KPMG at Davos

Thoughts From Davos - by John Griffith-Jones joint chairman, KPMG Europe LLP

Day Three

Enough of the banking crisis.

What's really grabbed my attention in the last 24 hours is the shift in economic power from west to east - what you might call the tectonic plate issue, linked, but arguably as a sub-set of the 'global imbalances debate'.

But what it is really about is ensuring an orderly transition of economic power from debtor nations like the US and the UK to creditor countries, especially China. Failure to do so smoothly risks a rise in protectionism, which would be bad for everyone.

Of course, this process is already under way and, increasingly, the so-called 'emerging economies' are making themselves heard.

Yes, they too have experienced some slowdown, but their delegates here keep pointing out that the banking crisis is primarily a Western one. Indeed, I have just heard an Indian official bemoan their growth rate falling from nine to seven percent: something we would happily settle for in the UK.

And listening to South African President Jacob Zuma reminds me that he is just as entitled to have a place on the stage as we are.

Last night I attended the Duke of York's reception. British and international business leaders mingled with the Chancellor, Alistair Darling, his government colleagues Lords Mandelson and Davies, and the Conservative heavy-hitters, David Cameron, George Osborne and William Hague.

This morning it was back to banks and an excellent breakfast discussion hosted by Standard Chartered. Then it was on to another debate on governments and regulation with David Cameron on the stage alongside European Central Bank President Jean-Claude Richet.

I leave Davos later today thinking there's still an awful lot to do to address these issues. There is a certain lack of confidence around the place but, unlike last year, also a lack of fear. It's Goldilocks country.

So it's goodbye from an uncertain World Economic Forum - and back to an uncertain world.

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Day Two

My first full day of meetings and conference sessions in Davos has told me one thing.

While the problems that led to the financial crisis are clearly and closely analysed, nobody has the complete answer on what should be done to prevent a recurrence.

The issues around capital, liquidity, asymmetric risk and pay are debated cleverly and at length but each tentative solution is met with the response: 'Ah, but that wouldn't solve the problem for the following reasons'.

In summary, there is no five-point plan that everyone can sign up to.

I went to two debates in the Conference Centre: one on 'Rethinking Systemic Risk', the other on 'Rethinking Values in a post-crisis world'.

I left thinking perhaps the delegates who went to the first session should have gone to the second as well - and vice-versa. Keeping a perspective on what the real world thinks of the financial world is highly therapeutic and probably essential.

Inevitably, much of the discussion has revolved around the role of banks. Bob Diamond of Barclays made the point that there is no causal link between size and systemic risk. In others words, making banks smaller won't in and of itself solve the problem.

Similarly, the point was made that drawing a distinction between a bank's proprietary trading and its market-making activities would be very difficult to make.

In fact, I think the banks got a pretty fair hearing during the day. One of the few things everyone seems to agree on is that while banks undoubtedly have been beneficiaries of government bail-outs, so too has everybody else.

And then came Sarkozy. Revolution - French-style - was in the air for the financial sector, he said, as he formally opened the World Economic Forum's annual meeting. Even the accountants - or at least their global rules - came in for a share of criticism.

So much for consensus. Solutions seem to be as elusive as ever.

Today I feel the agenda will move on to emerging markets and climate change. More of this later.

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Day One

It's January, it must be Davos. I've just arrived and the Swiss ski resort is as beautiful as ever in the snow.

The World Economic Forum is an extraordinary gathering of over 2500 delegates from all over the world trying to grapple with this year's theme of 'rethinking, redesigning and rebuilding to improve the state of the world'.

Now that the worst of the financial crisis is behind us confidence is clearly returning, while global economic activity has rebounded, though a full and lasting recovery is not quite yet 'in the bag'.

Davos therefore will provide an early opportunity to take the temperature of the global economy in 2010.

Apart from the economic update, I have two key issues on my agenda over the next couple of days.

First, climate and sustainability. I got off to a good start on the way here from Zurich airport - it's 'Green Davos' this year and we were encouraged to take the bus - which I did (and I was not alone).

From my perspective, if we are going to re-engineer the world towards a lower carbon economy we are going to have to get to grips with a rigorous and universal carbon measurement system.

If it is to be the fair basis for carbon trading or taxing us all it is essential we have a sensible methodology which, dare I say, is one that is also capable of audit.

Second, Davos is also a chance to get a better perspective on what went wrong in the financial sector - and what lessons are to be learned.

For me, what the banking crisis taught us more than anything was that we must get better at assessing and managing risk, both at a micro- and a macro-level. Risk must go up the boardroom agenda all the way to the top.

So I'm really looking forward to attending sessions about rethinking risk in the boardroom. On Friday, for example, I'll be going to one entitled: "Casinos, Collapses and Clawbacks: What Next For Banks", which will be chaired by Standard Chartered chief executive Peter Sands. One of the panellists is Lord Turner, chairman of the Financial Services Authority, the UK regulator. It should be an interesting discussion!

But what really makes Davos special for me is not just the lively debates that occur in and around the main Congress Centre, but what happens at the numerous receptions and briefings that take place on the periphery.

In many ways it's like a party conference or political convention where much of the real action takes place away from the main event itself in a series of often ad hoc meetings. So for all the planning and preparation, I think it's important just to go with the flow - and, of course, to pace myself accordingly!

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