Find episode transcript below.
ANNOUNCER:
00:00:00:23 Welcome to PwC Pulse, a podcast to provide insights to help you solve today's business challenges.
KATHRYN KAMINSKY:
00:00:09:23 Hi, I'm Kathryn Kaminsky, Chief Commercial Officer for PwC. I'm excited to bring you today's episode of PwC Pulse podcast. With a new administration led by president elect Donald Trump and a Republican Congress, business leaders are focused on what's coming next.
00:00:27:08 Today, we'll listen on a recent conversation between PwC leaders unpacking potential changes. We'll cover everything from policy actions and supply chain impacts to how business can manage AI responsibly and adapt to rising energy demands.
00:00:42:18 Business leaders have a lot to think about in the coming months. It's a crucial time to plan, be strategic, and prioritize effectively. Let's listen in. I'm so excited to have my partners Rohit and Roz with me. You couldn't ask for a better experience. So, Rohit, I'm going to go fast. We have a lot to cover. With the TCJA provisions expiring soon,
00:01:05:07 what do you think the chances are that the new administration will pass them in the first 100 days? I'm going to double down with another question, though. As we talk about budget reconciliations, can you talk a little bit about how it works?
ROHIT KUMAR:
00:01:18:15 So reconciliation is this process that allows a majority when they have control of the House Senate and White House to pass bills through both chambers by simple majority vote. And that's really important in the Senate, where typically you need 60 votes to do anything of significance, frankly, other than nominations and budget reconciliation and a handful of other things.
00:01:36:07 Sixty is the norm in the Senate. So with a 53-47 majority using this tool, Republicans can pass a tax bill without any input from House and Senate Democrats if they can get together in a unanimous way with a very narrow majority in the House, there's almost no margin for error. And so the question of how quickly and when really comes down to a first order question of are they going to do one reconciliation bill or two?
00:02:01:06 There's been a robust conversation recently about doing two bills, just like Democrats did when they took the House Senate and white House after the 2020 elections. First, the American Rescue Plan, then the Inflation Reduction Act. Republicans will have the same opportunity. And they're seriously looking at doing an immigration-enforcement oriented bill first. And if they do two bills and that immigration bill comes first, I think that does get done within the first 100 days.
00:02:24:17 That's sort of the theory of the case. Quick wins early points on the board. The challenge, of course, with that is you always get the first bill, like you always get the first bill in a new administration, especially with a new majority. Everything after that starts to get a little bit riskier. There's obviously some politics associated with foreign expenses versus domestic expenses.
00:02:42:12 But I think at a minimum, we get a better treatment of domestic expenses. 12/31/25 is the deadline. That's when these tax cuts expire. And typically, at least in my 15, 20 years of doing this, Congress waits until the very, very end to make the tough decisions that they have to make, but they won't make them until they absolutely have to. And in this case, have to is really end of calendar year.
KATHRYN KAMINSKY:
00:03:03:00 Thanks, Rohit. Some really good sort of nuggets to think about planning and where things are going. With that, Roz, I'm going to turn to you. One of the themes that everyone's talking about is deregulation. When you think about the administration coming in, what kind of things do you think they might do thinking about AI, trade, M&A, and sustainability? President elect Trump has said he's raising tariffs by executive order. So also thinking about that as well. So over to you, Roz.
ROZ BROOKS:
00:03:30:18 Thanks, Kathryn. As you indicated, the expectation is certainly that president elect Trump and the incoming administration is going to focus on deregulation and on day one, begin to roll back many of the Biden administration's regulatory actions and executive orders. So some of the areas most talked about during the campaign and since the election, I know you mentioned tariffs.
00:03:53:17 I don't think of that in the deregulatory context, but as things that he said he would do. But when we think about deregulation, energy and climate for sure. Right. So think about regulations related to air and water quality or environmental justice considerations. Definitely expect a withdrawal from the Paris climate agreement. President elect Trump often talks about easing permitting restrictions to expand domestic fossil fuel production.
00:04:19:02 I would think another anticipated action in this area, the repeal of President Biden's EO on climate-related financial risk. And then, similarly, when you're talking about climate, we would expect to see the incoming administration to take action to dismantle the SEC climate disclosure rule that's currently in process in the courts being challenged. I would think AI is also expected to get a boost, right from the deregulatory agenda.
