Chester Clinic

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the magazine for decisionmakers. march-may 2005 Biotech file. Success through innovation: Swiss companies take the lead. ETH Zurich. How do you become world class? By making your visions a reality.
Weisse Arena AG. Edging the competition for guests, overnight stays and image. Coop. Hansueli Loosli: Staying competitive without forsaking quality. Publisher: PricewaterhouseCoopers AG ceo magazine, Stampfenbachstrasse 73, CH-8035 Zurich, Switzerland Editors-in-chief: Alexander Fleischer, [email protected], Franziska Zydek, [email protected] Creative director: Dario Benassa, [email protected] Concept, editing and design: purpur ag, publishing and communication, zurich, [email protected] Photos: cover Thomas Eugster, pages 29-37 Niklaus Spoerri, page 50 Courtesy Global Fund Lithography: CMS Sticher AG, Printing: Sticher Printing, Lucerne Copyright: ceo magazine PricewaterhouseCoopers. The opinions and views expressed by the authors do not necessarily reflect those of the publisher.
ceo magazine appears three times a year in English, German and French. Circulation 40,000 Free subscriptions and changes of address: [email protected]

Change is in the air. By working hard, generating goodideas and daring to take risks, innovative entrepreneurs are meeting the future head on.
Markus R. Neuhaus, CEO PricewaterhouseCoopers, Switzerland In the past year we have watched many Innovation in politics and management is ing results that are of value beyond the ivory Swiss companies embark in new strategic also required to maintain these strengths tower of science. Its ambition is to be one of directions. This reorientation is now being and build on them. Voting tendencies over the top universities in the world and to put into practice with concrete schemes, the last few years have made it obvious that create a network in Switzerland that links and as assurance and advisory service voters will reject too ambitious plans as well business and society with the aim of providers we are able to support many as excessive demands. A policy of small promoting a lively exchange of teaching and companies in this process. Change is in steps is more likely to lead to success.
research ideas.
However, even these small steps make itpossible to keep up with international This is the right approach, for to turn know- The last two issues of ceo magazine competition – by increasing the pace of the ledge into the equity that drives growth in featured articles on Swiss firms investing in steps and taking more steps more quickly.
our national economy, science must new regions — such as China and Russia Simplifying relationships with the EU combine with enterprise. Business and — as a way of ensuring future prosperity.
through the second round of bilateral science can bring about this transformation The biotech industry is a good example of a agreements is the next important stage.
by working in tandem, and it is the job of new sector in which Switzerland has been business to supply the entrepreneurial spirit.
successful in achieving a leading position.
Switzerland's future will not be determined In her interview, professor and entrepreneur By working hard, generating good ideas by politics alone. The business community Jane Royston paints a rather bleak picture and daring to take risks, innovative entre- must find its voice, make itself more clearly of the state of entrepreneurship in Switzer- preneurs and researchers are meeting the understood and demonstrate its commit- land. It is up to all of us to prove the oppos- future head on. How individual firms in ment. Even as the field of activity for many ite. And it can be done largely outside the this industry will fare is still uncertain. But companies becomes more global, the political arena. already Switzerland is providing the responsibility for balancing politics, busi- environment needed for young companies ness and society at home remains. I wish you a stimulating read.
to assume world leadership in their field.
Business has a particular role to play inensuring that Switzerland continues to lead Markus R. Neuhaus in a climate of increasing global competi-tiveness.
The future of Switzerland will also dependto a large extent on how well and howquickly its transformation into a "knowledgesociety" can be achieved. ETH Zurich, theSwiss Federal Institute of Technology, is animpressive example of a university produc-

ceo1/05. march-may contents Trend: Professional entrepreneur. ProfessorJane Royston on the importance of theentrepreneurial spirit in Switzerland and herfear that future opportunities will be missed. 20 Lars-Christer Olsson, CEO of UEFA, writes Walter Knabenhans, CEO of Julius Bär about transparency and discretion: "We can Holding, writes about transparency and only safeguard our legitimacy by acting discretion: "A policy of misinformation does as a working democracy with transparent nothing to create trust but can compromise or even destroy it." Biotech file. The Swiss biotech industry is world-renowned and Charismatic action man. Reto Gurtner, CEO of Weisse Arena AG.
enjoys a high potential for growth. But only a few companies The Flims Laax Falera region is one of the largest ski areas in manage a successful breakthrough. A brief survey of the industry.
Switzerland – and a profitable one.

Value and limits of the audit: The expansion of regulatory provisions is fostering new collaboration between companies and Sarbanes-Oxley Act – challenge and opportunity: Complying with the SOA canresult in a quantum leap in internal control.
31 Leader. Added value will increasingly rely on knowledge and innovation. ETH Zurich is an engine The CIO as risk manager: Rapid techno- for this change in Switzerland.
logical development forces IT managers to pay closer attention to risks, quality ofservices and costs.
Global partnership. Pricewaterhouse- The 5-minute expert: Topical business Coopers acts for the Global Fund in many issues in brief. countries of the world. AIDS, malaria and TB have been fought successfully in Ghanasince 2003 using Global Fund resources.
50 Transfer pricing: The taxman wants to knowhow you implement your strategies, and hehas local and global rules on his side.
37 Reader services: Events, publications andresearch. Subscriptions and addresses. 39 Staying competitive without forsakingquality: Hansueli Loosli, chairman of theboard of Coop, on competitiveness, innova-tion and sustainability.
46 forum1. transparency/discretion Lars-Christer Olsson, CEO UEFA: The only way to maintain our legitimacy as the governing body of European football is through a properly functioning democracy.
Swedish-born Lars-Christer Olsson (53) is is the single biggest cost of their business! While this may bring a lower profile in the the highest-ranking working manager within Clubs do, however, publish a figure for total short term, it should bring moral respect UEFA. He is responsible for management of wages and salaries, but this can be 50-100 and authority in the long run.
UEFA's administration at the headquarters percent as high again.
A further key area of discretion for UEFA (or in Nyon. As chief executive of UEFA, Olsson any football association) is that of separa- participates in meetings of the Congress, In contrast, in the annual report and ac- tion of powers. Since UEFA is organised as the UEFA Executive Committee and other counts of UEFA, you can see in detail what a democracy, there is a separation of UEFA committees. we spend and receive – down to the details powers that is normal for any democracy.
of what we spent on, say, trademarks or Therefore, we have a legislative (the The philosophy of UEFA is to continuously translations in the previous year. In addition, Congress or assembly), an executive (the improve in all areas, and also to be the lead- all relevant statutes, communications and Executive Committee and CEO), and an ers in everything that we do. We have no regulations of UEFA are freely available to independent judiciary (the disciplinary choice – otherwise others will challenge our the world at large on our website bodies). In order to keep these different legitimacy as the governing body of Euro- www.uefa.com. We therefore like to think parts of the football democracy separate, it pean football. For this reason, we strive to that we are at least one step ahead of the is easy to imagine the need not only for have an ever-improving, modern and demo- clubs as far as transparency is concerned! discretion, but also for complete separation.
cratic system of governance – which We are proud to be viewed as a transparent Consequently, the UEFA Executive Commit- includes being transparent. Good gover- and open organisation, and one that has tee, CEO or administration cannot influence nance, including transparency, is also never been accused of corruption. This has or interfere in any way with the work of the required from us by the political authorities.
always been part of the UEFA belief system disciplinary bodies. For example, the European Union member – but it is also, as already mentioned, an states (who now make up almost half of increasing necessity in the modern world.
