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Globalization continues to shape the financial services industry, requiring firms to internationalize their operations and expand their footprints across the world. In the post-Global Financial Crisis era, most financial services companies took a hard look at their corporate structures and global footprint. More recently, Brexit, and a looming trade war, have financial services firms considering non-traditional site selection locations that could shake up an industry built on the power and prestige of long-standing traditions. Venerated financial hubs such as London, New York City, and Tokyo have storied reputations and street credibility, but they are also incredibly expensive and congested in a world that is becoming increasingly cost-conscious, nimble and decentralized. Another important element that has accelerated this trend is the development of the fintech industry, which promises to disrupt traditional business models and ways these companies have interacted with their customers thus far. FinTech is poised to revolutionize mainstream banking and consumer engagement through advanced platforms and apps that will streamline mobile payments, peer-to-peer loan transactions, and modernize how people invest in stocks, cryptocurrencies, and conduct other Internet-based financial transactions through their smartphones. This decentralization of the industry presents unprecedented opportunities especially for growth or emerging economies. Determining exactly where, and how, to establish a new presence in different states, countries, or cultures requires a complicated mix of critical factors that could—without notice—devastate not only the expansion venture, but the entire brand and enterprise. The key to understanding any complex situation is to break it down into its core elements and examine it, from every angle, how those elements are connected and create either success or failure. For financial services firms, effective site selection requires a cohesive team that offers a diverse array of expertise and competencies in everything from real estate and international tax laws to environmental engineering and supply chain logistics. Navigating this level of sophistication requires extraordinary diligence. Below is a list of seven site selection challenges financial services firms must resolve to avoid costly expenses, if not permanent damage to their brands. 1. Cultural Differences: Cross-cultural communications pose a variety of unseen and unexpected challenges as different people can experience the same interaction and yet walk away with entirely different impressions and conclusions. Site selections require in-depth discussions about elaborate topics such as local licensing rules and regulations, construction and utility issues, and other culturally sensitive matters regarding labor laws, political matters, and financial protocols. Every site selection team must have members who are fluent in the language and cultures of the selected geographies. 2. Poorly Defined Requirements: Every site selection is unique and presents its own particular sets of challenges and obstacles. Too often financial services firms overlook important details in their fervor to expand their footprints and impress stakeholders. Smart site selection teams rely on built-in checks and balances to ensure requirements are clearly defined and prioritized throughout the process, from discovery to final negotiations. Simultaneously considering multiple sites helps teams abide by a definitive scope of requirements that must be confirmed with each site assessment. If the initial requirements are not clearly defined and delineated, the entire project is put in jeopardy. 3. Lack of Transparency: Site selections involve a dizzying number of people, opinions, and professional insights that do not always align or connect in productive ways. Communication breakdowns can impact every level of the process, and result in costly mistakes that may require unbudgeted time and money to correct. Site selection teams must ensure that protocols are in place to guarantee all criteria are measured through objective facts and data. All human beings are fallible, so site selection teams must follow strict guidelines that protect the integrity and transparency of data sources, research procedures, and the dissemination and analysis of information. 4. Incomplete Research: Site selections impact an extensive spectrum of stakeholders, and each of them must be carefully consulted. Most instances of incomplete research are the result of failing to solicit the full involvement of all of the stakeholders—and not just the readily obvious ones. In addition to the decision-makers and inhabitants of host nations and municipalities and their respective regulatory bodies, site selection teams must consider neighboring municipalities, labor and economic development organizations, and other relevant community, political, or industry groups. Addressing the priorities of these stakeholders early on is key to a successful site selection. 5. Underestimating Full Operational Impact: Site selection is a resource-intensive endeavor, and it is easy for companies to underestimate the full impact the process can have on existing priorities and operations. Even the smallest reallocation of human capital, technology, or other assets can reverberate throughout a company and its external partners in ways that disrupt important routines and relationships. Before initiating the site selection process, companies should perform a stress test that identifies the people and processes most likely to be impacted by site selection procedures. 