00:04:45:18 With the increased focus on fostering U.S. technological innovation from a national security standpoint although you do expect to see some continued focus on balancing innovation with public safety concerns. So we'll have to monitor how that all plays out. I think in the financial services sector, you can expect to see the deregulatory agenda that prioritizes housing supply. That's one of the campaign promises that president elect's focus on.
00:05:12:02 Also, expect to see action under the new administration that rolls back many of the Consumer Financial Protection Bureau rules and actions taken under President Biden. And similarly to what I mentioned around climate, you can expect to see less of a regulatory focus on ESG and the financial markets.
00:05:31:00 So given that the incoming administration is coming in with a slated goal of eliminating burdensome regulation, business leaders should expect the deregulatory agenda to span far and wide. So I didn't touch on healthcare, education, workforce issues, but those are all areas that we expect to see deregulatory actions taken.
00:05:52:04 So one of the questions I get when I'm talking to clients relates to timing. So how soon will we see all of this when we think about deregulation? And I often say that depends on what process we're talking about and kind of what area you're talking about. So think about executive order, things that he can do, day one, that's immediate.
00:06:12:09 As I mentioned, reversing a lot of Biden's executive orders, identifying some, whether it's easing permitting restrictions, things that he can do directly. Then you think about regulation that may have passed, that a new Congress can decide that there are regulations that they're going to repeal.
00:06:32:02 So we know the incoming administration is working from a list, working with congressional Republicans to decide which of those rules that I think the cut-off date may have been like August of this year, which rules have been finalized since that time period by the Biden administration that it's worth kind of spending legislative time to reverse and kind of get those off the books.
00:06:54:01 So that's the other process. That timing is going to be slower than a EO, and it's going to take legislative time, but it's going to be quicker than the last one. In some respects, the last one which is agency action. So things that occur by agency action, where it will depend on if we're talking about a finalized rule or a rule that's been proposed or something that staff had just had as guidance, things that were proposed or staff had his guidance, the agency could just withdraw immediately.
00:07:21:03 The agency has to go through the procedures required to notice, provide comment, get comment, and then potentially repeal the rule in that fashion. And so that will take a longer period of time. One of the things we were talking about earlier is the possibility for an agency to just say, ‘Look, we plan to withdraw this rule or we plan to take those actions so you can stop following it.’
00:07:43:20 You don't have to kind of go through it, but then you still, in order for another administration not to come in and change that up, you still have to go through the process of eventually noticing, commenting, having the comment period and being able to repeal it. So given all this, you ask kind of the impact around sustainability, M&A activity,
00:08:02:13 I think sustainability in particular. Look, I've had this conversation with a lot of people. We're on a march towards decarbonization, right. The question is how fast you are going? What kind of incentives are going to be there for you to do it? And no question, the administration coming and it's a slower process. There is not as much focus, I would think, on incentives, tax or otherwise solely focused on renewables.
00:08:27:08 In fact, there's the belief that that's been done too much in recent terms to the detriment of the fossil fuel industry. But you're still going to have the states and global that have focused on not only net zero commitments, but disclosures around those who think California and their rules around climate disclosure think CSRD and the global contacts. That stuff will continue.
00:08:50:01 And then I would say on the M&A front, deal activity, look, who knows what's really going to happen? I can tell you, everyone is excited and thinking that there's been a lot of pent-up kind of money on the sidelines and expect to see that put to use, and I think that would be something the incoming administration would be looking forward to and supportive of.
00:09:09:13 The one caveat I would give is if it involves potentially foreign acquirers or foreign businesses. So with that, Kathryn, I'll give it back to you.
KATHRYN KAMINSKY:
00:09:18:09 Thanks, Roz. I'm smiling because you're right. Everyone is really looking forward to the deals market coming back. With that, Rohit, I'm going to end with you going back to tariffs a little bit because we're going to spend more time on it in the next section, but reconciling sort of tariffs and what that means in the tax conversation and how those two come together?