Finally, because the governing body of UEFA's 52 members) have recognised both Discretion has always been at the heart of European football sits "in the middle" as a sporting specificity and the autonomy of UEFA's philosophy for another reason.
neutral observer and arbitrator, we have sports-governing bodies (such as UEFA), UEFA is an "association of associations" therefore historically been asked to arbitrate but they do so only on the basis that we run and, as such, our philosophy is one of or settle disputes. This role obviously ourselves in a democratic and transparent subsidiarity, delegation and empowerment manner (European Council, Nice 2000).
of the national football associations – feder- To conclude, for the reasons laid out above, To illustrate the importance of transparency alism rather than centralism.
transparency and discretion are not only to UEFA, I would like to compare UEFA with part of UEFA's philosophy, they are also an some of the biggest European professional This belief often requires discretion be- obligation and a necessity. The only way for football clubs. In accordance with our legal cause, for example, the UEFA Executive us to justify our autonomy, and to maintain structure (a non-profit-making association Committee or CEO may have a particular our legitimacy as the governing body of in accordance with the Swiss civil code), view on a given subject. For example, it is European football, is through a properly UEFA is not required to publish financial in- not UEFA's place to issue a press release on functioning democracy with transparent formation. Despite this, UEFA publishes a any issue of significance in any major foot- principles for the governance of our sport.
detailed budget and set of audited accounts balling country – where such an issue can But we must exercise this transparency with each year in its annual report and accounts be dealt with locally by the national associa- discretion. In any case, as with any democ- (publicly available). In contrast, many of the tion without interference "from above" by racy, it will be our members – and everyone richest European clubs, despite being listed UEFA. UEFA is always prepared and ready with an interest in football – who will be the on the stock exchange, do not disclose to intervene if asked to do so by a member, final judges of whether we have found an their spending on player salaries – and that but wherever possible, such issues should optimum balance between the two. // be dealt with locally. After all, UEFA belongsto its members, not the other way around.
Photo: Mathias Braschler In this way, UEFA exercises discretion.

forum2. transparency/discretion Walter Knabenhans, CEO Julius Bär Holding:Transparency must also have its limits because excessive transparency could inflictdamage upon the company.
Walter Knabenhans (55) was managing suppliers, the authorities – from tax to en- Transparency requirements are not only director, chief risk officer and member of the vironmental protection, tariff partners or subject to pre-defined laws but also to expanded board at the Credit Suisse Group.
industry associations, stock market control changing moral and ethical aspects. Some- In 1998 he moved to the Julius Bär group for public limited companies, and official thing that is flawless from the point of view and since 2001 he has been president of regulatory bodies for banks, both at home of the law may nevertheless still be inter- the group and chief executive officer. preted negatively and receive anunfavourable response from elements of the Transparency is a dual and multi-layered Transparency is particularly important from public. Transparency has a constantly management tool for any company, which the perspective of an asset management changing dimension, there is no clearly impacts all management tasks and respon- bank quoted on the stock market which is defined status and there are no comprehen- sibilities. The multi-dimensional function of markedly influenced by family shareholders.
company management, which should be The family's long-term association with the regularly controlled by a team while attach- company should be made known. The When searching for the optimum informa- ing particular tasks and responsibilities to clientele must also be granted transparency tion and communications policy as well as the CEO, results in a whole range of infor- with regard to the basic company culture optimum transparency, a constant balanc- mation and communication requirements and investment policy, the content of the ing of benefits and risks, advantages and that should lead globally to optimum trans- services offered and the resulting costs.
disadvantages is required. Transparency parency in that company.
Like many other types of company, a bank must have its limits, because an excess of has the problem of offering not real testable transparency could potentially or immedi- By dual transparency I mean the fact that products but future services. This requires a ately damage the company. To some extent, tasks should be visible within the company high degree of trust from the customer the legitimate desire for protection in the as well as in the public domain. This which must be constantly justified through private sphere also applies to a company. emphasises the responsibility of the head of the company with regard to all stakehold- This private sphere for a company is a high- ers. There should be transparency for However, considerable problems can be ly immaterial possession, comparable to the employees in the firm's internal relations – generated by the wide-ranging span of legally based patent law and the protection transparency with regard to company strat- information which constitutes the trans- of "intellectual property". No company can egy, choice of location, key research parency of the company as a whole. In each be expected to disclose results of research themes, product ranges, markets, personal individual case the question must be and development, technical expertise, qualifications and choices, promotion po- weighed whether any information should be sensitive details of planned company strate- licies and salary structures. For an employee given at all, to which recipients and at what gies, in short – all comparative competitive transparency, in the true sense of the word, juncture. Regulations on ad hoc publicity for advantages, without restrictions. The "see- means being recognised and understood.
public limited companies are the best- through company" is not a valuable alterna- Optimum transparency creates trust and is known example of how good intentions are tive in a world which propagates exposé a fundamental source of motivation. an inadequate basis for judgment, and this journalism in many other areas of life to can only be achieved through meticulous satisfy envy or pure curiosity. // Transparency is also the basis of trust adherence to all rules. From this angle a outside the company and it is required policy of misinformation does nothing to Photo: Mathias Braschler when dealing with shareholders, customers, create trust but can even compromise ordestroy it, with all the negative conse-quences which that implies, such as sanc-tions inflicted by shareholders. report biotech1. survey switzerland An explosion in innovative high-tech laboratory research.
The Swiss biotech industry is world-renowned and enjoys a high potential forgrowth. But only a few companies are able to make the breakthrough to success.
A brief survey of the industry.
Text: Bernhard Raos At the end of 2003, in terms of business form anymore," said Maier. Of some 3,000 Photos: Thomas Eugster volume and the stock market value of biotech companies in the world, fewer than Even the soberest of Federal Councillors quoted biotech companies, Switzerland 100 are profitable. The sector is heading such as Joseph Deiss waxes lyrical when had taken second place in Europe behind strongly into the red. Most companies – in referring to the Swiss biotechnology indus- the United Kingdom, with sales of EUR 2.2 Switzerland a third of them are less than five try. "Together, we are world class", were the billion and market capitalisation of EUR 9 years old – are still expending huge words chosen by the Minister of Economic billion. Furthermore, the Swiss biotechnolo- amounts of capital. In a company employ- Affairs at the launch of the common Internet gy industry is creating jobs. It currently ing 50 people, that represents an average of platform serving the biotechnology industry employs over 13,000 people, with 8,000 of CHF 15 – 25 million a year. This is caused www.swissbiotech.org. Indeed, the first these in this country.
by the high cost of research over the many "Swiss Biotech Report" produced in 2004 years it takes before a drug can reach the under the patronage of the State Secretariat Roland Maier, in charge of research at the market – this may take 10 – 15 years at a for Economic Affairs also portrays a rosy holding company BB Biotech, stresses that cost of between CHF 400 and 800 million. picture. With a total of 227 companies, "Swiss companies need fear no compari- of which 139 are purely biotech companies, sons". For example Serono, based in Founders of biotech companies are aware Switzerland is ranked sixth in Europe and Geneva, is the largest biotech company in of the risks. "If we have not made it in ninth in the world. No other country in Europe. However, the most important three or four years, we never will," said the world has a greater density of biotech biotechnology location, with the greatest Wolfgang Renner, CEO of Cytos in Zurich.
companies in proportion to its population.
level of commercialisation, is the USA At 0.5 percent of the gross domestic And Switzerland also heads the field where stock exchange quoted companies product, the biotech industry makes a in terms of quality. At the end of 2003, 20 produce some three quarters of the total relatively small contribution to the Swiss products were in Phase III – approaching business volume. The major players in the economy. And in its industry analysis, the final hurdle prior to receiving marketing industry are Amgen, Genentech and major bank Credit Suisse believes that the approval. In Europe only the United King- jobs engine will slow down in the future. dom has achieved a better performance. "We believe that the annual growth in But despite such acclaim, biotech com- employment will slow down from its current panies are fragile plants. "I am convinced 30 percent to around 10 percent." that in five to ten years, most of the com-panies, even the ones quoted on the stock exchange, will not exist in their present Although the younger companies tend to public funds is comparatively thin on the report biotech2.
make the headlines, it is the larger pharma- ground, and since the high-tech bubble ceutical groups that carry out a large burst, private backers such as venture company profile apoxis: proportion of the work in the field of bio- funds have tended to invest mainly in technology. And the major pharmaceuticals companies whose drugs have already got are sponsoring both small and medium- through the initial clinical stages. Add to this sized companies in a variety of ways. For the fact that while those who set up biotech example Roche has withdrawn from the companies are excellent scientists, they field of anti-infective drugs and outsourced have a lot to learn about managing a or sold their licences to companies such as company. Alice Huxley, CEO and founder of Basilea and Arpida (see page 16). The Speedel, talks of the "Darwinian principle": Novartis Venture Fund handed out start-up Only the fittest survive. But according to the If Apoxis in Lausanne manages money to companies such as Speedel (see Credit Suisse industry report, this has its to break through, it will revolu- page 18), so that they could continue the good points. If the state cornucopia were to tionise cancer treatment. supernumerary projects following the be overgenerous to young companies, they But the new company, holder of Ciba/Sandoz merger. In this way the phar- could run the risk of becoming overburden- the Swiss Technology Award 2004, maceutical groups are outsourcing their ed. "Only those companies that are able to still has a long way to go.
development risks while retaining control.
break away from public sponsorship and They thus secure the licence and use their find private investors will enjoy lasting sales organisation and financial power to be the first to bring new drugs onto the market.
