00:00So this report that you put out, it's interesting because it predates, of course, the conflict,
00:05what we've seen unfold in the Middle East, in Iran.
00:08But I have to imagine that what we're seeing play out when it comes to the geopolitical landscape
00:14fits into the broad umbrella of uncertainty here.
00:18A broad umbrella is a great way to characterize it for sure.
00:22This has been really an unprecedented time of disruption, including with geopolitics.
00:29But it's really not just geopolitics. It is tariffs, trade policy. It's U.S. economics. It's technology investment.
00:37And in the events of last week, certainly in the Middle East, are taking some of the sentiment that we're
00:42seeing in the CEO outlook
00:43and just taking them a bit further, which, as you noted, what we've seen is a disconnect between our last
00:52survey,
00:52where we saw stronger confidence by CEOs in the U.S. economy and the global economy.
00:56And we're starting to see that sort of disconnect from how they feel about their own businesses
01:01and their ability to grow versus confidence and uncertainty, I would say, in that broader geopolitical environment.
01:11Well, it's interesting. You know, you think about tariffs, you think about trade policy.
01:15Certainly that has been the conversation over the past year, the past couple years.
01:19And, I mean, heading into the events of the past 10 days, how were CEOs feeling when it comes to
01:26the state of their supply chains
01:27and the state of how their products are moving around the globe?
01:31So CEOs have become incredibly resilient on that topic, specifically around trade policy.
01:37And, you know, in that domain, when everyone thinks that it is calming down, you have different events happening.
01:46And you have Greenland, right, you've got the Supreme Court ruling on tariffs.
01:50And then you've got the uncertainty as it relates to potential refunds around those tariffs.
01:55One of the huge benefits, though, and you see it come through the survey as well,
02:00is that at the moment, C-suites are using AI, including our tariff modeler, for example,
02:06and they've been using it over the last year to be able to quickly make decisions,
02:10be able to forecast over what are millions of parts, right, that are going into their supply chain,
02:16and then make some decisions.
02:17Right now, most changes to supply chains have been made.
02:22And so companies are certainly focused on cost takeout where they can and can continue to take out.
02:28And then, of course, they're looking at, CEOs are looking at how resilient the consumer will be
02:33in terms of being able to absorb price.
02:35With regards to AI and the pace of AI innovation, is that being viewed as opportunity or as a major
02:41risk?
02:43Opportunity, for sure.
02:44And that's certainly how I look at it, Romain.
02:47What you're seeing come through the results of the survey is this acknowledgement
02:52that spending on AI is most certainly not discretionary.
02:56We have moved well beyond the idea that we're going to pilot AI
02:59and see whether we're going to actually invest.
03:02And we've moved very, very quickly into very significant capital investments into our businesses.
03:09And so with that will come certainly workforce disruption.
03:13And you see that certainly being acknowledged over the last number of weeks
03:17in a number of different articles and viral posts that have been put out.
03:22But more so, how I look at it and certainly how I see it within our business is a huge
03:28opportunity
03:28in terms of being able to grow our business over the next number of years.
03:33How do you and other CEOs, though, measure, I guess, the potential return on that?
03:38I know a lot of people, particularly investors, they just want to look at the ROI.
03:41And I know that's kind of an imperfect barometer, certainly at this stage.
03:44But is there a sort of a more, I guess, familiar way to sort of think about what that return
03:49can be or what it should be?
03:52Yeah. So boardrooms, that's one of the number one questions, right?
03:56Because the capital spend is really significant around technologies.
04:00And the investment takes time to be able to understand what that ROI is.
04:06You see that come through the survey as well.
04:07You see this concept of CEOs saying, you know, this year it seems to be that AI is really hyped,
04:14right?
04:14It's very, very loud, you know, in terms of, you know, what's happening, how fast can you move,
04:19what's happening to your business.
04:21And the reality of that is these technologies take time to embed in your business.
04:26You need to redo process flows before you can put that technology in.
04:29You need to make sure your data is clean in order to put the technologies on.
04:33And then you can start to see the return on investment come through.
04:37And that does not happen overnight.
04:38I can tell you a measure that I'm using to see how we're doing with our investments in AI,
04:43which we've been doing for years now, is labor cost margin,
04:46which is that idea of really understanding per engagement, what is the cost of labor?
04:52What is the cost of technology?
04:55And then what is my overall cost to deliver my engagement?
04:58What I can tell you is the cost of labor as it comes down over time is offset by the
05:02cost of technology.
05:03And so where that actually lands over time will be really interesting.
05:08What is for sure is that as we embed technology and companies embed technology into their businesses and platforms,
05:16the volume of work that can go through those platforms will be increasing.
05:23And, of course, you know, this is about growth.
05:25Companies are not only looking at back office and how they do business,
05:28but it's what they actually deliver, the products and how they develop them.
05:31It's pretty exciting.
05:33I also want to bring cyber risk into this conversation because, I mean,
05:36you've seen this pop up over the past several years, whether it's KPMG surveys or similar ones,
05:42the idea that cybersecurity is top of mind for a lot of executives.
05:46And to fold in our conversation around AI,
05:48how has that sort of changed or sort of made this question more urgent for CEOs?
05:54Cyber risk is at the top of every C-suite agenda.
05:59And it's brought up almost every single time I'm talking to a CEO.
06:03And the reason for that is with the technology and the advancements that are rapidly increasing,
06:09including the agentic capabilities, those are being used as threats as well.
06:15So where cyber risk was certainly high on the agenda before, it's even higher.
06:20And companies need to be able to keep pace with the accelerating technologies that are being used against them.
06:27And so, you know, that's obviously opportunities for firms like KPMG.
06:32But it's a place where you're starting to see fully automated threats against businesses start to be publicly discussed.
06:42And then you take that, and we talked about this last time I was with you,
06:46which is this concept of quantum computing.
06:50And over the last number of months, that theme is becoming louder and louder.
06:56Because as you think about that, we don't know when that compute power will be upon us.
07:01But the timeline continues to shorten.
07:03And that compute power provides the opportunity to break all encryption that we know of today.
07:07And so companies need to be thinking about it.
07:09They are, and they're leaning into making revisions to their businesses to be able to be prepared.
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