6. Inadequate Oversight: Effective leadership is key to running a successful site selection project. The numerous groups and individuals that contribute to site selection decisions make the operation highly susceptible to workflow silos, data fragmentation, and neglected performance benchmarks. Site selection teams must have an entity responsible for accountability on every level—from defining requirements and evaluating communities to tax/real estate analysis and the final site acquisition. Oversight mechanisms must be implemented from the very beginning to prevent corrupted data or processes from contaminating ensuing discussions and decisions. 7. Brand Integrity: Expanding operations to increase a financial services firm’s global footprint is a very public, costly, and high-profile pursuit. News of a site selection failure quickly spreads throughout the industry, and across the world. Financial services firms that “get it wrong” suffer catastrophic damage to their brand identity, and become associated with perceptions of incompetence, poor management, and bad decision making. Site selection teams should work with media companies to lead the narrative regarding the efficacy and benefits of the site selection. Firms that “get it right” elevate their brand above the competition and can build future business and profits based on a well-orchestrated site selection operation. In conclusion, financial services firms must remember that each site selection project is a singular endeavor that will require flexibility, foresight, and a willingness to learn. Using the same strategies and asking the same general questions is a recipe for failure. However, implementing an unbiased, dynamic, and comprehensive strategy will identify challenges early on, enable realistic solutions, and optimize the entire process. Situational awareness must be observed at all times, from every member of the team. After all, successful site selections are the ones where people take precedence over the place.

Mario Ferraro | 15 Nov 2018
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Career

Multinational companies, especially those in North America and Europe, are increasingly looking east at emerging markets, with a focus on Asia, as new engines of growth. With a growing middle-class population and adoption of technology on the rise, these markets present opportunities at a time when growth in other parts of the world may have slowed or plateaued. To be able to enter and scale their presence across these markets, multinationals are presented with the challenge of mobilizing their seasoned executives and persuading them to move to emerging market hubs. Emerging But Unequal Asia   With increasing improvements in infrastructure, public services and transportation across Asia, this persuasion is less of a challenge than it used to be a decade ago. However, development in the region has not been ubiquitous or evenly spread and therefore the question of hardship, especially in long-term assignments, invariably arises. The issue of hardship and how an employer can address this concern is often compounded if the assignment entails movement for entire families. Differences in living standards across the region warrant serious consideration for a number of reasons. First, they can create anxiety for the assignee and family, which may lead to reluctance to undertake the assignment. Second, change in living conditions may erode the employee’s morale and affect their performance over time. This could ultimately lead to “assignment failure,” that is, failure to achieve the desired objectives of the assignment and/or a request from the assignee to be repatriated prematurely. Considering the significant financial investment made in deploying an employee overseas, assignment failures are best avoided. Finally, poor planning and preparation for differences in living standards can expose the assignees to a number of risks with potentially harmful consequences. Employers have a “duty of care” obligation toward their employees, which extends to overseas assignments. 2018 Quality of Living Survey   According to Mercer’s recently released Quality of Living 2018[1] survey, Singapore, the most progressive economy, continues to lead the region in terms of ranking. We also see marked improvement in the rankings of other metropolitan hubs in the region, with continued investments in infrastructure and public services by governments in Asia. Five Japanese cities performed well: Tokyo (50), Kobe (50), Yokohama (55), Osaka (59) and Nagoya (64). Other notable cities in Asia include Hong Kong (71), Seoul (79), Taipei (84), Shanghai (103), and Beijing (119). Governments in the region recognize that offering a certain quality of life—making it attractive for Western multinationals to setup and scale their emerging markets or Asia operations—to today’s digital-first and globally mobile talent is the key to attracting trade and investments. Mercer’s proprietary Quality of Living methodology compares living standards in terms of 39 factors grouped into 10 categories for 450 cities around the world. The categories