ROHIT KUMAR:
00:09:38:01 So tariffs are likely to be done mostly by executive action. Congress over the last 100 years has delegated a significant amount of authority to the executive to impose tariffs by executive action. I am pretty skeptical that you're going to see Congress vote for tariffs at scale. There are just too many free traders left on Capitol Hill, amongst House and Senate Republicans to be able to command a majority for doing that, but that's okay from a…
00:10:02:12 If you want tariffs, that's okay, because the president has the authority to do it. The challenge becomes, as to your point, Kathryn, how does that fit into the context of a tax bill? Can you count the tariff revenue towards paying for the extension of the tax relief? And as an official kind of budget scoring matter, the answer is no.
00:10:18:19 If Congress doesn't vote for it, they don't get credit for it. They don't get credit for it. They can't officially count it towards the cost of extending the tax relief. But officially is, that's a detail, right? They could if they so choose. And if they're willing they could count it politically. All right. So I fully expect at some point some administration official is going to get asked the question or will volunteer.
00:10:38:22 Hey, if we have these tariffs, how much revenue is it going to collect? And because Congress have budgets in ten-year windows, the question is going to be and if these tariffs were in place for ten years, how much revenue would that raise in certain number here. And then Congress, if they are willing and I think they might be willing to say, okay, there's X billion or trillion or whatever the number is of revenue that's being raised by tariffs, we're going to count that politically towards the cost of extending the tax relief.
00:11:01:14 So we maybe we vote for a reconciliation instruction that contemplates a larger amount of deficit-financed tax extensions than we're comfortable with. But that number is artificially high. It's not counting tariff revenue. And so I'm going to count that. And that makes it okay. And last thing I will say, look, I think these tariffs are here. They're coming.
00:11:18:17 They're going to stay. The Biden administration didn't undo any of the Trump tariffs. Actually, added some more. And I'm encouraging everybody. You should do a tariff impact analysis. You should figure out, this is going to be a revenue raiser that helps make the numbers work. You should know the answer to the question, how much of that revenue is coming out of me?
00:11:35:12 And based on the size, that number, you may want to think about doing things differently or some changes you can make. But if you don't know how much you're contributing to the total, you have no idea of the scale of the impact or what mitigation strategies might be available.
KATHRYN KAMINSKY:
00:11:47:15 Thanks, Rohit and Roz. I think the 2 or 3 things I'm going to summarize, and then we're going to move to business imperatives, is one, take score, plan. Like you said, Rohit and Roz, I think your point that I think we don't hear as much as don't forget about other regulations that's set out there through states and through global, just to make sure when you're doing your planning, to make sure that's part of your impact analysis
00:12:10:02 as people look at deregulation. So, we're going to shift to the business side of the world. And we're really focusing on four topics. Supply chain, AI innovation, renewable energy, and then regulatory changes at a deeper level. I'm going to have with me today Matt, Sean, Earl, and Brett.
00:12:29:07 I'm going to start with you, Brett, because tariffs has just been such a topic. And when you think about it, I think that with it clearly being high on the priority list, it's probably the number one question that people are worried about.
BRETT CAYOT:
00:12:41:19 Yes, Kathryn. The impact, it could be quite large. In fact, in our recent PwC Pulse survey, we found that 75% of executives said that even just a 10% tariff would reduce growth. So you may ask yourself why? Well, if you start by looking at this at the top level, from a macro perspective, the US imports just under $4 trillion worth of goods and services every year.
00:13:08:00 A 10% tariff on those imports would be a rather large increase on input costs for businesses. That obviously would result in price increases or reduced profitability. What's most interesting, though, is frequently the tariff increases are larger than the company's current annual profits. These realizations are raising a lot of questions like how can I change my supply base? Can I move manufacturing?
00:13:33:09 Should I refine my overall supply chain strategy? We believe that over time, companies will take these actions and shift their supply chain footprints. We've already witnessed this major change in recent years, as evidenced by Mexico becoming the largest trading partner with the US over China, some of which was probably driven by the 2018 tariffs on China by Trump.
