Sustainable Cost
Optimization (SCO)
for regional HQs and Shared
Service Centers in Switzerland
Schaffhausen, 11.9.2014
in association with
Introduction
Fuelled by a strong Swiss Franc and a strong economy direct and indirect
expenses are increasing for key functions
Strong Swiss Franc
Real Estate
Trend for Staff growth at
reg. HQs
Changes in corp. taxation
High Productivity
Clusters
Well trained workforce
Top Infrastructure
International Business
Environment, etc.
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
1
Typical HQs and SSC functions and possible optimization opportunites
■ Professional Service Suppliers
■ SCM Performance
■ Vendor Management
■ Finance Organisational Optimization
■ CPM Solutions
■ Alternative Locations
■ Benchmark with Outside Providers
■ Treasury Management
■ Governance, Risk & Compliance
■ Facility Management
Procurement
and
Supply Chain
■ Reporting Cycle Review
■ Lease Review
■ Facilities Utilisation
Real Estate /
Facilities
Finance
Function
Operating
Model
■ Indirect Tax Management
■ Custom & Trade Management
■ Contract + Tax Compliance
■ Transfer Pricing
Human
Resources
Tax / Legal
Function
IT and
Management
Information
Systems
■ Tax & Legal Compliance
■ Tax Planning, Tax Rulings
■ Legal Entity Maintenance & Rationalisation
■ Workforce Optimization
■ Training & Education
■ Visa / Work Permits
■ Salary Benchmarks
■ Payroll
■ IT Supplier / Governance
■ IT Infrastructure
■ Expat Packages
■ HR Operations
■ Data & Records Management
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
2
Human Resources
Human
Resources
International
Assignment Policy
Benefits
Optimization
Local vs Expat
Costs
Expat cost USD200-250k
Standard Office
Procedures
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
3
Procurement
and Supply
Chain
Procurement Management
Education
Housing & Shipping
Process
Improvement
Volume Discounts
Vendor
Management
Fleet Management
Telecom
In house
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
Outsourcing
4
Real Estate and Facilities
Lease
Agreement
Renegotiations
Real Estate /
Facilities
Regulations
Optimization
Utilization
Ratios
Cleaning
Services
Security
Services
Facility
Management
Support
Services
Property
Services
Infra
Services
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
5
Finance Function
Finance
Function
Actions performed in a Pharma multinational
■ Data entry – 4 different systems
■ 100’s of Excel spreadsheets
■ Data quality – double/triple transactions
Transactions
Reporting
Optimization of
Finance function
Reporting
Analysis
Transactions
s
Analysis
Centralization - Decentralization
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
6
IT and
Management
Information
Systems
IT and Management Information Systems
Actions performed in a multinational company in the Information Industry
■ Server consolidation
■ Network improvement (routers)
■ Vendor negotiations (printer, Laptop and other IT equipment)
■ Efficient back-up solutions (cloud)
IT – Strategy
Set-up of Network
Procurement IT Equipment
Infrastructure
(Security, HVAC, Cabling)
Set-up PC, Monitors,
i-phones…
Capacity Planning
(Storage, Racks,…)
Set-up Server Architecture (incl.
cloud computing)
Helpdesk
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
7
Cross-functional analysis
Tax / Legal
Function
Tax and Legal Model
■ Identify benefits of current tax / legal set up in terms of existing tax rulings, ETR, risks and
efficiencies
■ Identify main administrative costs (tax & regulatory compliance costs, legal expense, etc.)
and its improvement potential
■ Assess legal / tax structure in regards to maintain / increase competitiveness and
profitability
■ Assess if new regulations (e.g. requirements for principal structures, BEPS, Corporate Tax
Reform, CbC Reporting) have been proactively considered
■ Evaluate usage of Tax Technology Tools
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
8
Our approach towards sustainable cost optimization
[…]
Project Planning
Fact finding
Analysis
Results
■ Analyze governance
model and strategy
■ Interview a limited
number of key
individuals
■ Analyze
organizational /
process charts and
applied tax planning
model
■ Heat map with cost
drivers for main
functions
■ Prepare a custom
review plan based on
cost structure, tax
model and projected
benefits
■ Review functional
models for key
functions
■ Collect tax rulings
■ Indentify quick cost
savings wins and
strategic cost
optimization
opportunities
■ Review tax-set up
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
■ Action plan for
immediate and
strategic cost saving
opportunities
■ Gap analysis of
current situation
against projected
strategies in tax
rulings highlighting
areas of improvement
9
Example of heat map
Key:
Highest priority
Middle priority
1
2
3
4
5
6
7
8
Reporting
Charts of account
Treasury
System
5
2
Important
3
Low
Finance
Function
Tax / Legal
Function
1
4
14
Compensation
Payroll
Training/Education
8
9
Contract compliance
Transfer pricing model
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
IT and
Management
Information
Systems
10
13
Tax Planning
Human
Resources
7
6
12
12
13
14
Guidelines
11
9
10
11
Data Management
IT infrastructure
IT vendor management
10
Action Plan
Functions
Documents
Actions
Human Resources
■ Review of Guidelines
■ Assess processes
■ Compensation and Benefits
■ Benchmark
■ Relocation process
■ Best practice
Procurement
■ Review of vendor contracts
■ Identify savings potential
based on other deals
Finance
■ Data Flow
■ Identify process
improvements
■ Roles and Responsibilities
■ Systems Support (excel?)
