Deloitte’s new business trust practice

NEW DELHI : Consulting firm Deloitte intends to introduce a practice to help businesses measure the degree of trust of regulators, investors, customers and the public in them to help them identify areas for improvement and increase their credibility with stakeholders.

The consultancy currently rates India’s top 1,000 companies by size, including listed ones, based on about 90 parameters to understand where they stand in terms of stakeholder trust. Rankings will be privately shared with companies.

Deloitte expects there will be takers for the new service, given that regulators, clients and investors place a premium on trust, and firms making public offerings could use their rankings to help investors decide .

A Deloitte study from several years ago covering companies in advanced markets such as the U.S. found that companies with high trust enjoyed 15-40 percent higher market capitalizations than less-trusted rivals, said Sriraman Parthasarathy, partner, corporate Trust, Deloitte India.

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

“We’ve found that companies that are highly trusted have high customer loyalty and retention. Furthermore, regardless of high employee compensation, burnout remains high in companies where employees perceive trust issues. In India, some reputable companies have employees with very long tenures because the employees trust the company and invest their careers there, even though they pay a lot without any imagination.”

Deloitte’s Trust Initiative is designed to measure trust and help businesses proactively manage it using reliable data points. It will also allow the business to understand what its stakeholders think of the enterprise versus where it aspires to be, Parthasarathy said.

Trust depends on several factors, including business competence and trustworthiness, empathy and transparency, leadership, experience in delivering a product or service, regulatory compliance and environment, social environment and governance. “We broke them down to see what drives trust and came up with different incentives for the whole business. We’ve developed something called the Trust IQ platform, which effectively measures trust through a very involved process with stakeholders and then, through an algorithm, calculates a trust code and compares it to a benchmark. We have benchmarked over 4000 companies globally to see what the trust index is and as we speak we are benchmarking the same in India. This type of assessment will reveal where an enterprise’s weaknesses are at a granular level and enable targeted corrective action by companies,” he added.

Deloitte’s benchmarking study in India is likely to be completed in two-and-a-half months. “We have now developed a platform for smaller and medium-sized companies. Companies are really starting to see the value of trust management because the bottom line is your market capitalization, customer and employee retention, and what regulators and others think of the company.”

Acceptance of such an assessment should be guided by the companies’ board, he said. There is enough historical data and evidence to say that the quality of management also determines the quality of market capitalization, he said. Typically, companies with very high market capitalization over an extended period of time also have high management, he said. “Imagine if you can list your trust index in an initial public offering document, what that means for investors,” Parthasarathy said, adding that Deloitte already has a corporate 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 an incidental outcome.

In addition, consumers demand ethical, transparent and responsible behavior from businesses, while some investors prefer businesses that focus on environmental, social and governance standards. Analysts believe that reliable firms gain a competitive advantage over others.