00:13:56:24 However, at the moment, companies are really challenged. They know that they need to do something. They just don't know what. Because of all of the uncertainty and open questions, how much will the actual tariffs be? Who will they be opposed on? Will be a 10% across the board? Could it be 20? Will Mexico or Canada have higher rates?
00:14:16:11 Will retaliatory tariffs require me to think about my export supply chain design as well? And how long would these tariffs last? If I'm an executive and I'm thinking about moving my manufacturing, I need to be confident these tariffs are going to last at least through the Trump term, if not longer.
00:14:32:08 For example, when we look at the China tariffs in 2018, while they're generally still in place, Canada and Mexico received exceptions to the 2018 steel and aluminum tariffs after only about 14 months. So in the end, what we think this means that really in the short term, companies may not be able to shift their supply chains quite fast enough to avoid the rather substantial cost increases and potential disruptions.
00:14:57:07 However, in the longer term, we fully expect that companies will enhance their supply chains to be more flexible, more resilient, more autonomous, which will enable them to really respond better to any ongoing policy shifts, retaliatory tariffs, or supply chain disruptions.
KATHRYN KAMINSKY:
00:15:15:09 So moving away from tariffs, Sean, Roz talked about regulation and deregulation. Can you go a little bit deeper from an industry perspective, whether it be FS or health, what does that mean and what should companies be doing?
SEAN JOYCE:
00:15:28:07 So the first thing, Kathryn, I think this is really an administration of disruptors. So it is not business as usual. And I think everyone has to take that perspective from the beginning. So when you look at Trump one he had EO 13771, which was two out for every one regulation in, I think you're going to be seeing something even more.
00:15:49:20 He'll double down on that with no incremental cost. So as Roz mentioned, I think deregulation is going to be the name of the game. I think you're going to see though almost in every sector, acquisitions picking up very quickly, Brett talked about supply chain tariffs. And I think crypto is a big space. Everyone listening out there, what do I take from all this speculation?
00:16:15:10 And what I always do is I look at what the leaders and how they're leading. So let's look at financial services. You got Scott Bessent, former hedge fund taking over the Department of Treasury. You got Paul Atkins, former SEC commissioner, still going to lead the SEC. I see that is more the norm. So what I'm saying is forget about the spin about we're going to get rid of the CFPB and the FDIC and it's going to merge.
00:16:39:18 Focus on the win. The win is keep doing the fundamentals. Safety and soundness are going to be there. It is still important that our financial system stays intact. Second thing is fraud, right? Atkins has made the comment companies don't commit fraud. People do. So I think there'll be a focus on people. So fraud, sanctions, we've already heard obviously from the terrorists, but also from a sanctions perspective.
00:17:06:00 And then any money laundering. So that's where in FS, if you need to focus is really those operational risk areas. Let's talk about telecoms, media, and tech companies. It's a little bit of a nuanced approach. But with again, FCC, Brendan Carr is coming in. He is definitely lighter touch regulation.
00:17:26:08 And then I still think there's going to be a nuanced approach on any trust, especially with the hyperscalers and what they're doing. Let's jump to health industries. RFK Jr, okay. He is all about taking cost out. He wants to look at what he thinks is a bloated FDA, NIH, ultra-processed foods, holistic medicine. I think we're going to be seeing a lot of changes.
00:17:52:04 What's the win for clients? It is cost takeout and digitalization. Without question, we have a lot of these, especially in the med-tech and pharma. There's been a history of acquisitions, but not an integrated approach. It's difficult because they're global companies but cost takeout, price transparency is going to be a big thing. How do you actually focus on that, digitalization.
00:18:16:06 All right. Energy and utility. Earl, I know you're going to talk about that in a second, but again with Doug Burgum, right, Governor of North Dakota. And he's going to be our energy czar. You have Chris Wright, former oil executive that's going to be basically over the Department of Energy. Listen, I think we're going to see “all of the above”.
00:18:35:05 It's not just renewable, it's fossil fuel. It's everything. What's the big win? I would say boost domestic investments in all areas looking for that long-term payoff. And then the supply chain. That's going to be a big deal.
KATHRYN KAMINSKY:
00:18:51:01 It's a great run down and it does set up Earl perfectly. So when you think about energy security in the US, what are the main challenges? And then a follow-up to that is what can people do proactively getting ready for it?
