Multinational companies with a multiplicity of pensions plans around the world have to answer some awkward questions nowadays. In particular, they need to know what type of retirement plans they have in place and how they are financed. Consequently, they need to be able to call up an instant inventory of their plans to check on details of benefit design and financing.
Tim Reay, a member of the Hewitt Bacon & Woodrow’s Global International Employee Benefits consultancy team which is responsible for advising multinational corporations on worldwide benefits provision, suggests that the prospect of new international accounting standards, as well as increased concerns about corporate governance, have made such fact-finding necessary:
“Changes in accounting laws mean that companies have got to account for pension costs in a more rigorous way than they had to previously,” he says. “Companies are also worried about their defined benefit plans. They want to know what they have around the world. And from our experience, many multinationals really don’t know.”
Hewitt has now developed the Global Inquirer Questionnaire (GIQ) to help multinationals answer these questions.
Global Inquirer is unusual among products on offer from benefit consultants because it does not depend on special software installed on the client company’s computer system. Instead it is web-enabled and needs only a standard web browser to operate.
Global Inquirer grew out of a paper-driven system devised for clients some 20 years ago to help them deal with the demands of the then new accounting standards SSAP 24 in the UK and FAS 87 in the US.
The next step was to put the questionnaire on to a computer. Programs were couriered and subsequently e-mailed around the world to collect information, which was then integrated into a central database.
The final step was to move the system on to the internet. “A couple of years ago it became clear that most of our clients had full access to the internet. So it was an obvious step to link our previous idea with web technology.”
There were other incentives to develop this, Reay says. One was the increased protection, which clients were bolting on to their computer systems. “It started getting more difficult to install our programs on a client’s computers because of all the security.”
Global Inquirer avoids this problem by, in effect, moving the database off the client’s central computer and on to a website. “We took advantage of the internet and essentially made it possible for companies to set up a database that wasn’t based on any particular system – or software. The only thing Global Inquirer requires is a web browser.”
There are a number of database packages on the market some of which are provided by IT companies. The most widely known is Microsoft Access. Others, provided by the leading consultancies, are aimed specifically at a particular benefit application. However, Reay says: “As far as I know, Global Inquirer is unique because it is flexible and customisable, and yet easy to use.”
As simple as possible
The main aim has been to keep Global Inquirer as simple as possible, says Reay. The problem with most electronic questionnaire systems is that they ask too many questions, he suggests. “They will ask a large number of questions simply to make sure that all the questions that need to be asked are. Therefore they end up asking too many.
“What we have done is built a system that can be set up to ask exactly the questions we want it to ask, and no more. In this way the questionnaire becomes manageable.
Global Inquirer is organised round a hierarchy of users. There are two categories of user - editors and viewers - with an administrator at the top. The editors create the data. “Every piece of data on Global Inquirer is owned by an individual, and has an editor’s name attached to it. Editors may be restricted in the areas of data they can create. For example, you may have an editor able to create data for Europe only, or for a particular line of business.
“Once editors have created data they can edit it. However, they can only edit the data that they have created. Viewers can see data but cannot edit it. However, they can see data from a number of editors if necessary.”
At the top of the hierarchy, the administrator manages all the levels of authorisation. Hewitt usually takes the role of administrator, although client companies can choose to do the job themselves. Administrators can log in as if they were editors, change information and re-allocate data from one editor to another. “We can do large scale data modification or restructuring or anything that the administrator wants to do. We also can modify the questionnaire very quickly.”
The questionnaire is defined in an Excel spreadsheet. “Excel doesn’t hold the data - it just holds the structure. So, if we wanted to change one of the options on the questionnaire, we just modify the spreadsheet, send it to the website where it automatically modifies the site.”
One of Global Inquirer’s most in demand applications from clients is for an investment policy and global governance review, says Reay. “This is where clients are worried about governance, including from the investment point of view. For example, some of the questions would relate to investment strategy benchmarks. Are you allowed to invest in this asset class? There may be a pension plan where hedge funds are completely non-investable. If they are allowed to invest, what is the strategic proportion?
“Linked to the investment strategy, we have a governance questionnaire. What’s the governance structure? What governance policies do you have? Who’s on the investment committee? Who takes decisions on voting at company meetings?“
One of the earliest applications of Global Inquirer was Hewitt’s own retirement benefits survey. “We provide industry groups with industrywide benefit surveys. The survey provides special reporting facilities that allow them to report anonymously what everyone else is doing.”
And, as a perk of participating in the survey, participating companies can use Global Inquirer for their own database.
In this context, Hewitt is just another Global Inquirer user, says Reay. “It has always been client orientated. It was never used in-house and then rolled out to our clients. In fact we introduced to our colleagues at the same time as we introduced it to our clients.”
Although Global Inquirer does not need special software to operate, it can be linked to additional software to do particular tasks, such as projecting accounting costs. “You can consolidate all the numbers and ask, what will happen if the return on assets is different over the next three years? What is that going to do to my projected service costs and projected funded status five years hence? It will tell you that, write your FAS reports for you and produce a consolidated schedule.”
For Hewitt, Global Inquirer is a means to an end rather than an end in itself, says Reay. “We’re not primarily in the business of selling software. We are advisers and we use Global Inquirer in the context of our advice to clients. If a company has retained us to review their benefits in 20 countries, we would use Global Inquirer to collect the data because it’s the most efficient way for us to do it. Likewise for accounting consolidations, we’ll use it for the project.
Just close it down
At the end of the project, the client has the option of continuing to use Global inquirer, provided they are prepared to pay for it. “Global Inquirer carries an annual licence fee. If the client wants to carry on paying the licence fee then they can keep the system. Otherwise we just close it down.”
Once the information has been input into the system, all that remains for the client to do is to keep the information up to date, he says. “This is actually not that difficult. Information on Global Inquirer is really one of two things, either information about benefits, or annual financial information.
“The annually updated financial information just requires an extra line in the company’s own annual process. As for the benefits information, if somebody is going to implement a new pension somewhere as part of the implementation stage, they just need to make a note that they have to update Global Inquirer as well. That’s all there is to it.”