The junior partners benefit from milestone Is Switzerland a good location? With some payments and from their share of the selling of the major pharmaceutical companies price – but naturally only in the case of based here and with several university success. If biotech SMEs market their own faculties in Switzerland, the pool of home- products, these tend either to be specialist grown and foreign expertise is sizeable.
products for a restricted market, or new Most young companies are multicultural From the outside you cannot see what is development and production platform tech- melting pots with people from 20 different going on behind the walls of the office nations, as is the case at Speedel, based building in Lausanne's Sévelin area. One of in Basle. This mix of cultures and diverse the companies, with offices and laboratories Anyone choosing to leave the shelter of a educational paths bears fruit. There are which occupy a whole floor, is Apoxis SA.
university research department or a well- occasional complaints about the tedious Entry into the heart of the research area financed research job at a major pharma- work permit procedures for foreign requires the wearing of shoe protectors and ceutical company to set up a spin-off oper- occasionally of ICU-type breathing masks – ation will experience some chill winds at standard for certain processes which have first. In Switzerland, start-up capital from The deep fragmentation of the industry into to be conducted in clinically sterile condi- its three main clusters in Basle (BioValley), tions. In the laboratory section there is also Zurich (MedNet) and Lake Geneva (BioAlps) an animal testing station where mice are is controversial. Opinions range from the kept in separate boxes, and there is a Network biotechnology "superb framework conditions" according stronger smell here. Providing professional services to the phar- to seco, to an "unnecessary dissipation of maceutical and biotechnology industries energy", as stated by Jean-Pierre Rosat, For Jean-Pierre Rosat, who has been the requires experience and specialised know- CEO of Apoxis. And the general scepticism CEO of Apoxis since the middle of 2002, ledge. To maximise the effectiveness of our of the public for gene technology puts a this one floor of operations is only a single services, PricewaterhouseCoopers main- statutory thumbscrew on the industry.
step in the first lap: "We will soon need tains pharmaceutical and biotechnology Protagonists such as Rosat are critical of more space and will have to employ more industry Centers of Excellence in key loca- this. "Biotechnology is the industry of the staff" – there are currently 42, and 18 tions worldwide. These centres in Basle, 21st century. Progress cannot be held months ago there were barely half a dozen.
Chicago, Florham Park, London and Tokyo, back." If it is too harshly regulated, com- Experts are of the opinion that most new directed by highly experienced partners, panies will move to other countries where companies in the biotech field will have keep our teams and clients briefed on the regulations are less inflexible. // disappeared within five years. 42-year-old emerging issues, regulatory developments Rosat has a confident response to this and industry best practices. Swiss contact prognosis: "We are better than the others.
"Pharmaceuticals & Biotechnology": For further information, We have excellent scientists and good Clive Bellingham, tel. 01 630 28 22, click on the links below management, and our pre-clinical trials promise good results." Apoxis currently has 42 employees. Just 18 months ago the staff numbered barely half a dozen. Jean-Pierre Rosat, CEO of Apoxis: "We have excellent scientists and good management, and our pre-clinical trials promise good results." What is Apoxis researching and develop- Indeed, even the Swiss establishment ing? The modified company name stands believes in the newcomer from Lausanne. In for their programme, so-called apoptosis 2004 Apoxis received the Swiss Technology (the programmed death of cells). Apoxis is Award, the most important award in this working to correct the frequent program- field, contested by a total of 58 teams. The ming errors. The biotech company Technology Award is the initiative of the specialises in so-called tumour necrosis Cantons, and the Federal Government is factors (TNF). In simple terms this involves one of its sponsors. re-starting the cell motor with the correctkey when the cell motor has dropped Apoxis has already sold two proteins from out, for example in cancers. Apoxis is the TNF family by licence to the American developing proteins as a type of cell medi- biotech company Biogen. If these cine – when injected it recognises the compounds pass the various clinical phases cancerous cells, docks there and triggers and new medicines are developed from their death without harming other types them, then Apoxis benefits thanks to of cells. The natural mechanism is thus corresponding contracts. At the same time reconstructed, and all this takes place with- they are developing other TNF molecules out expensive surgical intervention and in Lausanne themselves. Initial clinical trials irksome chemotherapy, which are standard are planned in 2005. nowadays for many tumours. In spite of its initial successes and a global Apoptosis involves a process which is cancer market with a current potential of important for survival. The suicide USD 20 billion, there is no easy money for programme deals with a balance between Apoxis. CEO Rosat is quick to criticise: the dying off and development of new "The Swiss biotech market is far too frag- cells. If too few of the worn-out cells die, mented, and there is no government aid this can damage the human immune system available to speak of. Gaining approval for or cause illnesses such as diabetes. foreign experts is a tedious process here." If too many cells die there is the risk of de- Apoxis' chief investors up to now have been generation as with Alzheimer's or Parkin- two joint-stock companies from Sweden son's disease, and if the cells multiply and France. Instead of investing in new unchecked then the cancer proliferates. technologies, the preference for subsidies inthis country tends to be with outdated This is therefore a broad area of activity for structures such as agriculture, much to cell researchers and specialists in basic Rosat's irritation. He finds such prevailing biological processes, such as Jürg Tschopp conditions more burdensome than his – a professor at the University of Lausanne, seven-day week at Apoxis. He describes report biotech3.
and his colleague in Geneva, Lars French.
this as fun, and laughs. He relaxes in the company profile cytos: The research duo founded Apoxis in 1999 evenings at home by cooking for his wife as a spin-off. Today both are members and two children. // of the board, and they bring their expertisewhilst allowing the management to "work independently", as CEO Rosat puts it. Apoxis SA, Lausanne Homepage: www.apoxis.com Rosat, who is himself the founder of several companies and a scientist with a PhD in Number of employees: 42 immunology as well as a Master's Degree in Chief investors/capital acquired: HealthCap, Banexi With its vaccines for nicotine Technology Management, needs this free- Ventures Partner, total CHF 11.75 million addiction, Alzheimer's, high blood dom. He prefers to be the boss of a small In the pipeline: Pre-clinical projects for cancer, pressure and skin cancer, Cytos – company rather than the number two in inflammation and autoimmune diseases based at Schlieren in Canton a larger concern. Easy-going in manner, CEO: Jean-Pierre Rosat Zurich – has set itself very high Rosat describes his position thus: "This is standards. Initial clinical tests have my ego trip. I enjoy taking on responsibility seen success.
and making decisions. My task is to put the right people in the right positions." Wolfgang Renner (right), CEO ofCytos, and his financial director, Researchers are learning from mice. In Jakob Schlapbach put their money molecular biology, and his financial director, animal trials, when endorphin – the happi- on the success of immunodrugs.
