KPMG’s fiscal year 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. Despite this, KPMG still succeeded in boosting its revenues even further, with net revenues rising to a total of CHF 455.3 million (+1.5%) and gross revenues coming in at CHF 606.4 Mio. (+0.6%). Audit generated net revenues of CHF 259.3 million (+1.9%), Tax & Legal CHF 132.8 million (+2.8%) and Advisory CHF 63.2 million (-2.7%). KPMG continued to make vital investments during this same period of time while also promoting innovations at different levels.
KPMG Switzerland’s performance in the past fiscal year ended 30 September 2019 was very good yet again and represents a new record high: Net revenues rose to CHF 455.3 million (+1.5%) and gross revenues amounted to CHF 606.4 million (+0.6%).
KPMG’s most important driver continues to be the disruption 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 in technology, personnel and infrastructures. It also opens up entirely new possibilities in both Audit and Advisory for performing comprehensive client data analyses, using client data, automating standard processes or developing innovative process optimization platforms. Historically low interest rates continue to have a strong impact; not only do they create fertile ground for many mergers and acquisitions, but they also go hand in hand with an increased risk of overleveraging. On the other hand, unresolved efforts to implement reforms in key policy areas such as the pension system, healthcare, energy, labor law, digitalization and market access are putting a damper on growth as they kindle uncertainty and a corresponding reluctance to make new investments.
KPMG drove key innovations during the year under review, the most impressive of which was the move to the (temporary) new headquarters on Räffelstrasse in Zurich, which is also home to the KPMG Insight Center (the firm’s new technology center), and to Pont Rouge, a district of Geneva. The new locations are in trendy neighborhoods and meet state-of-the-art requirements in terms of workplace design, ambience, digitalization, energy and building technology.
Our employees benefit from many of these important changes and investments, including more flexible working models, lifelong learning initiatives as well as efforts to promote our employees’ good health and their participation in physical activities. KPMG invested more than CHF 8 million in training and further education in 2019 and hired 586 new specialists. Investments on the client side focused on digitalization, where KPMG spent some 6% of its revenue on software and technology development. Equally important is the “KPMG Innova” initiative, which aims to bundle a wide range of in-house digital activities and strengthen the firm’s overall innovativeness. The KPMG-founded Board Leadership Center is an exclusive, high-caliber networking platform for board members.
In 2019, KPMG was once again a key contributor toward efforts to position Switzerland as an attractive, sustainable and trustworthy business location, particularly within the scope of its commitments at economiesuisse, digitalswitzerland, Women Corporate Directors and many other national, regional and specialized networks. Universities and universities of applied science have also profited from KPMG’s support. KPMG regularly supports a fact-based, public discussion on important forward-looking issues by conducting a variety of studies on key issues facing Swiss businesses.
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.
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.
Tax & Legal boosted its net revenues 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 posted net revenues of CHF 63.2 million (-2.7%). This slight 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.
Clients from the banking industry were mainly interested in advice on transforming 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.