GLOBAL BUSINESS STRATEGIES Transcript CHAPTER 1: Welcome and Introduction STEPHANIE: Hello and welcome to this Global Business Strategies discussion where we aim to offer new insights on intercontinental business practices and vital global economies. There's little question that corporations are more global than ever. In 2002, the Fortune Global 500, Fortune's annual ranking of the world's largest corporations, boasted businesses from 27 countries. The U.S. was home to 192 Global 500 concerns or nearly 40% of the companies on the list. In 2011, some 36 countries boasted companies on the Global 500 and the number of U.S. headquartered companies had fallen to 133. Multi-nationals and virtually every industry are boasting increased revenue and profits from outside their home countries and many large corporations employ more workers abroad than at headquarters. We've assembled a distinguished panel of financial professionals to discuss the challenges, best practices and rewards of operating far-flung organizations. Joining us for the discussion are Roger Carlile, Chief Financial Officer of FTI Consulting, a U.S. based firm that offers a diverse portfolio of consulting services ranging from strategy to litigation to corporate restructuring. Stephan Baars, Chief Financial Officer at BCD Travel, a corporate travel management company that serves more than 90 countries on 6 continents. Joanna Lohkamp, Chief Financial Officer, NBBJ, a global architecture and design firm with operations around the world including offices in Beijng, Shanghai and London. I'd also like to introduce Mike Katergaris, Director and Senior Corporate banker in the global corporate and investment bank at Bank of America Merrill Lynch. CHAPTER 2: Shifts in Global Business Strategy STEPHANIE: Mike, let's start with you. Tell us a little bit about Bank of America Merrill Lynch's global footprint and the services that you offer your clients around the world. MIKE: Bank of America Merrill Lynch has a presence and offers banking services in over 40 countries around the world outside of the U.S. Outside of the US on the global corporate investment banking platform we offer our clients M&A and advisory services, capital markets, risk management, cash management investment solutions. STEPHANIE: So, Mike, what has changed in the last two to three years as your clients seek to expand and broaden their presence internationally? MIKE: I think the financial crisis has changed the way companies look at the globe. They try to focus on getting more information into the company; they try to focus on minimizing their risks across the globe. And now we're seeing a change in strategy when it comes to expansion.
In the last two or three years, we've seen companies moving overseas because they've found opportunities. Recently we've seen more confidence in our North American multi-nationals as they expand overseas whether it be in Greenfield projects or whether it's through acquisition. We're seeing a little less confidence right now in the European side of things with our large European multi-nationals because of the euro-zone crisis. But, historically, companies expand internationally because they're following their clients. They want to be where their clients are. Bank of America has expanded internationally to be where our clients are and that's really the catalyst for our expansion growth. In addition, we've seen companies that have outgrown their home markets and are looking for opportunities to grow global market share by expanding outside of their home countries. CHAPTER 3: Growth Strategies: Acquisition vs. Organic STEPHANIE: Stephan, BCD Travel has grown through acquisition. Can you talk about the ways that your company uses acquisition to expand your global footprints? STEPHAN: Yes. Acquisition is one of the most important ways to follow our customers as Bank of America is doing as well. So acquisition will give us a bigger footprint in the world and we follow the customer demands wherever customers feel BCD Travel has to have an own operation. We try to do it - - acquisition, do joint-ventures and have a strong part in a network to service our customers worldwide as we do today in 90 countries on six continents. STEPHANIE: And Roger, for your organization, how do you balance acquisition versus organic growth, particularly as you look to expand to new markets internationally? ROGER: Well I think of that really as cultural risk versus financial risk. If you grow organically and maybe some ways you're taking people from maybe your home location to the overseas locations. You have a lower cultural risk, but you often have a higher financial risk in terms of the