Jakob Schlapbach, are keeping their feet ness hormone – is supressed in baby mice, But "only 10 percent of the on the ground. "Only 10 percent of the they do not react when they are separated products that have got through products that have got through the clinical from their mothers. A normal youngster gets the clinical phase, ever make it to phase ever make it to the market." So Cytos extremely distressed without its mother – never builds its future on a single product. it wants to suckle, because suckling makes A total of six immunodrug candidates – all it happy. The same effect can be seen in vaccine based – are currently undergoing, smokers. "We use this mechanism in our or will shortly be undergoing, clinical devel- vaccines," explains Wolfgang Renner (37), opment. Experiments on animals for CEO and founder of Cytos in Schlieren in vaccines against arthritis, obesity and high Canton Zurich. The vaccine "Immunodrug Over 1.2 billion people smoke throughout blood pressure have been successful.
CYT002-NicQb" is currently undergoing the world. According to estimates tobacco Novartis already holds a commercial licence clinical safety and effectiveness trials with consumption costs around 5 million lives for an immunodrug against Alzheimer's, and 300 smokers at the St Gallen cantonal every year and billions in health care. A can now move to the clinical development hospital. Said Renner: Nicotine creates an successful vaccination against the addiction effect only because the body contains what would be a blockbuster success. Sharing is known as a receptor that responds to the the options, Renner and his team would The Cytos business operates as follows: addictive drug. "The vaccine forms anti- then be extremely well set up. And the Medicines for the mass market, with their bodies to neutralise the nicotine." shareholders too – Cytos has been quoted high development costs, are outlicensed to on the stock exchange since 2002 – would well-capitalised pharmaceutical companies; be rubbing their hands with glee.
But what happens if CYT002-NicQb is atotal flop? Renner, who holds a doctorate in on the other hand Cytos wants to market report biotech4. company profile arpida: some individual specialist products itself.
Renner and Schlapbach are convinced thatwith their well-filled pipeline, they willachieve success. They believe it will stilltake three or four years until the break-through comes. If it does not, the company The bacteria killers.
will cease to exist in this form.
Why has Cytos concentrated exclusively on Antibiotics are increasingly losing their effectiveness. vaccines? Renner projects onto his office In the battle against resistant bacteria, Arpida, based at Münchenstein, wall a PowerPoint presentation showing the has several irons in the fire. age pyramid for Switzerland in 2050. In thatyear the over-85s will be the biggest agegroup in Switzerland. Throughout the worldthere are more than 2 billion people over 60years of age. "If in future we don't want towaste away en masse from chronicdiseases, then we need to prevent degener-ative illnesses such as Alzheimer's. And weneed to do it before the first symptoms In a former warehouse on the outskirts of clinical study (Phase III) before the official appear," explained Renner. The most effec- Münchenstein, in Canton Baselland, at first approvals procedure is about to begin. Arpi- tive and the cheapest way of doing this is glance little stands out from the norm. A row da has the necessary expertise and suffi- by administering a vaccine. of laboratories contain apparatus for mixing cient capital.
substances, and for cooling and heating The people at Cytos are proud of their own bacterial cultures. Lab technicians and "It is looking very good," says Harry Welten, new production facilities at the handsome scientists busy themselves under so-called financial director. The former banker refers company headquarters in Schlieren – the fume hoods with pipettes, recording results to the statistics. In four cases out of five, hub of Switzerland's biotechnology industry.
as they sit in front of their computer anti-infectives that have successfully got The production facilities include a screens. But what looks like mere routine is through the second clinical phase are 90-square-metre cleanroom working area, for the staff at the biotech company Arpida successful in reaching the market as a drug.
meeting the highest of demands. Cytos is a race against time. "The antibiotics crisis is And Iclaprim compares well against the investing millions and is moving full speed intensifying. We are developing drugs to "gold standard". Arpida's drug has been ahead. The company is still spending much combat multi-resistant bacteria," explains compared with vancomycin, which is more money than it earns. But this does not Dieter Gillessen. The co-founder, chief always administered where there is multiple worry financial director Schlapbach or his operating officer and director of Arpida is a resistance to bacteria.
boss. "No established pharmaceutical former Roche research scientist. company would have developed so many So why develop a new drug if it's only as drugs with so little money in such a short The development is particularly dramatic in good as the old one? Finance director space of time." // hospitals. In the USA alone 90,000 people Welten is in his element as he replies: die from infections contracted in hospital.
"Iclaprim has a broad range and works The elderly and those recovering from against Gram-positive and Gram-negative Cytos AG, Schlieren recent operations are particularly affected – strains of bacteria. Our drug is also a bacte- Homepage: www.cytos.com by pneumonia or septicaemia. Since more ricide, that is to say it kills bacteria. Many of and more bacteria are becoming resistant to the competitor products simply stop their Number of employees: 109 the usual antibiotics, the risks are increas- growth." And Iclaprim is one of the few Principal shareholders: Wolfgang Renner, GLS LP ing. Some bacteria are already indicating drugs that can be administered either intra- Investment, HBM Bioventures, Novartis Research multiple resistance, where three or more venously or orally.
different drugs have no effect.
In the pipeline: vaccines for nicotine addiction, In the USA hospitals generally pay the costs high blood pressure, arthritis, obesity, Alzheimer's, The news from the Arpida laboratory has if a patient becomes infected while an in- all currently in the clinical phase (Phases I/II) and in awakened great hopes. Some years ago patient. With resistant bacteria this repre- pre-clinical development Arpida acquired the research molecule sents an average of USD 45,000 per CEO: Wolfgang Renner Iclaprim from Roche. This too is thanks tothe former Roche research scientists whoare among the founders of Arpida. Sincethen Iclaprim has passed the first two clini-cal test hurdles (Phases I and II). The final "The antibiotics crisis is inten-sifying. We are developing drugsto combat multi-resistant bacteria." Dieter Gillessen, co-founder of Arpida, COO, directorand former research scientist, with his financial director, HarryWelten (right).
patient. As Welten says, quite simply:"If thelength of a stay in hospital can be reducedand the patient can be discharged after afew days, with drugs they can take orally,hospitals can save around half of the usualcosts." Other drugs in the pipeline are just as prom-ising. One example is a product for generalpractitioner use which works on commoninfections such as pneumonia and elimi-nates resistant bacteria. To reinforce its R&Dstrengths, in the autumn of 2004 Arpidatook over Combio, the Danish chemicaltechnology company, with which it hadbeen nurturing a close partnership. Thetakeover was achieved by means of ashare-exchange deal.
Since its foundation a total of CHF 140million have been invested in Arpida in threerounds of investment. The company isbelieved to be capable of market success.
The sales potential for Iclaprim alone isaround USD 500 million per annum. Forsome years Arpida has been a hot candi-date for the stock exchange. CFO Weltenremains uncommitted: "Whether and whenthere will be an IPO will be decided primarilyby the market and by our investors." // Arpida Biotech AG, Münchenstein Homepage: www.arpida.com report biotech5. company profile speedel: Number of employees: 73 Principal investors/acquired capital: Alta Berkeley, CDIB, HBM BioVentures, HealthCap, Partners Group, Temasek Holdings, Novo, swissfirst Bank The blood pressure reducers.
and others, total CHF 140 million In the pipeline: Highly effective anti-infectives in clinical (Phase II) and pre-clinical development Everything staked on a single card, yet still in the game: CEO: Khalid Islam With its blood pressure reduction drugs, Speedel, the start-up companyfrom Basle, has cleared the first hurdles.
"Do you measure your own blood pressure from high blood pressure. And since people every week?" we ask. Alice Huxley, CEO are getting progressively older, the risk will and founder of the Basle-based biotech increase in the future. Most of those affect- company Speedel, looks briefly at her direc- ed do not even know that they are suffering tor of research, Peter Herold, and both from the complaint that can be the cause of laugh out loud. "We haven't time for that." a "sudden death". Only one person in two Still laughing, Huxley adds: "My blood pres- of those treated for high blood pressure is sure is probably too low." And for the boss adequately controlled with the treatments of a company specialising in drugs to available today. "There is no universal drug combat hypertension, that is a provident to help everyone," says Huxley.
