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May 2010

Impact of Regulatory Reform A KPMG Survey of Senior Executives. K P M G L L P. May 2010. 1. KPMG’s Survey on the Impact of Regulatory Reform. Interviewed C-Suite executives from large U.S. based companies Representing wide cross-section of industries 59% with Fortune 1000

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May 2010

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  1. Impact of Regulatory Reform A KPMG Survey of Senior Executives K P M G L L P May 2010 1

  2. KPMG’s Survey on the Impact of Regulatory Reform • Interviewed C-Suite executives from large U.S. based companies • Representing wide cross-section of industries • 59% with Fortune 1000 • 23% with Fortune 500 • 80% represent companies with revenues exceeding $1 billion • 27% of respondents in healthcare industry • 20% in financial services • Total responses: 126 • Conducted in March 2010

  3. Key Findings C-Suite Executives • Are concerned about the impact regulatory reform will have on their businesses • Concerns center on compliance costs, government intervention • Are divided on its effect • Despite concerns, about half see reform as a potential “net positive” • Have begun to take action to get ahead of reforms • Major focus is on risk management • Think uncertainty of reform poses a challenge to long-term planning • Believe regulatory reform will expand beyond financial services and healthcare

  4. More healthcare executives (47%) expressed “extreme concern” about regulatory reform than any other sector Virtually All Executives Are Concerned About The Impact Of Regulatory Reform

  5. 40% of Financial Service executives cited “access to capital” and “changes in compensation”; 57% of executives outside FS & Healthcare were concerned reform would “slow growth and threaten the fragile recovery.” When Asked To Identify Their Top Three Concerns About Regulatory Reform, Executives Most Often Said …

  6. Government intervention also #1 concern of executives in Financial Services (32%) and Healthcare (30%) When Asked to Name Their Single Biggest Concern, Executives Most Often Said …

  7. Executives Divided About Effect Of Regulatory Reform Despite their concerns, about half agreed with this statement: “Regulatory reform has the potential to be a net positive for my business depending on the form it takes.” Even among those who were “extremely concerned” about regulatory reform 47% thought it could be a net positive; Of those who said regulatory reform was NOT of “great concern,” 58% saw it as a potential positive.

  8. Potential Net Positive:The Most Important Goals for Finance Industry Reform When asked to name the three most important goals of financial reform,88% identified an activity to “grow the economy” and 80% identified an activity to “restore trust in capital markets.”

  9. Almost 60% said increased regulation would be at least “somewhat effective” in averting another financial crisis Executives See Another Potential Positive When Asked How Effective Increased Regulation Could Be in Helping Avert Another Financial Crisis 71% 59% 56% 54%

  10. When asked how the drive to regulatory reform was affecting their business, executives most frequently said “planning or acting to get ahead of reform.” Executives Decide To Take Action to Get Ahead Of Regulatory Reform

  11. By far and away, “changes to risk management policies” was the most frequent action cited by executives in all sectors Actions Executives Are Taking To Get Ahead Of Regulatory Reform

  12. Executives Say Uncertainty Poses a Challenge to Their Long-Term Planning When executives were asked if uncertainty affected their long-term business planning, an overwhelming majority said yes. (N=126) (N=25) (N=34) (N=67) • In their own words... • “Clients are holding off on decision-making and our own decisions re: growth and expansion of the business are being held off until we know exactly what goes through.” • “Planning a 5 year strategic plan with no clear understanding of the financial impact of reform (is a concern).” • “You can plan for what you know, but it is difficult to prepare for uncertain government intervention.” • “Product development often takes months once funding is secured. No funding decisions of any magnitude in the Securities area are certain at this point.” • “We’re concerned that plans we put in place and invest in now will be rendered ineffective with regulatory changes.” • “Uncertainty forces one to think of alternate strategies and spend time on advocacy versus spending time on patients and executing against care delivery plans.”

  13. Most Executives ExpectRegulatory Reform To Expand Percentage of executives who agreed with the statement: “There is a push towards regulatory reform in this country that extends beyond the financial sector.”

  14. Sectors Of The Economy Where Executives Expect Regulatory Reform To Occur On average, each executive mentioned four broad areas

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