More multinational organizations are centralizing employee benefits governance

Multinational companies face increasing cost pressures and rising risk when it comes to managing their employer-sponsored benefits programs around the world, but best practices in global benefits governance can lead to better risk management, according to Aon Hewitt and American Benefits Institute. A new report from Aon Hewitt and the American Benefits Institute, the research affiliate of the American Benefits Council, reveals these mounting challenges are continuing to drive the centralization of global benefits management.

Aon Hewitt and American Benefits Institute surveyed more than 200 multinational corporations around the world to determine their current and expected approach to global benefits management. The study found that while 70 percent of organizations have some form of corporate guidelines and controls in place, they still struggle to effectively manage their global benefits centrally.

Aon Hewitt and American Benefits Institute discovered that only 20 percent of firms are leading the way as “best practice” organizations. Key differentiators included:

• The best practice organizations generally have the information they need to make risk management decisions. By comparison only 20 percent of “other” organizations have access to necessary
data to understand their risks, and monitor risks and opportunities on an ongoing basis.

• Ninety-three percent of best practice companies have established global centers of expertise (COE) to manage benefit programs, while 51 percent of other organizations use a global COE model.

• Eighty-seven percent of best practice organizations conduct formal audits to ensure that local benefits are aligned with global policies, compared to just one quarter of other organizations.

• Fifty-six percent of leading companies say, with a high degree of confidence, their benefit programs are in line with their workforce strategy; by comparison only six percent of other companies are confident that their benefits are in line with their workforce strategy.

According to Aon Hewitt and American Benefits Institute, best practice organizations excel in five key areas:

1. HR and finance have central access to data and market information on their global benefits programs

2. Understand benefits costs, risks and opportunities

3. Have well-defined risk management policies

4. Have an operating model with roles and responsibilities defined at the local, regional and corporate level

5. Monitor and report risks on an ongoing basis

“Market volatility, rising costs, competitive pressures and regulatory changes are driving the desire to manage benefits more centrally by multinationals,” explained Amol Mhatre, senior partner at Aon Hewitt. “Without information to make good decisions, and operational infrastructure and the governance discipline to execute decisions on the ground, companies will continue to struggle to mitigate risks posed by their benefit programs.”

“The financial cost of plan sponsorship is significant. In some ways the management of these programs across multiple continents represents an even more daunting challenge,” said James A. Klein, president of the American Benefits Institute. “Compliance with myriad regulations may always be difficult, but this study shows how the world’s ‘best practice’ plan sponsors thrive in a competitive global business environment.”

SOURCE: www.aon.com.

Visit our News Library to read more news stories.