outcome of the investment and the timing and those types of things. So, for us, we do both: we do organic growth and acquired growth. And we're trying to balance those two risks; the culture risk of the organization and the financial risk in terms of the timing of the investment and the payback and the client relationships. CHAPTER 4: Local Presence, Local Talent STEPHANIE: All right. You raise the issue of talent. Let's keep on the topic for a little bit longer. Joanna, you have offices around the world. How important is a local presence and how important for you company is local talent? JOANNA: That's a great question, Stephanie. We do work in many countries in which we don't have a local office -- for instance Kuwait, Korea, Lebanon -- but we find when we do open an office and develop a local presence, local talent, it allows us to develop a much richer, deeper client relationships and also have a much better understanding of the culture. So we've done that in China, we've done that in London, and let's take China for example. In China, we actually serve our clients from both our China and our U.S. offices, but without that local presence, it would be so difficult for us to really have a deep understanding of the China market, how quickly
it moves, the pace of life and work there. So we're able augment our local presence, our deep local expertise, with our U.S. design culture. And we find that, that mix of talent is ideal for us and, in fact, it's what many of our clients want. CHAPTER 5: Centralization Through Common Technology STEPHANIE: Stephan, talk a little bit about the centralization effort that's being undertaken at your organization. What does it mean when you talk about centralizing? Are you centralizing operations by country or by line of business? Talk a little bit about how that strategy is unfolding. STEPHAN: It's a very important point for BCD Travel and as well here we follow the demand of our multinational and national clients. Centralization for us happens in a mixture of services. What we very often do is that we follow customers to locations where they want to have centralized call centers and here we look where we find the talents because you do not find the talent at every place where the customer wants it to have. So what we try to optimize is customer needs and availability of talent for centralization. We do that with a lot of technology behind that because we, being in 90 countries of this world, need to have aligned and common technology. CHAPTER 6: Managing Risk, Growth and Talent STEPHANIE: And you're all here because your companies have had a degree of success in globalization, but there are still challenges. Bank of America conducted a survey with Fortune Magazine to ascertain business executive's top five concerns related to international business. The top five in order are talent personnel, 58% of respondents said that was a challenge; maintaining strong customer relationships, 40% said that was a challenge; managing growth 38%; Foreign currency risk management 36% and finally exporting, that s duties, custom credit risks, etc, that was 32%. STEPHANIE: So let's go through a couple of these, sort of one-by-one. We'll start with risk. Mike, how do your clients assess risk, particularly in this environment? What are the tools that they're using to figure out what the economic, political, social, and environment risks are? And what role can Bank of America play in helping your clients? MIKE: That's a very good question. We do have a number of clients that have enterprise risk management within the organization and they use that to assess risk across the globe both from a macro level and a micro level as it relates to their company and their industry. In a lot of cases we see companies that will reach out to the big four accounting firms or legal firms on the ground. But in most cases, when I ask my clients what they look for or who they look to, they advise that they look to their banks because the banks have people on the ground and the banks not only understand the local environment, the business environment, but they also understand the regulatory environment. And banks have access to the local regulatory bodies within certain countries so they will look to banks. A good example is recently with the euro-zone crisis, everyone wants to know about what's happening in Europe specifically with Greece. And Bank of America has host a number of conference calls with our clients as key events have developed within the euro-zone. STEPHANIE: And do you feel confident that your people on the ground are keeping their ear to the ground and getting the information they need in a timely way?