include political and social environment; economic environment; socio-cultural environment; medical and health considerations; schools and education; public services and transportation; recreation; consumer goods; housing; and natural environment. The scores attributed to each factor, which are weighted to reflect their importance to expatriates, permit objective city-to-city comparisons. However, unlike some of the more quantifiable factors mentioned above, quality of life implications are not only monetary, but can also impact employees’ and their families’ entire ways of life. This can make compensation package calculations a bit trickier. For example, an employee working in a high-ranking quality of life city such as Frankfurt probably wouldn’t be excited about relocating to a remote town in a hardship location. Salary data tells us that employees in a higher-ranking market are likely to be paid more due to the local market compensation trends and a higher cost of living and that employees who are relocated to cities with a lower quality of living will want some extra incentives to take on these less-than-ideal assignments. What Can Organizations Do?   To be better prepared, multinational organizations looking to send employees to such assignments could consider the following: In terms of planning, the company would need to carefully evaluate the risks, prepare the assignees and provide as much “on the ground” support and advice as possible to help the assignees and families understand the foreign environment, navigate the various challenges and mitigate the risks. This also includes ensuring that adequate insurance cover is provided for medical emergencies, accidents and fatalities. Extra care is required when deploying employees to conflict zones or locations prone to natural disasters, as many insurance policies exclude “acts of war” or “acts of God,” and may therefore require additional policy riders.    From a pay standpoint, the company would need to adequately incentivize and compensate assignees to undertake assignments to such difficult locations. Failure to incentivize these moves would ultimately result in high refusal rates and “assignee bias” toward less difficult locations. Companies also need to have a short- to medium-term roadmap for designing assignee compensation, based on their talent requirement and available pool of “assignable” executives. “Attracting and retaining the right talent is set to be one of the key challenges for businesses over the next five years,” [2] according to Ilya Bonic, senior partner and president of Mercer’s Career business. As with most strategy and policy decisions, there are no silver bullets, and every multinational will need to weigh in their employee mobility decisions in the context of their business and the macroeconomic environment. The talent challenge, however, has meant that evaluating these decisions in light of what employees want has become increasingly important. Learning from the strengths and weaknesses of cities around the world could provide a blueprint for finding the right talent in an increasingly globalized or connected world.   1 Insights  https://mobilityexchange.mercer.com/Insights/quality-of-living-rankings 2 Vienna Tops Mercer's 20th Quality Of Living Ranking  https://www.mercer.com/newsroom/2018-quality-of-living-survey.html

Mario Ferraro | 25 Mar 2018
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Career

Over last few decades, globalization has pushed many organizations to turn their focus towards emerging markets in search of new clients and competitive advantage. But the draw of the growing middle-class consumer base is often matched by the struggle to find talent with the rights skills and competencies. The solution is generally to import foreign employees to work alongside local hires, to provide the skills and experience necessary to run the business in the short-term and help build local capabilities for the long-term.  But asking an employee to uproot her life and move isn’t an easy sell, especially for assignments of long duration. Add a challenging economic, social or geopolitical environment, and you leave employees with a difficult choice. To bring the whole family with them has clear advantages, but would also mean exposing their spouse and children to the same level of hardship. The alternative—leaving the family behind—brings all the emotional challenges associated with long-term separation. Some organizations offer the intermediate option of stationing the family in a nearby alternative location, reducing the distance between the employee and family members and allowing for more frequent family visits. For example, it’s not uncommon for employees on assignment in some middle eastern locations to relocate family members to Dubai. Irrespective of the situation, differences in living standards deserve serious consideration for a number ofreasons. Firstly, they can create anxiety for the employee and his family, which may lead to reluctance to undertake the assignment. Secondly, living condition may erode the employees’ morale and affect his performance over time. This could ultimately lead to “assignment failure”: the employee falling short of achieving the objectives of the assignment and/or a request to be repatriated prematurely. Considering the significant financial investment made in deploying an employee overseas, assignment