EARL SIMPKINS:
00:19:04:11 It's definitely coming. I think energy and resources power so many things that we utilize, that we consume. Energy security is certainly an important topic to think about. And it starts with a number of topics. One is the security. So having a secure infrastructure. The second thing is around resilience and reliability. So we need to have a resilient and a reliable infrastructure, particularly in the context of extreme weather events that are putting pressure on the infrastructure.
00:19:30:09 And then the last thing is we want it to be affordable. And so for us to have to pay for it, but also affordable from an investments standpoint for all of our clients who are making these investments, investing in new technologies. And so those things basically lead us to energy supply and independence as a critical topic. The investment in the infrastructure, hundreds of billions of dollars are being spent on investing in the infrastructure now.
00:19:52:21 And as we think about the increasing frequency of extreme weather events, the NOAA reported $61 billion of damages from weather events in 2024 alone. So, when you think about that and the importance to energy security, we'll see investments there. And then lastly, as Sean mentioned, right at the end, just the vulnerabilities in both domestic and international supply chains will become important.
00:20:13:14 And we're already seeing clients think about that in context. So those are actions that we're going to see clients taking a look at. We've already seen clients taking a look at and to the point around the new administration, I think, this will take coordinated action across federal, state, local governments, but also the private sector. And what we're seeing in the new administration is a focus on investment, a focus on domestic production.
00:20:36:01 We're also seeing a focus on innovation. So when we think about the data center and hyperscaler impact in the power sector, investments in innovations like nuclear technology, as an example, is one of those areas where we are seeing increasing load, increasing demand for power across the country caused by not just the data centers, some hyperscalers, but electric vehicles and other things electrifying the infrastructure.
00:20:58:16 So innovation and investment in new technologies is going to be important. Physical security, which we talked about, but also time to market. So when you combine the time to market impact with the innovation that becomes important, I think a real opportunity for companies now and for the new administration is they're thinking about how do they really make some of this stuff happen.
SEAN JOYCE:
00:21:17:10 I think Earl, you make a good point, and I think it's understated where there is going to be, I think, a heavy focus on nuclear. And when you talk about small modular reactors for data centers, the requirements that AI is really requiring, I think is just going to cause us to actually look for different and new sources.
KATHRYN KAMINSKY:
00:21:35:16 Yeah, I couldn't agree more. You read about AI and then you read about energy. And I think you've done a layout for Matt Wood who’s with us, which is great actually is around innovation. And then Roz talked about deregulation and talked about AI. And so Matt, how does a company balance innovation, AI with deregulation? But yet their responsibility around these new types of things when they innovate?
MATT WOOD:
00:22:00:12 Generative AI is probably the single largest shift in how we're going to interact with data and information and each other since the advent of the very, very earliest internet and organizations that invested in the early internet 30 years ago went on to enjoy pretty tremendous growth in the intervening time. And it's my estimation that organizations that are investing to generative AI today are going to experience similar, if not greater, levels of growth in the next 30 years because of AI.
00:22:27:15 So it’s a really large opportunity. Now, AI is probably best known today for being used in chat bots and assistants, and that's a great use case for a lot of organizations, including PwC. A finding is that it's really an entirely new tool for building intelligence and reasoning capabilities into any product or process.
00:22:48:02 Now, I really can't think of any tool which is useful that doesn't carry with it some level of expectation and responsibility in how you acquire and use that tool correctly and safely. So for any tool that we introduce inside an organization, we tend to set up training and guardrails and a set of internal expectations and standards for how and when to use it.
00:23:10:09 And these guardrails and expectations, they actually lead to more use of those tools, not less, because it's easier for your teams to know what the right tool is for the right job. They don't have to guess, and as a result, they end up using more of the tool.
00:23:24:08 Now, the same is true for artificial intelligence and investing in establishing those expectations, and the training around responsible and efficient use of a tool is actually an excellent way to encourage the safe, broad, and efficient use of artificial intelligence as a tool.
