Satyam scam: Price Waterhouse goes all out to protect its reputation

The year began on a grim note for many, what with fires and protests lining up a formidable agenda for the year. But for one of the most reputed consulting firms, the UK-headquartered Price Waterhouse (PW), it has been a particularly ominous start in India as the Securities and Exchange Board of India (Sebi) imposed a two-year ban on the firm’s auditing business in the country. While the India office was quick to step in and distance itself from the scandal, brand consultants and industry leaders say that the brand and business will take a hit.

On January 10,  Sebi banned Price Waterhouse (PW) India (the audit arm of PW) from providing audit services to listed companies and market intermediaries for two years in the Satyam fraud case. Within a few hours the firm sent off a signed e-mail from its chairman in India, Shyamal Mukherjee to its key clients and associates that said: “The Satyam incident was in January 2009. Over the years, PW Audit firms in India have made huge investments in tools, training and infrastructure and are today recognised for their high quality stringent audits. I would like to assure you that the firm remains committed to maintaining the highest standards of quality...”

A spokesperson from Price Waterhouse Network of firms in India said that they had acted quickly and transparently upon receiving the order. “Communicating transparently and consistently was our immediate priority. We explained the implications of the order while reiterating that we had no part to play or had knowledge of the management perpetrated fraud,” the spokesperson said.

While the firm has acted by the playbook in dealing with the crisis,  many believe that its image has taken a beating and the damage could spread beyond the auditing business. “Other services might also get impacted.  After all auditors are the angels of business processes so this is a fall from grace,” said Prabhakar Mundkur, chief mentor with HGS Interactive, a strategy consulting firm from the Hinduja Group. 

Even if the damage is limited to the auditing business, as Bharat Bambawale, brand consultant and former global brand director of Airtel expects, business will suffer. “There is no question they will lose a fair bit of their 20-30 per cent audit revenue as clients seek new firms,” said Bambawale. But he says, present day consumers understand that in multi-business firms, a problem on one side of the business is not necessarily a reflection on the entire business. “Look at Samsung’s Galaxy Note 7 battery issue. It did set back phone sales and cast a brief shadow over its mobile phones. But it didn’t affect other businesses, and, a year later, even  Galaxy phones bounced back,” he said.

However PwC should have acted earlier. Many say that while PW has responded with alacrity to the Sebi order, it should have stepped on the gas earlier given that the Satyam sword has been hanging over its head for nine years. Especially since PW knew what was at stake.

Everyone brings up the Arthur Anderson (AA)-Enron scandal as point of reference. Part of the ‘big five’ consulting firms of the world, AA had to disband itself following its indictment in the Enron saga. Subsequently the firm’s consultancy and outsourcing arm rebranded itself and forged life anew as Accenture. “The AA brand almost collapsed, lost credibility overnight and PW will also certainly see an impact on other businesses,” said Ramesh Thomas from Equitor. 

The AA consultancy business survived because it adopted another name. “For PW too one way out would be to consider launching different brand names for the other, but this should have been done in the last many years post the scandal,” Mundkur added. 

The AA affair is also an indication of just how fragile brands are and how easy it is to blow up the trust that takes ages to build. Bambawale said, “Reputation is earned over years and lost in minutes.” 

Still, there is hope for PW. In two years it could get back to business. And in the interim period, if PW can demonstrably reinforce its commitment to transparency, the brand could come out stronger. Till then the brand has little option but to undergo its trial by fire.




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