.
    Philipp Hallauer
    Head of National Quality & Risk Management, KPMG Switzerland
  • 02
    The worse the numbers, the more flowery the language.
    Prof. Dr. Peter Leibfried
    Institute for Accounting, Controlling and Auditing, University of St. Gallen
  • 03

    Has the audit business grown riskier?

    Philipp Hallauer: The audit business has always been inherently risky. Some of the key factors include the role of governing bodies, joint and several liability plus the fact that we aren’t present at our clients’ place of business all year round. Added to those are new factors like the momentum of transformation, swift advances in technology and a rise in cross-border regulations. At the same time, the media and the general public are taking a growing interest in our work as well.

  • 04

    How do you deal with the expectation gap, this mismatch between expectation and reality in your profession?

    Philipp Hallauer: I’ve been dealing with the expectation gap for around 30 years. It’s directly linked to trust – a prerequisite for the proper functioning of the capital market and our economy. Every player in the business cycle needs to be able to trust our work. Stakeholders have every right to expect a certain standard and it’s our job to deliver. If there’s a gap, auditors are responsible for closing close it. Our role is sometimes misperceived by the wider public; for instance, we may mistakenly be viewed as an all-seeing compliance officer. Or as a guarantee for a company’s long-term survival. We can’t satisfy expectations like this within the scope of our legal mandate. Some clarification work needs to be done – by the industry, authorities, politicians and media. That would improve people’s understanding of our role.

  • 05

    The trend is moving toward wanting “greater certainty” and “more control” – aligning these expectations with the reality of an audit is quite difficult, isn’t it?

    Philipp Hallauer: You’re right about that. In today’s world, it’s all about preventing accidents and surprises wherever possible. And if something does happen, there always has to be somebody to blame. But this attitude underscores just how important and relevant our profession is. We can use new audit methods, new approaches and spend more time on the audit to close many of those gaps between expectations and reality. Society’s general attitude toward absolute certainty and control, though, needs to be addressed by other bodies because in the business world, mistakes will always happen and companies will actually fail from time to time.

  • 06

    Has there been a shift in employees’ risk behavior over time?

    Philipp Hallauer: That’s actually a very relevant point. The social bond between employees and their employers isn’t what it used to be 50 years ago. Global mobility is one contributing factor. That has an impact on the risk-related conduct – and misconduct – of employees and members of upper management, in particular. Since their sense of loyalty isn’t as strong, they’re of the opinion that they can simply continue their journey elsewhere if anything goes wrong. This culture is much more pronounced in the English-speaking world, particularly since failure doesn’t have as much of a negative connotation there. At the same time, and as a direct result, the regulatory burden in the US is much heavier than it is in Europe. But here, too, we’re well on our way to catching up...

  • 07

    Will today’s audit methods be replaced by a real-time audit process?

    Philipp Hallauer: That’s actually being discussed in the industry and it would be an extremely interesting approach. Processing all the complexities of a global corporation in real time is no easy task, though. Let’s just wait and see where innovation takes us on that topic.

  • 08

    What role does independence play in audit?

    Philipp Hallauer: Independence is a key prerequisite for external audits. If independence cannot be guaranteed, the auditor loses its credibility and the trust of every stakeholder, regardless of how well the audit was carried out. Balance sheet readers put their faith in the fact that we reached our opinion neutrally and objectively. That’s precisely why an extensive set of rules exists, both at the national and international level, and it’s our job to use the tools at our disposal – including a multitude of processes, controls, training and communication – to ensure a company’s compliance with those rules. The fact that not all stakeholders share the same understanding of independence doesn’t exactly make matters any easier...

  • 09

    Can an auditor’s independence be guaranteed 100%?

    Philipp Hallauer: You can actually only ever be absolutely independent if you’re willing to give up or lose an engagement under certain circumstances. Of course, that’s just the worst-case scenario, but ultimately it’s about an auditor having a mindset or professional sense of ethics that gives them the strength to firmly stand up to a large, im-portant client with resolve and explain why a certain situation has become untenable. Not only do they have to meet the requirement of “independence in fact” but also that of “independence in appearance” because if anybody even questions whether an auditor is actually independent or not, that auditor’s credibility – and the trust placed in them – is on the line.

  • 10

    Do you think splitting the Big Four into separate audit and advisory firms makes sense?

    Philipp Hallauer: So far, the audit-only concept hasn’t been implemented anywhere but it’s being discussed again in the UK. I’m extremely skeptical about the whole idea and am not alone in the industry. Even the EU, which seems to impose new regulations left and right otherwise, made a conscious decision to reject the idea of separating audit and non-audit services following the 2008 financial crisis. Our services are based on a multidisciplinary model. Our clients expect teams with a broad range of skills and expertise.

  • 11

    Why are high-quality specialists from different fields important in audit?

    Philipp Hallauer: The high demands placed on audits carried out in accordance with today’s standards don’t only call for well-trained auditors but also IT specialists, forensic experts, tax experts, pension fund specialists, legal professionals, etc. In a scenario with pure audit firms, it’s unrealistic to believe that this kind of company would be able to recruit and retain a large enough number of such high-quality specialists.