Speedel – short for "speedy development" – The subject is serious indeed. Throughout specialises in compounds called renin the world some 200 million people suffer inhibitors. Renin is the key enzyme for regu- lating blood pressure. "Imagine it as being illustrated in Diovan, the blood pressure re-ducer from Novartis. This blockbuster drugis earning CHF 3 billion a year in sales.
"To begin with, we were a one-productcompany. If the initial clinical phase hadfailed, the whole company would haveground to a halt. But I was alwaysconvinced that we would succeed," saysHuxley. The most difficult stage was theperiod after Speedel was founded in 1998.
Identifying and persuading investors, find-ing staff with a pioneer spirit and organisingthe company – if it's a matter of survival,you learn very fast.
And how are things today? 27 patent appli-cations and eight patents, a pipelinecontaining several products in different clini-cal and pre-clinical phases, and drugsactive at three different levels of bloodcirculation. With Speedel Experimenta inAllschwil, winner of an enterprise award in2004, the company has a research unitwhose efficiency is well above the average.
Branches in the USA and Japan forgecontacts with principal markets. Since it was founded Speedel has enjoyedrevenues of some CHF 180 million fromoperational earnings, capital investment Speedel has eight patents, 27 and convertible loans. This money is patent applications and a pipeline enough for three years of operation. Mean- like an avalanche coming down a mountain.
containing several products in while, highly qualified people are approach- The higher up you take action, the better different phases. Alice Huxley, ing the company to make unsolicited the braking effect is," explains Herold. CEO and founder, with research applications for jobs. If everything goes So renin is at the top of a cascade. For director Peter Herold (centre): according to the business plan, the private technical reasons it has not been possible "There is no universal drug to help company will be converted to a public before now to produce a drug to provide limited company. Huxley is not specific such treatment.
about the date of the IPO. The 47-year-oldexecutive, who, besides her full-time job, Speedel has found a solution. Its renin also looks after a family with two children, inhibitor Aliskiren was clinically effective in inhibitors. Then came the merger with believes firmly that "we must allow patients with high blood pressure. So Sandoz to form Novartis, and the survival of ourselves enough time, but we must not convincingly, that Novartis has safeguarded the renin project was under threat. Huxley, miss a single day." // the rights. Since March 2004 Novartis has who is persistent by nature, would not been carrying out a broad-based study with let go. She convinced Novartis manage- patients in so-called phase III – the final ment to release Aliskiren and to outsource it Speedel AG, Basle stage before market approval can be given.
to the newly founded company Speedel.
According to this schedule, the first renin The Novartis Ventures Fund provided the inhibitors could be introduced onto the starting capital, and in return retained a call- Number of employees: 57 world market in 2007.
back option on Aliskiren. Principal investors/secured capital: DSM Venture Fund, Novartis Ventures Fund, total CHF 180 million Aliskiren is a shining example of enterprise If it is a success, Novartis holds a trump In the pipeline: Clinical (Phases II and III) and pre- and how the system of give and take can card. And Speedel benefits from the mile- clinical drugs for blood circulation and metabolic work in the pharmaceutical business. Alice stone payments payable with back-licens- Huxley, a biochemist, was a manager ing as the work advances. But the biotech CEO: Alice Huxley at the former Ciba, and with her team was company can really only start earning seri- already working in the field of renin ous money if Aliskiren comes onto themarket as a drug, bringing in regular sales-related royalties. The prospects here are trend. professional entrepreneur Jane Royston1, professor for entrepreneurship and innovation on entrepreneurial spirit as a key to the commercial future. Her view that the Swissmight miss the boat is controversial.
"A country that doesn't encourage youngcompanies will lose its ability to compete." Interview: Iris Spogat Kuhn So is Switzerland the right country for the and-coming generation of entrepreneurs. ceo Magazine: What would have to If this does not happen, I think the outlook happen for more young specialists to set up It is an absolute paradise for entrepreneurs! It is possible to set up a company here in a Jane Royston: The parents of our students matter of days. Taxes are low. Salaries are What do you think would persuade are teachers, doctors, lawyers, officials, high, yet people work longer than in other managers and employees, and very few of countries. It is also simple to employ and, if Unfortunately, it has to be a real crisis which them come from an entrepreneurial back- necessary, to dismiss people. And anyone would presumably make the whole country ground. This type of life plan is missing in setting up a business, who makes a aware of the importance of a solid base of Switzerland. We need new examples and success of it and sells it on, is not taxed on technology companies and highly special- concepts for the future, and this begins with ised innovative SMEs to ensure survival.
schools and the media. More information, Competitors from the new EU countries are more role playing and more positive ex- And what is the catch? already forcing prices, and in quite a few amples are required. An awareness of the That it is so difficult to set up a new busi- industries we cannot keep up. We have to profession of entrepreneur has to be creat- ness. Who provides the necessary start-up successfully establish ourselves in a market ed in society, and young people need to be capital for young entrepreneurs in this which creates employment and guarantees inspired to venture into such an exciting country? That is not the role of the banks field. My 10-year-old daughter would like to who, I believe, take a lot of flak in this be an entrepreneur, but I bet she is the only respect – it is the job of the state! In other Five years ago the Chair of Entrepreneur- one in her school who does! countries the establishment of a new gener- ship and Innovation was set up at the Swiss ation of entrepreneurs is recognised as an Federal Institute of Technology in Lausanne important task for the future – and therefore and you are its director. What have you 1After studying mathematics at the London School given the appropriate financial backing. I achieved since then? of Economics, Jane Royston began her career as a wonder where Switzerland will stand in ten I am particularly proud of the 100 high-tech manager at the chemical company DuPont de years time in relation to Germany, since our start-ups which our former students have Nemours. In 1986 she struck out on her own andfounded NatSoft, an IT service company which has neighbour has been investing billions in set up since then. We have also managed to developed into the largest service provider in young entrepreneurs. western Switzerland and which she sold to a partnerin 1996. Since 1999 Jane Royston has been profes-sor for entrepreneurship and innovation at the Swiss What is your prognosis? Federal Institute of Technology in Lausanne, and We are lagging behind and losing our ability since 2002 president of Create Switzerland, to compete. Politicians have to be persuad- a national entrepreneurship programme. She hastwo daughters and sits on many committees, ed that it is of the utmost importance to including the Federal Commission for Innovation actively encourage young companies in the business sectors of the future. Moreover,efforts are required to guarantee a new up- "In other countries the establishment of a newgeneration of entre-preneurs is recognised as an important task for the future – and istherefore given the appropriate financialbacking. I wonder whereSwitzerland will stand in 10 years time in relationto Germany, since our neighbour has beeninvesting billions in young entrepreneurs." initiate a series of lectures for freshmen, and ment, and thus increased wealth, in become at least as great a concern for in the meantime over 50 percent of new Switzerland. The most important resources politicians as maintaining the dairy industry students at ETH Lausanne have opted for in our country now are intelligence and a entrepreneurship as a chosen subject. high level of education. Our engineers andscientists are excellently equipped for glob- What do you think would be a forward- Why does Switzerland require more young looking programme for promoting this? Ultimately the sum of the aspects discussed The Swiss economy consists primarily of here – creating an awareness of the profes- SMEs and some big long-established and Are engineers and scientists particularly sion of entrepreneur, implementing very significant companies. On the whole, suited to founding companies? economic aspects in training, guaranteeing there is a good mix of industries but not In Switzerland it is scientific thinking that is state financial injections for start-ups. In a very healthy blending in terms of age and a focus for technical training and not Israel, for example, there is a USD 400- size and there is not much movement. If one economic thinking. These are two different million-a-year programme for supporting or two pillars of the economy were to worlds. However, an entrepreneur needs innovative technology companies. The state crumble, there is nothing to replace them.
profound business expertise, and this is has a share in returns – therefore USD 200 Furthermore, many large companies are where there is a need for action! And only a million flow back into the coffers. That is no increasingly shifting their production few people feel the calling to entrepreneur- mean feat, and an excellent investment abroad. What will happen to Switzerland if ship. In Finland in the 1970s, 80s and 90s a indeed in the economic future of the coun- this continues? If we do not manage to survey was conducted to find out the build up a new generation of successful percentage of people who felt they were technology companies which might fill attracted to being entrepreneurs. The result Do you have any tips as to how future gaps, then I envisage that we will was 2 percent, irrespective of the decade young entrepreneurs can find support in have big problems. and the prevailing economic situation. If you divided up this 2 percent into engineers and Gathering good people around them and Why technology companies in particular? scientists who have a good business idea, securing top coaching. Clever young entre- A study was recently published in America this would probably represent one person a preneurs look for five skilled board directors which stated that a job in the area of new year, and of course that is nowhere near and pay each one CHF 20,000. They thus technology leads to one or two posts in gain the expertise and the network of five other fields. Efficient technology companies experts for the salary of a single member of therefore guarantee well-paid local employ- Is general rethinking required? I see a positive development with regard tothinking in this country. Compared to fiveyears ago, entrepreneurship today is afamiliar term and also one that has positiveconnotations. What is missing is action.
