The problems and the solution
Historically, many multinational companies have left the design and financing decisions related to benefit programs to their local subsidiaries , with minimal oversight or control from headquarters. This includes the selection of brokers and other consultants that provide advice on these programs locally. This decentralized approach has a number of implications:
- In the absence of strategic direction from headquarters, benefit designs may or may not be consistent with the overall global benefits strategy.
- Depending on the level of local negotiating power (and the role of intermediaries), total premiums paid in local markets may not be as competitive as they could be.
- Savings from multinational pooling may be suboptimal due to a lack of proactive management and coordination of the pooling strategy.
- There is little potential for leverage on broker and consulting fees globally.
- There may be situations in which duplicate or overlapping benefits exist.
- It is difficult to apply consistent governance practices and processes.
- Basic information on the risk benefit programs around the world (such as plan designs, insurers and premiums) may not flow up to headquarters effectively.
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