    Today’s multidisciplinary business model, which permits the use of in-house specialists for audit clients and enables firms to offer advisory clients the entire range of services, is more sustainable. It not only lets audit teams benefit from the extensive experience of highly motivated specialists, but also calls for a culture that focuses on the quality of audit services, a culture where an awareness of the public’s interest in our work is ingrained into every single employee.

  • 12

    Should Switzerland start taking more of a cue from developments in the EU?

    Philipp Hallauer: I’m against regulatory expansion. When it comes to audit and accounting, Switzerland has always adopted international norms, which are currently quite extensive, or aligned its own standards with those norms. To me, it seems much more important for an institutionalized exchange to take place between our industry, the relevant authorities and politicians aimed at further strengthening not only their understanding of audits but also the quality of those audits in the process.

  • 13

    What is KPMG doing to strengthen the quality of audit in Switzerland?

    Philipp Hallauer: Since audits are a global product, KPMG has launched several different initiatives at the global level. We’re heavily involved in these initiatives, with one central measure being the introduction of a comprehensive quality management system. This is based on the new International Standard on Quality Management 1, or ISQM 1. Another is the implementation of new audit software that uses a defined workflow to ensure that auditors address every relevant aspect of an audit. Big data and digitalization now also play a role in our work. We’re seeing data analytics increasingly penetrate our audit work, thereby enabling us to automate routine tasks and spend more time focusing on our discretionary scope.

  • 14

    Major investments are squeezing margins – what does that mean in terms of competition?

    Philipp Hallauer: These investments should ultimately help us perform our work not only better, but also in a more targeted, more efficient way. But of course they also come at a price. At any rate, the continued professionalization of clients’ audit committees has also brought with it a realization that audits generate enormous added value and that investments in auditing can enhance this even further.

  • 15

    How is digitalization affecting the chair of Audit & Accounting?

    Prof. Peter Leibfried: Digitalization is fundamentally changing academic work! In the past, students might have read around 30 annual reports for a master’s thesis and evaluated these reports based on some sort of criteria. For a Ph.D. thesis, they might have scoured 100 or 300 annual reports. Nowadays, students program an algorithm capable of analyzing the entire text of 500 annual reports in three seconds. They also conduct linguistic evaluations that lead to conclusions like “the worse the numbers, the more flowery the language”. It’s something we’ve always suspected, but now we have scientific proof. That’s the new world of analytical science for auditing and accounting.

110%. That’s commitment in numbers.

Our employees are key to our success. Their commitment, professional expertise, innovative thinking and agility lay the foundation for sustainable client relationships.

2092
Employees
17%
Part-time employees
42 / 58
Women / Men
59
Nationalities at KPMG Switzerland
185096
Hours of professional training
757
Pro bono hours, equivalent to CHF 151,725
  • 03

    Tobias Valk

    Member of the Board of Directors

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  • 02

    Hélène Béguin

    Member of the Board of Directors

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  • 01

    Roger Neininger

    Chairperson of the Board of Directors

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  • Board of Directors

    Executive Committee

  • 01

    Stefan Pfister

    CEO

    Contact me
  • 02

    Philipp Hallauer

    Head of National Quality & Risk Management, KPMG Switzerland

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  • 03

    Stefan Kuhn

    Head of Tax & Legal

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  • 04

    Lukas Marty

    Head of Audit

    Contact me
  • 05

    Philipp Rickert

    Head of Financial Services

    Contact me

Regional contacts

Lausanne
Portrait of David Oberson
David Oberson
Partner, Accounting and Payroll Services, Suisse romande
Berne
Portrait of Hans Jürg Steiner
Hans Jürg Steiner
Partner, Head of the Market Region Berne-Mittelland
Geneva
Portrait of Yvan Mermod
Yvan Mermod
Partner, Office Head Geneva
Neuchâtel
Portrait of Fabien Perrinjaquet
Fabien Perrinjaquet
Director, Co-Head of the Market Region Neuchâtel, Jura and Bernese Jura
Portrait of Valérie Reymond Benetazzo
Valérie Reymond Benetazzo
Director, Co-Head of the Market Region Neuchâtel, Jura and Bernese Jura
Basel
Portrait of Claudio Boller
Claudio Boller
Partner, Head of the Market Region Basel
Zurich
Portrait of Roman Wenk
Roman Wenk
Partner, Head of the Zurich Market Region
St. Gallen
Portrait of Peter Michael
Peter Michael
Partner, Head of the Market Region Eastern Switzerland
Schaan
Portrait of Hans Vils
Hans Vils
Partner, Office Head Schaan, KPMG Switzerland / Liechtenstein
Lugano
Portrait of Lorenzo Job
Lorenzo Job
Partner, Head of the Canton of Ticino Market Region
Zug
Portrait of Thomas Affolter
Thomas Affolter
Partner, Head of the Central Switzerland Market Region
Lucerne
Portrait of Thomas Affolter
Thomas Affolter
Partner, Head of the Market Region Central Switzerland
Lausanne
Berne
Geneva
Neuchâtel
Basel
Zurich
St. Gallen
Schaan
Lugano
Zug
Lucerne
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