Encouraging entrepreneurship must The winter sports magnate.
The Flims Laax Falera region is the largest ski area in Switzerland – and profitable to boot. The people of Grisons keep their wits about them in thecompetition for guests, overnight stays and maximum image appeal. Their secret weapon is Reto Gurtner, the dynamic CEO of Weisse Arena AG.
Photos: Roth und Schmid 22 ceo/weisse arena Text: Corinne Amacher At 100 square kilometres the region of Flims Laax It was a first-rate publicity stunt. During afew mild days at the beginning of November Falera is one of the biggest ski resorts in the world.
– some people were driving around in The Weisse Arena Group has experienced a huge convertibles – two off-road vehicles caught upturn in the last few years. Enjoying a turnover the attention of passers-by in the Zurichand Basle areas. The cars, with Grisons of CHF 65 million and a million guests a year, the number plates, which seemed to be winding company offers highly attractive tourist packages. their way haphazardly around the streets,had a meter-thick layer of snow on theirroofs, their bonnets had a sprinkling ofsnow on them and icicles hung from theirwing mirrors. People looked on puzzled,then read the lettering on the car doors – It all started with the Crap Sogn Gion Moun- amalgamation of the two rival regions took "Flims Laax Falera" and grinned. The artifi- tain, which was a favourite for skiing and place. With pistes 220 kilometres in length, cial snow looked deceptively real in the flat snowboarding thanks to its gentle gradient.
it is one of the big continuous skiing areas country, and the message was being put Reto's father, Walter Gurtner, wholesale in the world, but the efficiency of transport out that the winter season had begun up in butcher and president of the commune of alone is not sufficient in the competition the mountains.
Flims, started up with small ski lift equip- to be the foremost winter sports resort.
ment in the 1960s and soon made it his aim "People don't come to travel in the lifts," Creating an enviably hip image to open up the Vorab glacier, in order to be says Gurtner, "they visit for the experience able to offer guests all-year-round snow. in the mountains." For him this meant "I had "Advertisers can do amazing things for us," He originally wanted to develop Vorab along to start by setting a scene to convey this says Reto Gurtner, CEO of Weisse Arena the shortest route from Flims via Nagens experience to them." AG, which incorporates the skiing areas of with two large aerial cable cars, but hotel- Flims, Laax and Falera. From small iers in Flims opposed the proposal. He Offering fun places for snowboarders advertising campaigns up to large building therefore pursued this scheme in Laax, projects, Gurtner fiercely promotes the where he was welcomed with open arms.
And this is why Reto Gurtner sees himself region's profile at all levels. With him as the Hardly anyone believed at the time that he as director on a natural stage "with the best driving force, the Weisse Arena Group has would be successful, but Gurtner senior backdrop scenery which is constantly experienced a huge upturn over the past quickly launched what was then the largest changing with the weather and seasons". few years. Enjoying a turnover of CHF 65 cableway in the world with private funding, To choose the performers he conducted million and a million guests a year, Weisse and very soon afterwards the glacier was market research and looked at the trends.
Arena is the biggest ski operator in Switzer- Whilst momentum was slowly being lost on land and also one of the most profitable.
the traditional ski circuit, a subversive alter- Compared with other famous resorts such Staging mountain experiences native scene was developing in the USA as Lenzerheide or St Moritz, it also has an and later in Europe, which inspired Gurtner enviably hip image. There is no winter It had not been envisaged that Reto, the both as an individual and a businessman.
sports region which attracts as many young oldest of three children, would enter the Mega-fleece-wearing teenagers, who were people as the gently slanting slopes of the company, but this is exactly what hap- making the pistes unsafe with extra-wide Surselva Valley. pened. He studied business administration snowboards, represented precisely the Reto Gurtner has practically single-handedly at St Gallen and law at Berne and initially target group he was looking for – young, built up the skiing region into an Alpine busi- wanted to pursue a career as a business sporty, active, communicative – and ready ness which is home to the most important lawyer. However, even as a young student tourist attractions. The 50-year-old from his father included him on the board of The boss put all his energy and creativity Grisons is the majority shareholder of the family business so that his son could into winning favour with the snowboarders.
Weisse Arena AG and the president of the practise the application of economic theory In the USA he bought the Pipe Dragon, board, managing director as well as CEO.
which he had learned at university, i.e. a high-tech snow machine allowing the Gurtner's comment is laconic on this restructuring the accounting. Sometimes construction of perfect half-pipes. He concentration of power: "The organisation both of them would travel to the French employed the dance label Ministry of Sound allows me to make swift decisions and to Alps where they were inspired by Emile and other big acts and thereby gained press ahead with my projects unimpeded." Allais, who had built up the big French valuable free advertising on MTV. tourist destinations. When his father died in 1983, Reto waspredestined to be his successor. It was nowup to him to realise his father's greatestdream – the merger of the Laax and Flimsmountain railways into an all-encompassingski area. It was only in 1996, after someopposition had been overcome, that the 24 ceo/weisse arena MAD and NTC Rent are perfectly suited 50 kilometres of glass fibre cable have been laid for gathering customer data. Concerned on the mountain, making real-time data from the cash mothers hand the ski instructors theirmobile numbers without question when registers of the mountain railways, the ski schools, they drop off their child, and when hiring restaurants and equipment hire shops available skis, the young enthusiasts do not hesitate to management. The data are collated using a unique to give information on their shoe size and favourite skis. These are extremely customer card with which guests can access all valuable details that are fed straight into the Weisse Arena services. central database and which form completecustomer profiles over the course of time.
Gurtner already has 200,000 such profilesstored, which are, as he states, "unique He organised high-profile snowboarding To complete his range of services, Gurtner in the Alpine region". Since 50 kilometres of events and placed his fans in the Riders has integrated other tourist providers into glass fibre cable were laid on the mountain, Palace boarders' hotel. his company. He set up Mountain Adven- data management has also been available tures AG (MAD), a firm which offers a whole in real time from the cash registers of the Packaging sports and leisure activities package of sports and leisure activities mountain railways, the ski schools, restaur- that had previously been sold individually by ants and equipment hire shops. This irony is typical of Gurtner: It is a hotel ski and snowboarding schools and the garni but is called a palace like the Palace mountain railways. Anyone wishing to take Collecting and analysing customer data in St Moritz. The CHF 10 million hotel a holiday in Flims Laax Falera today can opened up at the valley station in Laax in use it as a one-stop shop for snowboarding The data are collated using a unique cus- December 2001 after much planning and a or ski courses, skiing equipment or even tomer card with which guests can access all short construction phase. In contrast to booking the hotel. Weisse Arena services. The customer may musty guest houses, young fun-loving Hiring equipment has been brought up to also give online evaluations of friendliness sports enthusiasts were offered the level of date – whereas customers used to have to or cleanliness in restaurants, pistes and rail- comfort they are used to at home, although wait an eternity in the back room of a sport ways using this card, which has therefore with slightly less space. The futuristic hotel shop for hired ski boots to be adjusted, improved transparency. The profiles help has 75 rooms from basic dormitories to Gurtner offers modern materials and Gurtner to focus his range of services and luxurious suites. To appeal to the multi- straightforward service at NTC Rent, his to build customer loyalty for Weisse Arena media-oriented youngsters, Gurtner entered new technology centres. NTC Rent is by way of targeted benefits or incentives.