Real Estate/Facilities
■ Lease agreement
■ Floor plans
■ Assess potential lease
renegotiation
■ Assess utilization rate
■ Facility Management
organization
IT Information Systems
■ Assess IT architecture
■ Provide alternatives
■ Vendor agreement
■ Benchmark agreements
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
11
Savings overview (1-1.5 years)
Area
CHF
Cost Savings
Optimization of HR cost
1.5 M
10%
Relocation (housing & shipping)
0.3 M
40%
Telecom
0.1 M
20%
Education
0.1 M
10%
Building cost (inclusing furniture)
2M
20%
Total
4M
15%
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
12
Example of gap analysis
Tax
Tax rate relevant? Risk
Worst case Area of
tax rate improvement
Probable
tax rate
Topic
Projected
Current
Tax status
Employees
50
5
Full tax
holiday for
10 years
0
Yes
Abolishment of
tax holiday and
claw back
12 - 24 Add more
people or obtain
tax ruling
0 - 10
0 CHF
Full tax
holiday for
10 years
0
Yes
Abolishment of
tax holiday and
claw back
12 - 24 Invest or obtain
tax ruling
0 - 10
Functions
European
Head of
Full tax
CEO, CFO,
Marketing holiday for
COO, Heads of
10 years
Procurement,
Marketing,
Quality
Control, …
0
No
n/a
0 Add more
people or obtain
tax ruling
0
Business
Model
Principal
structure with
limited risk
distributors
IP
Full tax
Company holiday for
10 years
0
No
n/a
0 Change
business model
or obtain tax
ruling
0
Profit
10 MCHF pa
500
Full tax
MCHF pa holiday for
10 years
0
Yes
No application of
tax holiday on
excess profit
Investments 20 MCHF in
production
facility
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
12 - 24 Obtain tax
ruling
5 - 10
13
Typical HQs and SSC functions and possible optimization opportunites
■ Professional Service Suppliers
■ SCM Performance
■ Vendor Management
■ Finance Organisational Optimization
■ Alternative Locations
■ CPM Solutions
■ Facility Management
Procurement
and
Supply Chain
■ Benchmark with Outside Providers
■ Lease Review
■ Reporting Cycle Review
■ Treasury Management
■ Governance, Risk & Compliance
■ Facilities Utilisation
Real Estate /
Facilities
Finance
Function
Operating
Model
■ Indirect Tax Management
■ Custom & Trade Management
■ Contract + Tax Compliance
■ Transfer Pricing
Human
Resources
Tax / Legal
Function
IT and
Management
Information
Systems
■ Tax & Legal Compliance
■ Tax Planning, Tax Rulings
■ Legal Entity Maintenance & Rationalisation
■ Workforce Optimization
■ Training & Education
■ Visa / Work Permits
■ Salary Benchmarks
■ Payroll
■ IT Supplier / Governance
■ IT Infrastructure
■ Expat Packages
■ HR Operations
■ Data & Records Management
© 2014 KPMG AG/SA, a Swiss corporation, is a subsidiary of KPMG Holding AG/SA, which is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. Printed in Switzerland. The KPMG name, logo and “cutting through complexity” are registered trademarks or
trademarks of KPMG International.
14
André Guedel
Head International Market Development
KPMG AG
Badenerstrasse 172, 8026 Zürich
T: +41 (0) 58 249 28 24
M: +41 (0) 79 696 75 11
E: aguedel@kpmg.com
Thomas Linder
Director
International Corporate Tax
KPMG AG
Badenerstrasse 172, 8026 Zürich
T: +41 58 249 54 58
M: +41 (0) 79 597 67 72
E: tlinder@kpmg.com
© 2014 KPMG AG/SA, a Swiss corporation, is a
subsidiary of KPMG Holding AG/SA, which is a
subsidiary of KPMG Europe LLP and a member of
the KPMG network of independent firms affiliated
with KPMG International Cooperative (“KPMG
International”), a Swiss legal entity. All rights
reserved. Printed in Switzerland. The KPMG name,
logo and “cutting through complexity” are registered
trademarks or trademarks of KPMG International.
Herbert Sterchi
Managing Partner
Herbert Sterchi Consulting
Zürichstrasse 9
6004 Luzern
M: +41 (0) 79 448 31 28
E: hs@hsconsultinggroup.com
www.hsconsultinggroup.com