MIKE: Definitely. It's important for our business, for our people, within those markets to have access to information and know about things as they develop. STEPHANIE: Right. Stephan, you have clients around the world, paying in local currencies around the world. Without getting too technical, can you tell us a little bit about how your organization manages currency risk and how you make sure you're staying on top of all those issues? STEPHAN: Sure. I think we are in a very luck position because our currency risk is really limited to those customers which want to have their services worldwide invoiced into one country. What we find 90% on our customer-base is that they want to get the service locally and get invoiced locally as well or charged locally. So we won't have a currency risk there. What we see more and more is, with our multi-national clients, they're moving to a central invoicing system. And, in these cases, we have, together with our bank partners as well, individual solutions for the customers which take care of the currency risk. We for sure as a company try to avoid to have currency risks. We need to find intelligent solutions with our clients together to minimize the risk. On the other side, on if we talk about financing as well, we have what we call a natural hatch, a natural risk assessment where we try to take international banks on board and have loan facilities in different currencies which will mix with our cash flow. STEPHANIE: Roger, much like Mike, your organization has a lot of in-house experts who are looking closely at crisis; looking closely as events unfolding around the world. Do you feel that, that has given FTI an edge as you have sought to manage through some of the euro-zone crisis and other events that are buffeting the economies around the world? ROGER: Yes, clearly. We're fortunate in one regard because we work with so many clients on so many events; many good events, many bad events. We joke a bit occasionally inside that for us reading what we call our "New Client Engagement Report" is a bit like reading the Wall Street Journal or the Financial Times six months in advance. So we have an opportunity to see what clients are dealing with. And I think, back to Mike's point regarding risk, the way you manage risk is, is you -- it's an exercise in gaining and synthesizing information and -- information from your clients, from your banks, from your people -- taking all of that information and seeing what it tells you. So it certainly benefits us and it benefits us and our ability to serve other clients as well. STEPHANIE: And based on everything you've seen, how have multi-national corporations, overall, faired? Have they done a good job of managing risk and managing through this most recent set of economic and financial crises? ROGER: Yeah, my sense is, for the most part, global corporate have done a very good job of managing risk and managing their operations. To some degree, that's been through pulling back on investment which I think we're seeing and feeling in the global economy. But I think those global organizations -- I think some businesses are doing good, in some cases, to very well. STEPHANIE: Right. Let's take one of the other concerns that came up on the survey: managing growth. It was the number three most sited issue in the survey and it seems like a good problem to have though, growth. Joanna, talk a little bit about the techniques that NBBJ uses to monitor growth, make sure that you have the resources in place to service new and growing clients. JOANNA: Well we actually look for measured growth. At NBBJ, our objective is not to see how big we can get. It's really important to use that we have the right resources to provide high-value design services to our clients wherever they are. So we take both a strategic and a tactical view of growth.
At the strategic level, our leadership has created a strategic framework by which to assess countries on quantitative and qualitative measures to really determine which countries we want to do work in and which we don't want to pursue. So that provides an overall framework for us. And then each office determines their own growth strategy; what projects they want to peruse and where. But at a tactical level, we have a go/no-go process to really look at each project and determine is it something that we want to do. And it's a collaborative decision between the local office leadership and our international practice leader who kind of looks at our firm-wide growth and insures that it's appropriate. Both have to vote yes. STEPHANIE: But interestingly saying, "No", is as important as saying, "Yes". JOANNA: Absolutely. In some cases, more important because it's so important for us to be able to determine, are we going to be successful in this project with the team we have and with that client. STEPHANIE: Roger, similar question for you. Do you forecast out? Do you project out where you think the growth is going to go and then pursue opportunities in those growth verticals or growth geographical areas? And how good have you been at forecasting where the growth is going? ROGER: Well, I think as we just heard, for us, we also sort of have a strategic and a tactical. So we look at the geographies of the world and the countries and we look at where our clients are and business activity and we decide which of those areas, countries or jurisdictions, we think are ones we would want to operate in or not. Ultimately, we follow our clients. So we don't try to be there ahead of clients, we try to be there with our clients. In terms of forecasting for our business, that's very difficult because a lot of what we do is what we refer to as "event-driven". It's driven by positive events like IPOs, mergers and acquisitions or negative events such as troubled companies or frauds or litigations and all the services that would happen around that. So we often say that it would be easier, I think, for me to forecast where I think I would be in three years where I think I'll be in three months. But within that what we do is we set sort of that trend, we measure current events to see where we are on that trend line and then we manage along that trend line. And we only worry about if something has caused us to be off that trend line, is that temporary issue or is that a permanent issue because if a permanent issue, then we would adjust to that. And so we regularly reforecast ourselves every six months to see if the current events are on that trend line. STEPHANIE: Right. Stephan, when we started talking about acquisitions, you raised the issue of talent and talent management. Looking to expansion in other parts of the world in new markets, how do you find the right kind of talent? How do you go about finding people, finding managers that really will get the job done? STEPHAN: Yeah. That's a very good question and very important to us being in the service industry and BCD Travel is very proud of the talent management programs we have initiated. Because we all have to realize that in the next 10 years we will have five generation, the so-called "Generation C", will come to the market and then we have to deal, first time, with five generation being in the job, hopefully, traveling with BCD Travel. And that will bring a different challenge to us. So we are investing in talent and we do it in-house and we do it externally as well. We have a project ongoing in Singapore, for example, where it is, for everyone who's stealing in Singapore, very difficult to find talent, to find employees. What we try to do is we work with the universities directly. So we give speeches in the university, we invite young people to come to our offices and we want to connect them very early to BCD Travel, and with that generating talent.