into a partnership with the Japanese elec- booming, and its growth rate has reached Loyal snowboarders can receive an up- tronics entertainment company Sony, which grade at the Riders Palace, which has three equipped the rooms with PlayStations and levels of comfort just like an airline. VIP DVD players.
guests have access to a reserved parking From a business perspective these hip place at the valley station until 11 am.
lodgings are particularly important for trans- Reto Gurtner never rests on his laurels – he port operations. Arrangements can only Facts and figures on Weisse Arena is always throwing himself into something be made by booking, which constitutes a Weisse Arena AG runs the Flims Laax Falera new with boundless energy. At Casa Primo, minimum of one overnight stay plus two ski area, which at 100 square kilometres is the headquarters of Weisse Arena, architec- mountain railway tickets for two days. The one of the biggest winter sports regions tural models and plans can be viewed price is re-set daily according to supply and in the world. The company, managed by behind a curtain – the work of Gurtner. In demand and is published on the Internet.
majority shareholder Reto Gurtner and the large car park at the Laax Valley station Added to the 20,000 overnight stays sold registering over a million guests, last year a CHF 70 million American-style resort is by the Riders Palace every winter, there are achieved a turnover of CHF 65 million and planned in the next few years, with holiday at least as many rail journeys. The hotel a net profit of CHF 2.7 million. The group apartments and hotel service, restaurants, thereby makes a contribution to covering consists of three divisions – the mountain bars, shops, an entertainment centre the costs of Weisse Arena, because the railways, which take guests up over 3,000 and even an ice rink. Accommodation will costs for operating the mountain railways metres to the Vorab glacier; the hospitality be arranged around this – not kitsch chalets remain the same – just like for flights – division, which includes the designer Riders but bare stone cubes, designed without irrespective of the number of passengers. Palace hotel, amongst others; and the extra features such as balconies. The build- fast-growing leisure section, offering rental ings will look just like they had been rolled and sales of ski and snowboarding equip- down into the valley from the huge rocks ment. Weisse Arena owns half of Mountain of Crap Sogn Gion, and Gurtner calls them Adventures AG (MAD), which gives the "Rolling Stones". // instruction in skiing and snowboarding.
ceo/weisse arena 27 ceo1/05.pwc expertise High expectations of the auditor: Value and limits of the audit. Page 29The Sarbanes-Oxley Act (SOA): Challenge and opportunity. Page 31Information technology: The CIO as risk manager. Page 34The 5-minute expert: Topical business terms illustrated with examples from research by PricewaterhouseCoopers. Page 36Transfer pricing: The taxman is interested in how you implement your strategies! Page 37Service: Events, publications and research. Page 39 28 ceo/pwc expertise High expectations of the auditor: Value andlimits of the audit The complexity of the duties facing the auditor has grown in line with the heavilyincreased demands on companies. Expansion of regulatory provisions creates new tasks in the collaboration between companies and their auditors.
The putative failure of the auditor can be The current revision of the statutory auditing Sensational business collapses have compared pictorially with the failure of a framework in Switzerland specifies and revived the topic of the so-called expecta- high jumper. Either the bar was set too high, extends the auditor's duties. In future a tion gap in auditing – in contrast to the past, or the leap was not good enough. From our company must provide proof of a function- however, in the wider context of the Corpor- viewpoint both are valid: expectations are ing internal control system and undertake ate Governance debate. A variety of ex- too high, and audits can be further a risk assessment. The auditor must then amples have impressively demonstrated the improved. The gap that exists must be examine this information. These additional need for functioning Corporate Governance closed from both sides. audit areas raise the bar for the high jumper procedures and high-quality corporate yet again, but they are aimed precisely at financial reporting in a market economy, Clear communication of the auditor's duties increasing the quality of corporate reporting raising the question of the auditor's role. and strengthening the force of the audit. Here there is a gap between public expect- The auditor's duties must be seen in the ations of the auditor and his actual duties context of the entire corporate reporting Improving the quality of the audit and their implementation. The difference chain (see diagram page 30). The audit between expectation and reality is more or represents an important assurance element The complexity of the auditor's duties has less pronounced among different groups in the communication between companies grown in the last decade in parallel with who are directly involved in the corporate and financial markets. Its function is, how- increasingly heavy demands on companies reporting process to the financial markets: ever, restricted to an audit of the financial in a rapidly globalising economy. The owing to their different functions, board reporting. Only if all participants perform continuing development of accounting members, management, banks, rating their duties professionally and the individual principles and their application places even agencies, regulators and legislators all elements in the reporting chain interact can greater emphasis on cooperation between have their own picture of the auditor's confidence in the reliability of financial companies and their auditors. duties. On the other hand, the general reporting and the quality of the supervisory On the other hand cost pressures have public frequently has the impression that, bodies be restored. Improving the quality of resulted in many companies placing audits in issuing their report, auditors not only financial reporting and the audit is therefore with the lowest bidder. The Swiss auditing confirm the correctness of the financial a core element in the present reforms at the profession as a whole has not adequately statements, but also the correctness of the international level and in Switzerland. grasped how to communicate the need for, business strategy. If the company goes into The introduction of Corporate Governance and the added value of, thorough, high- bankruptcy or serious fraud is discovered, guidelines and their disclosure in reports, quality audits and to promote them in the the first questions are: Where was the extension and harmonisation of accounting auditor? Why did he not warn of the danger principles and auditing standards, and strengthening of government and regulatory Among the more obvious effects of the supervisory bodies responsible for ensuring current reforms in the USA (Sarbanes-Oxley observance of accounting principles and Act, see page 31) are the increased time it auditing standards represent significant will take to conduct an audit and a concomitant increase in audit fees. The will-ingness of Swiss businesses to bear the time and cost burden of enhancing Corpor-ate Governance is growing. This alsoincludes external audits, which support thisprocess to a higher standard and morecomprehensively than previously. Stephan A.J. Bachmann is Leader, Assurance, Geneva.
ceo/pwc expertise 29 The Corporate Reporting Chain: Board of Directors Financial Analysts Other Stakeholders Market Regulators The Swiss profession has reacted to this Professional cooperation is called for For Corporate Governance and reporting development. The revised Independence to fully benefit from the audit requires that Guidelines lay out rules for preserving For the high jump to be successful and management, Audit Committee and audit- auditor objectivity and independence. the bar not to fall, everyone involved must ors have the courage to openly discuss In addition the Swiss Institute of Certified follow the aim of high-quality corporate critical matters concerning accounts, in- Accountants and Tax Consultants has reporting and auditing. Most important, ternal control and risk management. // brought the new Swiss Auditing Standards the new Corporate Governance must be (PS) into harmony with the International implemented and lived in companies. Standards on Auditing (ISA). Continuingeducation for auditors is continually being For auditors, the Audit Committee assumes updated to take account of the new an important role. The Audit Committee has requirements. The measures adopted by the task of monitoring the quality of financial In a market economy every busi- the profession in Switzerland and at the reporting in its own company; but it is also ness activity is associated with international level must be seen in the the competent body for assessing the risks. Companies collapse for context of a number of similar projects quality and independence of auditors. For many different reasons, such as affecting other market players, such as example the Audit Committee reviews the strategic errors and a competitive codes of conduct for rating agencies and permissibility of non-audit services by environment. These an auditor financial analysts. Furthermore, individual auditors in order to find a balance between cannot prevent. But he can ensure auditing firms have expanded their internal available synergies (e.g. auditors' know- that reports describe emerging quality control and assurance procedures ledge of their clients) and preservation of economic difficulties promptly, and intensified their internal training, e.g.
