Sustainable Cost Optimization (SCO)
for regional HQs and Shared Service Centers in Switzerland
Schaffhausen, 11.9.2014
in association with
© 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.
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Introduction
Fuelled by a strong Swiss Franc and a strong economy direct and indirect expenses are increasing for key functions
Strong Swiss FrancReal Estate
Trend for Staff growth at reg. HQs
Changes in corp. taxation
High ProductivityClusters
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.
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Typical HQs and SSC functions and possible optimization opportunites
OperatingModel
■ IT Supplier / Governance
■ IT Infrastructure
■ Data & Records Management
IT and Management Information
Systems
■ Professional Service Suppliers
■ SCM Performance
■ Vendor Management
Procurementand
Supply Chain
■ Finance Organisational Optimization
■ CPM Solutions
■ Benchmark with Outside Providers
■ Reporting Cycle Review
■ Treasury Management
■ Governance, Risk & Compliance Finance Function
■ Indirect Tax Management
■ Custom & Trade Management
■ Contract + Tax Compliance
■ Transfer Pricing
■ Tax & Legal Compliance
■ Tax Planning, Tax Rulings
■ Legal Entity Maintenance & Rationalisation
Tax / Legal Function
■ Alternative Locations
■ Facility Management
■ Lease Review
■ Facilities UtilisationReal Estate /
Facilities
■ Workforce Optimization
■ Training & Education
■ Visa / Work Permits
■ Salary Benchmarks
■ Payroll
■ Expat Packages
■ HR Operations
Human Resources
© 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.
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Human Resources
InternationalAssignment Policy
Local vs ExpatCosts
Expat cost USD200-250k
Standard Office Procedures
Benefits Optimization
Human Resources
© 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.
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Procurement Management
In house Outsourcing
Vendor Management
Process Improvement
Volume Discounts
Education
Housing & Shipping
Fleet Management
Telecom
Procurementand Supply
Chain
© 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.
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Real Estate and Facilities
RenegotiationsLease
AgreementRegulations
Utilization Ratios
Optimization
Support
Services
Facility
Management
Property
Services
Infra
Services
Cleaning
Services
Security
Services
Real Estate /Facilities
© 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.
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Finance Function
Transactions Reporting
s
Analysis
ReportingAnalysis
Transactions
Optimization of Finance function
Centralization - Decentralization
Actions performed in a Pharma multinational
■ Data entry – 4 different systems
■ 100’s of Excel spreadsheets
■ Data quality – double/triple transactions
Finance Function
© 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.
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IT and Management Information Systems
IT – Strategy
Procurement IT Equipment
Set-up PC, Monitors, i-phones…
Set-up Server Architecture (incl. cloud computing)
Capacity Planning (Storage, Racks,…)
Helpdesk
Infrastructure (Security, HVAC, Cabling)
Set-up of Network
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 and Management Information
Systems
© 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.
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Cross-functional analysis
■ 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
Tax and Legal Model
Tax / Legal Function
© 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.
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Analysis
■ Analyze organizational / process charts and applied tax planning model
■ Indentify quick cost savings wins and strategic cost optimization opportunities
■ Review tax-set up
Results
■ Heat map with cost drivers for main functions
■ Action plan for immediate and strategic cost saving opportunities
■ Gap analysis of current situation against projected strategies in tax rulings highlighting areas of improvement
Fact finding
■ Interview a limited number of key individuals
■ Review functional models for key functions
■ Collect tax rulings
Project Planning
■ Analyze governance model and strategy
■ Prepare a custom review plan based on cost structure, tax model and projected benefits
[…]
Our approach towards sustainable cost optimization
© 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.
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Example of heat map
Highest priority
Middle priority
Important
Low
Key:Reporting Guidelines
1
23
4
5
6
8
7
14
12
13
11
109
Charts of account
Treasury
System
Compensation
Payroll
Training/Education
Data Management
11IT infrastructure
IT vendor management
109
321
Tax Planning
Contract compliance
Transfer pricing model141312
765
4 8
Tax / Legal Function
Finance Function
Human Resources
IT and Management Information
Systems
© 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.
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Action Plan
Functions Documents Actions
Human Resources ■ Review of Guidelines
■ Compensation and Benefits
■ Relocation process
■ Assess processes
■ Benchmark
■ Best practice
Procurement ■ Review of vendor contracts ■ Identify savings potential based on other deals
Finance ■ Data Flow
■ Roles and Responsibilities
■ Systems Support (excel?)
■ Identify process improvements
Real Estate/Facilities ■ Lease agreement
■ Floor plans
■ Assess potential lease renegotiation
■ Assess utilization rate
■ Facility Management organization
IT Information Systems ■ Assess IT architecture
■ Vendor agreement
■ Provide alternatives
■ 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.
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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) 2 M 20%
Total 4 M 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.
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Example of gap analysis
Topic Projected Current Tax status Tax rateTax relevant? Risk
Worst case tax rate
Area of improvement
Probable tax rate
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
Investments 20 MCHF in production facility
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 CEO, CFO, COO, Heads of Procurement, Marketing, Quality Control, …
Head of Marketing
Full tax holiday for 10 years
0 No n/a 0 Add more people or obtain tax ruling
0
Business Model
Principal structure with limited risk distributors
IP Company
Full tax holiday for 10 years
0 No n/a 0 Change business model or obtain tax ruling
0
Profit 10 MCHF pa 500 MCHF pa
Full tax holiday for 10 years
0 Yes No application of tax holiday on excess profit
12 - 24 Obtain tax ruling
5 - 10
© 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.
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Typical HQs and SSC functions and possible optimization opportunites
OperatingModel
■ IT Supplier / Governance
■ IT Infrastructure
■ Data & Records Management
IT and Management Information
Systems
■ Professional Service Suppliers
■ SCM Performance
■ Vendor Management
Procurementand
Supply Chain
■ Finance Organisational Optimization
■ CPM Solutions
■ Benchmark with Outside Providers
■ Reporting Cycle Review
■ Treasury Management
■ Governance, Risk & Compliance
Finance Function
■ Indirect Tax Management
■ Custom & Trade Management
■ Contract + Tax Compliance
■ Transfer Pricing
■ Tax & Legal Compliance
■ Tax Planning, Tax Rulings
■ Legal Entity Maintenance & Rationalisation
Tax / Legal Function
■ Alternative Locations
■ Facility Management
■ Lease Review
■ Facilities UtilisationReal Estate /
Facilities
■ Workforce Optimization
■ Training & Education
■ Visa / Work Permits
■ Salary Benchmarks
■ Payroll
■ Expat Packages
■ HR Operations
Human Resources
© 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.
André GuedelHead International Market DevelopmentKPMG AGBadenerstrasse 172, 8026 Zürich
T: +41 (0) 58 249 28 24 M: +41 (0) 79 696 75 11E: [email protected]
Herbert SterchiManaging PartnerHerbert Sterchi ConsultingZürichstrasse 96004 Luzern
M: +41 (0) 79 448 31 28E:[email protected]
Thomas LinderDirectorInternational Corporate TaxKPMG AGBadenerstrasse 172, 8026 Zürich
T: +41 58 249 54 58M: +41 (0) 79 597 67 72E: [email protected]
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