We do a lot for our own employee-base so we have invested very heavily in the last years in our talent management group worldwide and we have put programs in place to keep people -- internally -- motivated, and indentify talent internally and as well hiring external talent. STEPHANIE: Roger, talk a little bit about how you disseminate the FTI culture to your employees around the world, particularly those that are new to the company and my not ever have an opportunity to work at headquarters. Are there any interesting ways that you found to sort of help your employees around the world understand the values and the culture of the company? ROGER: Yeah. So what we have what I refer to as "milestone events" for our employees so starting with a new hire orientation all the way through our most senior level program which we refer to as our "Executive Leadership Forum". And in each of those we're talking about the strategy of the firm, the values of the firm, the clients, and what we're trying to achieve. And as you progress through that you would grow in terms of knowledge of those issues and the culture of the firm. So we do that two ways. We go out to the people -- we're in over a hundred offices around the world so we go out to the people; we spend time communicating with them there. We also bring them in. So we'll have programs that we run globally. We'll bring 30 to 50 of our best people in each of the various levels of the firm together for sometimes as short as a few days and sometimes as long as a week or two across a year. And it's all about sort of communicating two ways so that they understand the strategy and the culture and the values. STEPHANIE: Joanna, you're nodding. Your company manages projects around the world; you interface with a lot of different constituencies -- suppliers, contractors, vendors -- some of whom may not share your value system. How do you do you try to communicate your company's values to this large constituency, this ecosystem that you work in? And how do you feel confident that you're communicating a set of values that you expect your constituencies to abide by? JOANNA: Yeah. Very much as Roger just said. You have to communicate quite a lot. And NBBJ was founded almost 70 years ago and we have a core set of eight strongly held values. The first of which is honesty and ethical behavior are our highest values which kind of can sound trite, but for us it's definitely not. We would rather lose a project than compromise our ethics and I think many companies struggle with ensuring that the whole ecosystem shares their values. I mean it's definitely a challenge. And it starts with recruiting the right talent; ensuring that our partners, our contractors, supplier, etcetera, we're choosing the right ones; our leadership is modeling and reinforcing the behaviors consistently; and that our reward systems support our intentions. And I think we really try to reinforce that consistently through the new hire orientation program and it really comes down to the judgment of our people. And we try to recruit and retain globally people who share our values. ROGER: And I think that's critical -- My view, particularly in a service organization which I think we all are, they're people-driven. Your number one risk is your people. MIKE: Right. JOANNA: That's right. ROGER: And your number one risk mitigation tool is your people. JOANNA: That's right.
