Deloitte’s new practice to check business credibility

NEW DELHI :Consulting firm Deloitte is set to introduce a practice to help businesses measure the extent of trust regulators, investors, customers and the public place in them to help them identify areas for improvement and raise their trustworthiness among stakeholders.

The consulting firm is currently assessing the top 1,000 companies by size in India, including listed ones, based on about 90 parameters to figure out where they stand in terms of stakeholder trust. The ranking will be privately shared with the companies.

Deloitte expects there would be takers for the new service given that regulators, customers and investors attach a premium on trust, and businesses going for public offers could use their ranking to help investors decide.

A Deloitte study a few years ago covering companies in advanced markets such as the US, found that highly trusted companies enjoyed 15-40% higher market capitalizations compared to less trusted rivals, said Sriraman Parthasarathy, partner, enterprise trust, Deloitte India.

The initiative is based on the premise that trusted companies are able to better navigate volatility, particularly during periods when geopolitical trust deficits impact international investments as well as trade.

“We have found that companies, which are highly trusted, have high customer loyalty and retention. Also, irrespective of high compensation to employees, attrition remains high in companies where employees perceive trust problems. In India, some reputed companies have employees with very long tenures because employees trust the company and invest their careers there, although, by no stretch of the imagination, they are high payers.”

Deloitte’s trust initiative is designed to gauge trust and support businesses in actively managing it using reliable data points. This will also enable the businesses to figure out what its stakeholders think about the enterprise versus where it aims to be, said Parthasarathy.

Trust depends on several factors, including competency and reliability of the business, empathy and transparency, leadership, delivery experience of a product or service, regulatory compliance, and environment, social and governance. “We broke these down to see what drives trust and came up with different drivers across the entire business. We developed something called the Trust IQ platform, which effectively measures trust through a very engaged process with stakeholders and then, through an algorithm, computes the trust code and compares it with the benchmark. We have done a benchmark of over 4,000 companies globally to see what the trust index is like, and as we speak, we are doing the same benchmark in India. This kind of assessment will reveal where the weaknesses of an enterprise are at a granular level and enable focused remedial action by the companies,” he added.

Deloitte’s benchmark study in India is likely to be completed in two and a half months. “We have now developed a platform for smaller and middle size companies. Companies are really starting to see the value of managing trust as the outcome is your market cap, customer and employee retention and what regulators and others think about the company.”

The adoption of such an assessment has to be driven by the board of companies, he said. There is enough historical data and evidence to say the quality of governance also drives the quality of market capitalization, he said. Typically, companies with very high market caps over a sustained period of time have high governance as well, he said. “Imagine if you can put out your trust index in an initial public offering document, what it means for investors,” Parthasarathy said, adding that Deloitte already has an enterprise trust practice in the US.

Deloitte’s initiative also points to the fact that businesses are increasingly viewing trust as a strategic priority rather than a chance outcome.

Also, consumers are demanding ethical, transparent and responsible conduct from businesses, while some investors prefer businesses which focus on environment, social and governance standards. Analysts believe that trustworthy businesses get a competitive advantage over others.