CFO Studio Magazine with David Chambers, CFO, Jaguar Land Rover NA

3rd QUARTER 2016 WWW.CFOSTUDIO.COM 33 “Decisions made today about pensions will have their full effect for the company’s financials in as long as 30 or 40 years.” New Job for CFOs Pension plan management, once an assignment of the benefits department, is now on the finance agenda. The actions the CFO takes depend on the circumstances of the company’s populations and how the pension plan relates to your long-term strategy, explains Mr. Draillard. “There are many questions regarding this. Where is the emphasis in your company? Is it in keeping cash for the short term or is your company more interested in making sacrifices with an eye to the future?” he asks. “Pensions are an important tool in the box to help with retention,” says Mr. Draillard. His company’s plan is richer than most in order to do so. “It has become not only a retention tool but it helps us attract seasoned professionals. Aircraft mechanics make up a shrinking population. A pension is meaningful to a mid-40s [FAA-licensed] professional. It isn’t as important to millennials as it is to these seasoned professionals.” Cash-flow Negative According to Cerulli Associates, a leading research firm specializing in asset management and distribution trends worldwide, America’s pension systemwill turn cash-flow negative this year. This deficit will continue to increase as baby boomers retire. “This has significant impact on CFOs and must be kept in mind when creating a de-risking plan,” asserts Mr. Draillard. A CFO Studio business development partner, Isaac Buchen is Leader of PwC’s Pension Risk Management practice. At the dinner he recommended “a series of steps that will allow plan sponsors to understand the nature of risks embedded in the current plans, establish key risk-management approaches, and embed a culture of periodic monitoring to make sure that the risk-management steps are having the desired effect.” Mr. Buchen explained in an interview that “plan sponsors generally have four levers at their disposal to address pension risk: • Benefit lever or changes to the plan design, including offering lump sums to terminated vested participants, • Investment lever or changes to the overall asset allocation, • Contribution lever or developing a strategy of how to fund the plan and potentially making non-cash contributions, and • Insurance lever or buying annuities for participants from an insurance company.” As the dinner discussion drew to a close, the group gathered in the Jets Green Room at MetLife Stadium overlooking the field where the CFO guests watched the New York Jets play the Buffalo Bills. Participants left the discussion with an understanding that there is a clear trend toward de-risking benefits and pension liabilities, and that the actual approaches taken are many, depending on the industry, the composition of groups covered by the pensions, and strategic priorities. C Discussion Leader Claude Draillard Vice President of Finance – CFO Dassault Falcon Jet BUSINESS DEVELOPMENT PARTNERS Isaac Buchen Principal PwC Brett Hertzig Director, Client Relationship Executive PwC James Mossey GM, Global Head of Services, LoB Finance SAP MEETING PARTICIPANTS Sandra Clarke Vice President of Finance and CFO Daiichi Sankyo Michael Colangelo Executive Vice President – CFO Maersk Lars Green Senior Vice President, Finance and Operations Novo Nordisk Anand Kini Chief Financial Officer NBC Universal Luke McKinnon Chief Financial Officer Tony Melfi Senior Vice President & CFO Brother International Corporation Matthew Nicholas Chief Financial Officer First Data Corporation Craig Steeneck Executive Vice President & CFO Pinnacle Foods “DECISIONS MADE TODAY ABOUT PENSIONS WILL HAVE THEIR FULL EFFECT ON THE COMPANY’S FINANCIALS IN AS LONG AS 30 OR 40 YEARS.”