00:23:42:04 And as a result, you'll see greater adoption in what you've already paid for, and you'll improve the ROI associated with it. So responsibility and AI innovation actually go hand-in-hand. You really can't have one without the other. It's an and, not an or. Now, some specific tool use carries with it more risk. And that risk is often regulated.
00:24:04:03 And one of the things that I think we can expect going forward, and which the panel have already talked about, is probably more AI regulation broadly, but less, which is mandated at a federal level. What that means is that the states are more likely to go one by one in establishing AI regulations against certain use cases.
00:24:22:05 And that's going to make the framework a lot more complex and push a lot of the responsibility for meeting and managing that complexity to the organizations that operate inside those states. And the same is probably true outside the US, country by country, as those countries organize themselves into different sets of rules.
00:24:40:03 So given that responsible use is one of the keys to AI success, now is the time to be investing in your responsible AI strategy, defining it broadly, and planning for how to scale and operate it inside your organization. As that complexity continues to increase, so that you can drive your own innovation agenda and drive greater return on investment of your AI tools.
KATHRYN KAMINSKY:
00:25:04:14 Matt, as you think about companies preparing for this risk, what other things other than having a plan do you see people do that's done extremely well to go down that layer of AI as a new risk that's out there?
MATT WOOD:
00:25:17:19 There are a couple of main pillars, and if you invest in these, you'll be pretty well set up, at least for the next 6 to 12 months. The first is just to focus on your data, the quality of the data, the privacy of the data, and the governance of the data.
00:25:30:08 Having a really good understanding of your own data strategy, of understanding what data you have available to you internally, what the quality is of that data, and providing guidance and checks and balances against where you can use that data, who can use it, and what it can be used for is one of just the fundamentals of getting AI right in a responsible way.
00:25:53:15 So having an investment, an existing investment in your data strategy is a great leg up to a relatively small increase in investment to be successful with generative AI. And if not, the AI advantages are often pulling a lot of organizations through such that they're investing more in their data strategy going forward. The second is just around tool use.
00:26:13:08 The quality of the tools, understanding what they can be used for, what they're good at, what they're bad at, and the governance around those tools so that your teams don't have to guess. That means understanding the accuracy that the tools operate at, the consistency, how reliable they are and how they're fit for purpose for different individual use cases.
00:26:33:10 And as we all start to use more tools more broadly inside the organization, that's going to be a critical pillar to invest in going forward. And then finally, another key to success is just investing in training and upskilling your teams, such as they understand how to experiment safely with this technology and how to harness it using your data for the right use cases with the right compliance to be able to really drive the agenda of artificial intelligence, more broadly inside your organization.
SEAN JOYCE:
00:27:03:01 Kathryn, I want to just say, obviously, as a risk practitioner, I can't help myself with process. And I think it's key.
KATHRYN KAMINSKY:
00:27:10:05 an auditor, I also like process. Right? It all goes back. Process matters. The better the process, the better the technology. Which leads me back to you, Brett. So you talked about what you can do, what we think is going to happen. If you had recommendations today, not knowing what's going to happen, what are the three things that you would tell someone to do with the tariffs as it relates to supply chain and thinking about technology?
BRETT CAYOT:
00:27:36:07 Yeah. And if I play off of what some of Matt was talking about, if we start kind of an overarching perspective, we know that early adopters of next-gen technology in supply chain have adapted better to disruptions and they're finding new ways for value creation.
00:27:54:07 In our recent Global Supply Chain Trends study, we found that leading companies or supply chain champions, as we dubbed them in the study that started that digitization of their supply chain ecosystem, are actually seeing greater margin improvement and higher revenue compared to others.
00:28:10:20 More specifically, with regards to the tariffs, I would offer a handful of actions. First off, as Rohit mentioned earlier, get a handle on what your potential impact is and be able to actually pinpoint down to your highest exposure areas. Then extend this into a true supply chain digital twin where you can include duties, taxes, perform a financial modeling, and assess various potential scenarios on your company.
00:28:41:13 To Matt’s point, this is also a really great opportunity to test AI and machine learning models in a real-life situation. These technologies can much easier and faster assess alternative options such as which of my suppliers have capabilities in different countries? Which manufacturing lines could I be moving more easily? Could I implement postponement strategies?