ROGER: It's all about communicating, as you said. Strategy, values, culture to be sure that, that value of integrity and honesty is carried forward. MIKE: Absolutely. JOANNA: And each local office has their own culture, but what's critical is that they have a foundational base of our strong values that provides a platform for the local culture to grow. MIKE: I think that's even more true in our organization because we are highly regulated so we have to have that very strong base from an ethics and compliance perspective. But we do strive for diversity across the globe. STEPHAN: That makes international business to interesting as well because, as you have said, you have to cope with the local laws and you have to cope with the local culture, but still you have to try to get a foundation where everybody's following the same rules and that makes the international business so attractive. STEPHANIE: Do any of you feel that your companies have made a positive impact on the way business is conducted in perhaps a new market that you've entered? Not in a heavy-handed way, but perhaps have you provided air cover to one of your suppliers who has been trying to, say, clean up the way they do business? Have they been able to say, "Well, NBBJ wants us to do things this way so we need to be completely transparent."? Do you think that in any of your instances you feel that you're contributing to transparency and greater communication in some of the new markets that you've entered? ROGER: Well I think for FDI Consulting -- again we're sort of in a unique situation, but I think that the answer would be, absolutely, yes. We investigate many of the largest frauds and compliance breakdowns in the world whether they be FCPA violations or something like where we handled the Madoff investigation. So I think frequently working with large organizations and large clients after a risk is actualized and understanding what happened and how to avoid that from recurring in the future, I think absolutely those clients take those learns then carry them forward in a way that improves their operations. STEPHANIE: We spent a lot of time talking about the challenges of operating internationally, but, Stephan, as you referred to -- there's a lot of fun and there's a lot of intellectual stimulation that comes from operating internationally. CHAPTER 7: Lessons from Doing Business in Emerging Markets STEPHANIE: Let's talk a little bit about some of the lessons learned and some of the things that you have gleaned from your operations around the world that have perhaps enhanced your own businesses. Joanna, what are the lessons you-all have learned from operating around the world? And what's some of the great advice you would give to other companies seeking to embark on a similar journey? JOANNA: Well we've practiced internationally for many years so we we've learned many lessons. And I think some of them -- the first one is really around knowing what you're good at, knowing your value proposition and ensuring that your client wants that. When you go internationally, it's not always so clear and I think you need to spend more time looking at that. The second thing is relationships, relationships, relationships. They are so important everywhere, but I think particularly in many of the international countries that we operate in. So understanding the culture, the local
business environment, is critical. Having business empathy with your clients and also knowing when yes means yes and when it means no. That's really important. Our philosophy is to be patient, to build a strong foundation for growth and ensure that the local operation really shares our values and our goals. So rather than going out and trying to grow quickly, we want to establish a stable foundation that will ensure sustainable long-term growth. Also definitely leverage; your banking relationships, your consulting relationships. We've been practicing in China for almost 10 years and from the very beginning Bank of America helped us with start-up operations and continues to help us stay abreast of the ever-changing regulatory environment. STEPHANIE: Mike, I'd like to give you an opportunity to build on what Joanna just said. Talk about the way that Bank of America starts with a company before they've even entered a country and helps them get comfortable with an expansion. And then what are the kinds of ways you help along the way as they grow from baby steps into significant local presence. MIKE: It s a very good question. We work with a number of companies around the world and work with them on their global expansion. In many cases, we're one of the first points of contact as they decide to enter a country and they work with us to discuss the local practices, local regulations and, from a banking perspective financing is always important, what they can expect to see in the market. So we work with them from the initial stages of due diligence. STEPHANIE: Stephan, I'd like to talk a little bit about lessons you've learned as a result of entering 90 countries around the world. Are there products and services that you've perhaps developed for an emerging market that Generation Y, forthcoming Generation Z audience, that have really come back and become broader programs that you offer to your mainstream customers? STEPHAN: Yeah, indeed, we have learned, as I think everyone, a lot lessons being international and dealing international. What predominantly comes from the emerging market is the risk management side because dealing with companies which have a lot of presence in the emerging markets have a growing demand on risk management side. They want to know where their people are, their travelers are. They want to have channels to communicate with these people and the travelers want to communicate with us. So what we have enhanced it the risk management side to identify where the travelers is; to give channels to the travelers in every country, every region to communicate 24-hours around the clock; and make sure that travelers, in case of hurricanes or volcanoes, ash clouds