Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Risk & Regulation in the Fourth Industrial Revolution

Posted July 05, 2016

The “Fourth Industrial Revolution” is here, proclaims KPMG’s U.S. CEO Outlook 2016, and it’s upending business models, blurring lines between industries and companies, and demanding an entirely new way of thinking about business.

KPMG’s survey of 400 U.S. chief executives sheds light on how companies are transforming in times of extraordinary change. CEOs say that rapidly evolving technology, and the speed of transformation it unleashes, are making the next three years more critical for their industry than the previous 50.

While the vast majority of CEOs are confident about their growth prospects, they recognize that they are operating in a new world – and they’ll have to operate differently to succeed. To manage disruption and seize opportunity over the next three years, CEOs will:

  • intensify customer focus
  • develop new products
  • invest in disruptive technologies
  • engage in external partnerships
  • transform into significantly different entities

“The corporate playbook is being rewritten and replaced by one that takes business agility to a level we have never seen before,” says Lynne Doughtie, Chairman and CEO, KPMG LLP.

Looking ahead, CEOs named cybersecurity as their top risk, followed closely by regulatory risk; evidence that a more connected, always-on operating model is shifting the risk landscape.

In the age of the Internet of Things, machine learning, cognitive computing, and artificial intelligence, security risks are increased exponentially. Accordingly, companies need to mainstream their cyber capabilities and each major decision needs to be looked at through the cybersecurity lens, the report concludes. 

As for regulations, an overwhelming majority of CEOs believe they will inhibit growth going forward, especially proposed tax regulations which could have a profound impact on how companies choose to structure themselves going forward.

“Many companies are restructuring their global operations and looking at their supply chains, with a view to minimizing any potential brand or reputational risk,” says Jeff LeSage, Vice Chair of Tax at KPMG LLP.  “They don’t want to deal with the potential fallout of negative publicity should a tax arrangement attract attention from media or shareholders.”

But he also notes that complying with new regulations can also provide an opportunity – particularly when they require companies to gather information that can be used to improve the business. “The tax compliance process generates a huge amount of data,” says LeSage. “Putting systems in place that can unlock that data and put it to work for the entire organization, not only the tax department, can give companies a competitive advantage.