00:29:03:05 Can I increase the use of duty drawback programs or implement free-trade zones where they might not have been cost advantageous in the past? The key, though, Kathryn, is that we want to take a multidisciplinary approach to this. This isn't just the supply chain folks. This isn't just the trade and tariff folks.
00:29:19:05 This is pulling together the end-to-end sales and marketing, policy, finance, tax and coming to a creative solution that works with it. The second recommendation I would offer is to identify opportunities to pull ahead inventories before the tariff. As you do this, also think about logistics disruptions and be ready for that.
00:29:41:02 When you think about what happened when the 2018 tariffs were announced, shipping capacity quickly became strained, delays ensued, freight rates doubled, and we had significant supply chain challenges. Thirdly, double down on investments and network collaboration with strategic supplier partnerships and customers.
00:30:01:06 These orchestrated efforts, we really see them as an opportunity to extend beyond the organizational boundary and help not only plan on today's actions and today's issues, but how to carve out joint investment relationships for long-term capability. This is also another great area to use technology tools to gain increased visibility of the supply chain from supplier manufacturing process.
00:30:24:07 Our progress to In-transit visibility and invent management. And then, finally I would just offer two higher level recommendations. One, start implementing cost out, no regret cost out opportunities across the business. The companies that are the leanest will be better able to manage these cost increases and gain a competitive advantage in the long run.
00:30:46:20 And lastly, start to consider options for reinventing your business model. Major changes like these always create disruption, and when there's disruption, you need to ask yourself the question of where could I be disrupted? Or where could I disrupt the market?
KATHRYN KAMINSKY:
00:31:03:12 Sean, I feel like I'd be remiss if I didn't ask you this question. You mentioned it slightly but crypto. What do you think is going to happen and where do you see that going? And I'm going to add to it a little bit as your other hat, you talk about cyber, you talk about crypto like those two together.
SEAN JOYCE:
00:31:20:11 It's a complicated question. I think people's perspective was the SEC currently would tell the exchanges what they couldn't do, not necessarily what they could do. There was confusion about whether these cryptocurrencies were actually a security, whether they are currency. You've heard president elect Trump talk about a national Bitcoin reserve. So, I see this digital currency is becoming a lot more prominent in financial services as a whole.
00:31:53:13 I mean, there's already asset wealth management companies that have a lot of these crypto currencies that they're holding. So the biggest thing I see is I think we're going to see a risk framework develop that everyone will know how to follow and what to do. So I think that's all positive.
00:32:12:08 So on crypto, what I would say is we're going to see clarity on basically how it is going to be regulated, which is, I think, good for everyone. I would expect when you talk about an actual digital currency, like I think that will actually show more legs than actually relying on Bitcoin or Ethereum or Solana.
00:32:35:06 On the cybersecurity piece of that, I think right now that is a big issue, especially on some of the off ramps with these cryptocurrencies where they're being housed outside the United States. And there is a big concern about money laundering and how they're actually being used.
00:32:54:10 I think there is a lot to do, and I think there is still, I would say, at the very nascent stages of how we're actually going to govern this and regulated sort of going forward.
KATHRYN KAMINSKY:
00:33:06:10 So, Earl, Roz talked about sustainability and what we think is going to be coming from the new administration, and everyone goes right to reporting, right? You're thinking about it very differently with things that will happen. What should people be thinking about? Because I have a worry that people are going to shut down when they hear sustainability. So if you had advice to people around sort of what's coming, if it's not reporting, what should they be focused on?
EARL SIMPKINS:
00:33:32:09 I think we'll continue to see a balanced investment and one that obviously is focused on fossil fuels and fossil fuel development and production, but one that also doesn't ignore renewables. And so the best example I can cite is in Texas, for example, where it's the number one state for oil and gas in the US. But 40% of the generation resources in Texas are renewable.
00:33:54:09 And so we've got a good balance of both. And I think you'll see from a lot of bipartisan support for things that are done within specific states to develop and advance renewable technology. So I think the real and all is how do we have a balanced view towards how we're thinking about renewables?