or even in terrorism times they know where to turn to; and to companies help them to identify where the travelers is and getting them out of a risk area so emerging markets have driven this demand more than before. The other side is what we learned in emerging markets. VIP travel is very important. Travelers in these markets are much more used to high service and that is something which we have expanded as well into the other countries and other regions where we're doing business to enhance VIP travel for our VIP travelers. STEPHANIE: Roger, similar question for you. Talk a little bit about things that you have learned perhaps from companies you've acquired or, again, from reaching into new markets that have really opened your eyes and have been brought back to the broader organization at FTI Consulting. ROGER: Well, again, I think when you're looking at growing internationally, the first thing that you learn is to listen to people who are on the ground and have a real sense of what's happening. And those people can be your employees, but certainly it can be your other key relationships such as your banks. And even I'll have to admit that BCD is our travel provider as of a few years ago. And I find what Stephan just mentioned to be actually very valuable because I've got employees all over the world traveling and at any moment, I might not
know where they are and an event happens. But now I can call BCD, I can find out do I have any employees in that location where there was a tsunami or a hurricane. So I think it's information. The one thing I take when you're growing globally is you have to have ways to get information and you don't want that information to be totally - - to that you have in your own organization, so you have to have relationships with others that can give you another perspective on that information and those events. CHAPTER 8: Leveraging Technology to Enhance Global Operations STEPHANIE: For any of the panelists, how has technology enhanced your company's ability to go global? Clearly it's a huge tool in terms of being able to stay in constant communications, to be able to find employees around the world using all the technologies we have available to us. But are there ways that you've found that, in particular, technology has really enhanced your ability to go global? JOANNA: Well for us, Stephanie, I mean our work is so collaborative with teams wanting to be shoulder-toshoulder which when you go to global, it's very difficult to always be present with your team so video conferencing, the ability to leverage our 3D modeling through video, has become very critical for us to help us when we can't travel all the time. STEPHAN: Yeah. And in the travel industry I think technology is so key to become a global travel company because you have to deal with travelers around the world. We have to be available 24 hours by seven. And we have to offer, and we want to offer and we will offer, common platform for the travelers. Because the demand is there that a traveler in the U.S. or in Asia, he wants to use and see the same tools all over the places and he wants to get the same service delivery if he's booking Singapore or if he's booking in New York. So the technology's changing very rapidly and I talked about the Generation C coming on the market. These new tools, how to book travel, how to get faster, how to exchange more information, this is a huge proposition for us and this is something where BCD Travel and the whole industry will grow. And that will enable us even more to stay a global company. STEPHANIE: As you say, there's a whole generation of young people who consider customer service not having to interface with customer service. STEPHAN: Exactly. So the world is changing there dramatically. STEPHANIE: Mike, you deal with customers around the world. Tell us a little bit about the things that you've observed that have become things that you've admired. Best practices that you've taken in and, in turn, want to communicate to your staff. MIKE: Well I think these guys have already mentioned it. One of the keys is technology. You have to embrace technology and the world moves rapidly. You've got to have information. Roger mentioned getting access to information and that is key. Having the technology and being able to use that technology to provide you the information to make decisions. With the euro crisis what we're seeing is clients are looking for information; they want to know where their cash is and the banks are providing that through technology. Stephan mentioned centralization. Technology on both sides of the business/client relationship allow for centralization because it's not just centralization of people, but it's centralization of information and that is key.
But one of the things that I've seen in the market, one of the companies I truly respect, what I've seen them do is they would gather a lot of information in the due diligence stage. And they would take a little bit longer in the due diligence stage than many others would as they look to enter a new market. Now they don't overengineer the process, but they have a longer due diligence process and that leads to a shorter implementation process and a lot less issues on the backend once they enter into new market. STEPHANIE: Well it's been a fabulous discussion today. I've learned so many wonderful things from listening to all of you. I think we've learned a lot about the power of information. We've learned a lot about importance of talent management, the importance of picking the right talent. We've learned the importance of listening to your clients, listening to your employees on the ground, knowing when yes means yes and when no mean yes or yes means no. And I think above all we're really learned a lot about the excitement of operating internationally and there's a reason why all of your companies are doing it around the world. It's not only because of the financial opportunity, but because of the social and cultural opportunity. So I want to thank all of you for your comments and thank you for joining us.