1  The 2nd Younger Members Convention A Guide to International Benefits 1-2 December 2003 The Glasgow Moat House

2 Overview Background Types of services offered Global benefit consulting Skill set Example

3 The services we offer to clients... Initial Needs –Expatriates –Benefit Audit Ongoing services –Global policy/governance –Accounting Co-ordination –Multinational Pooling Cross Practice –Global Investments –Global stock plans –M&A: Due diligence, Integration

4 Competitiveness Avoid black holes! Cost effectivenessConsistency Compliance Benefit Inventory/Audit Identifying and understanding what is "out there". Sharing information

5 Expatriate Arrangements Development of expatriate policy International pension plans (design, funding and vendor selection) Advice on individual cases –terms –compensation –pension Developing cost effective, business supporting solutions

6 Ongoing Services Global policy / governance Accounting Co-ordination Multinational Pooling

7 Corporate Structure Shareholders

8 Managing Corporate Risk and Governance Compensation - base versus "at risk" - metrics for reward Benefits programme design Efficiencies of management Finance Volatility of cost. Increasing cost Attraction/Retention of key employees - Differentiation - Market competition Environment: Globalisation, Workforce, Demographics, Talent Gap External influences Market Scrutiny: Accounting Standards, Post Enron/Worldcom, Rating Agencies Legislation: Disclosure, Diversity, EU+ Domestic Alignment to strategy - Reinforcing "right" behaviours - Avoid lock in of wrong people Human Resources The right people at the right price Corporate Risk in compensation & benefits Special risks of deferred compensation (LTIPS, Share (option) plans, pensions etc) Understanding cost - actuarial assumptions Managing risk over deferral period - investment strategies Transfer of risk - insurance

9 Why the interest now? Corporate behaviour is moving towards –greater control –concentration on core activities –labour mobility –economies of scale –removal of duplication –maintaining resources and skill Market focus on governance and reputational risks Market focus on unfunded pension obligations Too important for Corporate HQ to leave to local level

10 What balance do you have? - and what do you aspire to? Tight framework Central control Loose framework Local autonomy How deep an involvement? Corporate Benefit's Mission Strategy Tactical issues Day to day management Where can you add value?

11 The role of the International Consultant Good communication Shared understanding Alignment to business strategy Communications International consultant to HQ Local Consultant ClientHQ Client local operations Communications Regular interaction

12 Plan funding Funding strategy - should we fund, and how? –book reserves –trust fund/foundation –insurance Actuarial valuations, solvency and surplus requirements The interaction with investment strategy Stochastic simulations - understanding the funnel of doubt and the scope for plans to impact on corporate finances Balancing corporate needs with local practice and requirements

13 Accounting Co-ordination -two different perspectives A Compliance Requirement. Corporate GAAP numbers must be: consistent measures of cost and funding level of material plans presented in common, easily understood format ready on time A Foundation for Plan Management. Use the numbers for a starting point for assessing the risks of each plan M&A consistency (huge sums at stake) comparability of business unit profitability input into an asset allocation process which has regard to Corporate's P&L exposure We bring advice, project management and in-depth valuation capability Understanding risk and avoiding surprises

14 Multinational Pooling To pool or not to pool? –Experience analysis –Optimal loss retention –Database of non-pooled plans Network selection Negotiating terms Reinsurance to captive Communication and implementation Monitoring of pools Accessing volume discounts, improved terms, and information

15 Cross Practice M&A: Due diligence, Integration Global Investments Global stockplans

16 Global Benefit Consulting Provide a view of 'the big picture' and help define the issues Multi country project management (eg M&A, accounting) Develop and apply best practices consistently Provide detailed support and knowledge on specific areas –country –expatriate/internationally mobile employees

17 The Skill Set Flexible Operating outside a defined Comfort Zone Managing lack of knowledge of detail Sensitive to different cultures Good interpersonal skills Pragmatic and practical blended with technical knowledge Significant network for support

18 Example Multi-country benefit audit (including compensation) M&A Global investments Global policy/governance Multinational pooling Global accounting co-ordination