00:34:12:03 Couple that with what we were talking about earlier, with respect to the innovation and the speed to market of some of these newer technologies. The nuclear, by the way, which we mentioned is in fact a renewable energy resource. And as you think about the demand that's required for the data centers and for all of the AI and the electrification, that puts a lot of stress on the grid.
00:34:30:08 And having a good, large source of baseload capacity that we obviously need to work on in terms of the construction, the ongoing operating costs, since we haven't done it in a while, we've had a new one that came online recently that will become important.
00:34:45:09 And we're seeing a lot of interest in companies wanting to explore nuclear as a potential option and working with some clients who've done that recently.
KATHRYN KAMINSKY:
00:34:52:08 It's interesting. And some of my client discussions, what I've seen from the chief technology officer, interestingly enough, is a three-year plan on how much energy they're planning to use and how they're going to fund it, what they're going to do. And I think there's ways that you can do it today, going forward to the future.
EARL SIMPKINS:
00:35:07:01 Yeah. There are ways of thinking about both the usage of energy and then the supply of energy as a business. And so when you think about how do we currently use energy, are there energy efficiency plays we can deploy within our facilities? Are there things we can do in terms of how we use and consume energy and adjust our demand?
00:35:24:05 That's one side of the equation. On the other side of the equation is how we're thinking about the utilization of distributed energy resources, and whether or not those can be deployed on our facilities, like wind or solar, for example, that are able to be developed pretty quickly. But this notion of distributed generation becomes important for companies to consider.
KATHRYN KAMINSKY:
00:35:41:22 So, Matt, I'm going to end with you. So as you've looked and thought about AI more broadly now from being inside a corporation to now working with us at PwC, where do you think some untapped potential for AI is in the next sort of year as it gets more deregulated?
MATT WOOD:
00:36:00:22 Yeah, it's a great question. I think one area that a lot of people are really excited about at the moment is just the maturation of the capabilities of AI agents. So today, we're all used to working with an assistant where we can ask a question and we can get an answer. But there is a category of artificial intelligence systems that don't just answer a specific question.
00:36:21:11 They can actually take direction and complete tasks on your behalf. So instead of stating a question or providing a prompt, you provide an objective and the AI system understands the objective and starts to build a to-do list for how to complete that objective and it adjusts its strategy based on what it's learning as it goes. Now, today, these agents, they can maybe operate the type of tasks and complete the type of tasks that would take a human about 5 or 10 minutes to complete.
00:36:48:13 And that means the work goes from spending a lot of time typing and sending emails and asking questions to a lot more time asking the AI systems to complete objectives on our behalf, and then evaluating the results of those objectives. And the results of that will be very broad ranging.
00:37:05:05 And you can imagine having agents help assist with healthcare professionals by getting not just detailed summaries of patient records, but suggesting potential diagnoses, evaluating lab reports, offering treatment options, all those sorts of things, or in the education space.
00:37:20:10 magine the creation of completely tailored educational content, quizzes, or personalized tutoring that allows you to learn much more quickly and more efficiently, or how to better manage financial risks and assess market conditions. All of those are under development today, and I think we'll have a very large impact on organizations and society over the next 6 to 12 months.
KATHRYN KAMINSKY:
00:37:42:13 Thanks, Matt. Thank you to all our speakers, and for taking the time to be with us today and preparing and really thinking about what this means and where we're going to go. The number one question I get from my clients is, what do we do now? And it actually reminded me of my father when I was growing up, studying.
00:38:00:09 He used to always say prepare, prepare, prepare. And I think that's what we really hope that you can do coming out of this webcast, to think about things where you can prepare, be proactive, be agile, think about what you need to do, what sits in your world, where you may need to shake hands with someone else in your organization.
00:38:19:04 We have a lot of information out there on our insights. Come to our website, and one of the things I think that's so important is just being on the webcast is the first way to preparedness is being aware, knowing what's going on. Thank you for joining us today.
00:38:33:07 I hope you enjoyed listening to our conversation and learned more about what's coming and what business leaders can do now. For our latest insights, visit our Road Ahead site on pwc.com.
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ANNOUNCER:
00:39:00:16 This podcast is brought to you by PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This podcast is for general information purposes only, and should not be used as a substitute for consultation with professional advisers.