failures are to be avoided at all costs. More importantly, poor planning and preparation for differences in living standards can expose employees deployed abroad to a number of risks with potentially harmful or even lethal consequences. Employers have a “duty of care” obligation towards their employees that extends to overseas assignments. There are several factors that can contribute to differences in living conditions when moving between locations. The annual mercer quality of living survey evaluates local living conditions in more than 450 cities surveyed worldwide. Mercer’s proprietary quality of living methodology compares living standards in terms of 39 factors grouped into 10 categories: 1. Political and Social Environment In some countries, the political environment may expose the employee to prosecution for saying or writing the wrong thing. In others, the social environment may be characterized by high rates of violent crime or exposure to terrorist attacks or social unrest. 2. Economic Environment Employees and their families may not be prepared for life in a country going through significant economic stress, or with a less developed economy. 3. Socio-cultural Environment Social and cultural differences can make going about one’s daily routine or making new connections difficult for foreign employees and their families. 4. Medical and Health Considerations Some countries may not have the medical infrastructure in place to meet the needs of employees with health conditions, or to provide reasonable standards of care in case of accidents or emergencies. 5. Schools and Educational Standards Employees with children may be forced to pay for private schooling or overseas boarding schools in locations where international schools are lacking. 6. Public Services and Transportation Infrastructure Others may not be able to drive due to legal or safety concerns, forcing them to rely on poor or still-unsafe public transportation. 7. Recreation Some locations may have very limited recreational facilities, depriving employees of much-needed diversion outside of work. 8. Availability of Consumer Goods Employees deployed to remote locations are likely to find a very limited range of everyday goods, and a shortage of many of their favorite items and brands. 9. Housing Standards Housing standards can vary widely between locations. In many areas it is important to pay particular attention to the security of the premises, as foreigners can be tempting targets for criminals. 10. Natural Environment Certain locations are notorious for natural hazards such as floods, monsoons, earthquakes and volcanic eruptions—unfamiliar occurrences for many employees.   It’s easy to see why it’s important to plan, prepare and support the employee to manage differences from the home location to the assignment location. Even the less urgent factors cited above have great impact on employees’ quality of life. We recommend organizations respond on two fronts: In terms of planning, the company needs to carefully evaluate the risks, brief the employee and provide as much “on the ground” support and advice as possible. The company may need to develop crisis management processes and procedures. Proper planning also includes ensuring that adequate insurance coverage is provided for medical emergencies, accidents and fatalities. Extra care is required when deploying employees to conflict zones or locations prone to natural disasters, as many insurance policies exclude “acts of war” or “acts of god,” and may therefore require additional policy riders. From a pay standpoint, the company needs to adequately incentivize and compensate employees for undertaking assignments in difficult locations. Failure to incentivize these moves can ultimately result in high refusal rates and strong bias towards locations perceived as “easier”—leaving the company with the same talent shortage it was attempting to address.   What Emerging Markets Can Do To Attract Skilled Talent   Having run the quality of living study for 19 years, we observed that infrastructure deserved its own ranking, as there is a strong connection between quality of infrastructure and a city’s attractiveness for global talent. We focused on power and potable water supply, telecom penetration, public transportation and international air travel connectivity with this new ranking. Singapore topped the chart, leading all other cities in the developed world. The correlation between the city state’s world-class infrastructure and the number of foreign workers who call Singapore home—including this writer—is clear.  Asia is leading the world’s economic growth today, but also its infrastructure growth. Governments in Asia and elsewhere across emerging markets recognize that investments in infrastructure go a long way in attracting multinational companies and the skilled talent that comes with them. A positive cycle of progress is created as their local economy gets a boost from the new skills and opportunities available. In the meantime, however, organizations in both emerging and developed markets looking to expand must keep in mind the considerations enumerated above as they deploy their talent abroad. There is no such thing as too much planning when it comes to ensuring the safety, happiness and productivity of a mobile employee.

Mario Ferraro | 28 Apr 2017
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