independence (e.g. not auditing their own transparently and properly. The concerning accounting principles, work). Furthermore it is the responsibility challenge is therefore to aid the internal controls and auditing procedures. of the Audit Committee, together with wider public in understanding The auditing profession welcomes the fact management, to confirm the appropriate- economic interrelationships and that self-regulation is being complemented ness of the audit's scope and to approve the different roles in the Corporate by government supervision and revisions the related audit costs. In order to be able Governance process and to to the statutory framework. The creation to carry out these duties, the time and tech- provide information about the of a government supervisory body will help nical requirements must be established social value and limits of auditing to enforce auditing standards and as well as a clear understanding of the in the functioning of financial guarantee independence and to support Audit Committee's duties. In their future markets in our market economy.
high-quality auditing in the long run. interactions auditors must clearly andstraightforwardly communicate to the CEOand CFO as actual preparers of the financialstatements and to the Audit Committee as supervisory body their evaluation of allaudit areas. 30 ceo/pwc expertise The Sarbanes-Oxley Act: Challenge and opportunity Companies perceive the provisions of the Sarbanes-Oxley Act (SOA) as a burden. It is worthwhile looking at the advantages: by complying with the SOA it is often possible to make a quantum leap in internal control.
corporate scandals in the USA, affects any The CEO and the CFO are responsible for company listed on a US stock exchange. the internal control Compliance, the observance of all internal Its objective is to restore confidence in and external regulations, is regarded by "corporate America", inter alia by means of One of the most radical innovations of the companies as a burden and an additional very strict rules on Corporate Governance.
SOA is that management (CEO and CFO) cost. This applies particularly to the provi- The intention of the SOA is to improve the must have their responsibility for financial sions of the Sarbanes-Oxley Act. As a result accountability, transparency and security reporting certified (Section 302 of the of the concept of the SOA, the related cost of US securities markets. In Switzerland SOA). Included in this certification is also and the deadlines to be observed, ensuring only 14 large companies are directly con- responsibility for the quality of the internal compliance with the SOA is primarily a cerned along with many Swiss subsidiaries control system (ICS). In the event of technical challenge for the companies of international groups that are listed on US infringements draconian penalties are fore- concerned that can be overcome by good stock exchanges. The SOA defines strict seen – imprisonment for 10 to 20 years and project management. obligations for the auditors of these compa- fines up to USD 5 million. But it is worthwhile widening the horizon to nies, but also influences the Swiss Corpor- include the strategic question whether the ate Governance debate. Its provisions The effectiveness of the internal controls objective of compliance alone makes tech- radiate far beyond its actual field of applic- must be periodically evaluated by manage- nical and financial sense. By complying with ability. Certain provisions of the SOA are ment and their conclusions published in a the SOA it is often possible to make a quan- expected to become a standard that other separate report, commencing with the tum leap in internal control. However, inter- big and listed companies will not be able to financial statements for 2004 (Section 404 nal control is scarcely a final objective, but ignore. This applies particularly to the of the SOA). US stock exchange listed a subset of enterprise-wide risk manage- COSO II Framework for Enterprise Risk companies whose head office is situated ment (ERM). The structures and processes Management, which was published on outside the USA (so-called Foreign Private created by SOA projects, as well as the 29.9.04 and co-authored by Pricewater- Issuers, FPI) have an additional year to know-how acquired, are an excellent basis houseCoopers. COSO II is a conceptual comply with the SOA 404 requirements (for for comprehensive risk management. development of the COSO I Framework for financial years ending on or after 15 July Internal Control and already today repre- 2005). This applies basically for the 14 Compulsory reading for listed companies sents a globally accepted benchmark for Swiss companies mentioned above. SOA risk management. 404 reporting by management must be The Sarbanes-Oxley Act is the most import- examined by the auditor and reported on.
ant US legislative revision affecting capital The current draft of the Swiss Auditing Law market participants since enactment of (RAG) also foresees that companies will securities legislation in 1933 and 1934. The periodically be required to perform a risk law, which was passed with astonishing assessment to be attested by the auditor.
speed in response to the now-familiar Preliminary experience in the USA hasshown that these SOA 404 requirementsinvolve considerable extra work, both for companies and their auditors. According to a survey of 224 US companies carried out in July 2004 by FEI (Financial Executives International; www.fei.org), Michael Abresch is Partner, Assurance, Basle, Thomas Scheiwiller is Partner, Advisory, Zurich.
ceo/pwc expertise 31 these companies expect to spend on aver- Professional project management saves timely communication of identified control age 25,668 internal man hours in connec- weaknesses, including any corrective tion with their 404 preparations. The internal measures proposed by management.
work reported by the companies is in direct Practice has shown that SOA 404 projects proportion to the size of the company are frequently carried out using a six-phase Irrespective of the relevant legal require- measured by turnover, i.e. companies with ments a good ICS also offers many advan- less than USD 100 million turnover estimat- tages from the company's viewpoint: ed 2,143 hours on average, while firms with 1. Establish the project organisation and more than USD 5 billion turnover quoted - Process security is enhanced. about 73,312 hours. In the same survey in 2. Document and evaluate process and - The documentation produced can be January 2004 the participants had reckoned control design (GAP analysis) used for additional optimisation and with an internal time requirement on aver- 3. Eliminate control weaknesses efficiency improvements. age of only about 12,265 hours. In addition 4. Test effectiveness of the internal control - Effective controls help to avoid the 224 companies surveyed in July 2004 fraud and embezzlement.
expect outside consulting of 5,067 hours 5. Sign-off and management reporting - The ICS represents an important on average as well as an additional increase (SOA 404 certification) element of an ERM system. in the annual external audit fee of about 6. Attest and reporting by auditor In particular, to ensure that the project iscompleted as smoothly and efficiently aspossible and also in view of the auditor'swork, it seems to us essential that theprocedure and the auditor's requirementsbe integrated into the SOA project at anearly date. This includes for example coordinating the scoping and the approachto achieving the objective of the project and Important SOA prescriptions for public companies (issuers)Issuers, Boards of Directors and management are affected in particular by the following provisions: CEO/CFO certification: Sworn statement that all financial SEC's option to ban delinquent board members or management statements and other reporting comply with stock exchange from working for SEC-registered companies regulations and the "True and Fair View" concept Duty to report immediately changes in the financial or operating Submission of a report by management on the effectiveness of New requirements for the composition and duties of the Audit Severer penalties for fraudulent manipulation of financial or other Committee (AC), including – Stipulation that the AC have a finance expert among its "Whistle-Blower Hotline": protection for employees who report – AC responsibility for the selection, remuneration and inaccuracies in financial statements monitoring of the group auditor – Approval of non-audit services by the group auditor by Prohibition of loans to board members and management the AC (Pre-Approval Process) Management obligation to return bonuses and other variable Ban on procuring certain, clearly defined consulting salary elements if the issuer subsequently has to correct its services from the group auditor consolidated financial statements 32 ceo/pwc expertise An opportunity that companies cannot because it was not efficient to perform analytic testing in the area. Now the entire The SOA poses a major challenge ICS will be a prescribed audit object also in for both the companies concerned The topic of internal control is not new in Switzerland, which in the long run – similarly and their auditors. As a rule, Switzerland. For example corporate law to the situation in the USA – will result in complying with the legal require- defines the design of the accounting substantially higher costs for the companies ments entails significant effort. system, financial control and financial plan- audited and for their auditors.
For auditors they mean in part a ning, to the extent they are necessary for new approach to the audit with management of the company, as being a Focusing on the ICS also involves risks. A a substantial extension of the area non-transferable duty of the Board of Direc- company should not take the ICS to be a to be covered. We are, however, tors (OR Art. 716a). Furthermore, Item 3.7 risk management system and think itself of the opinion that, on the basis of the Corporate Governance guideline of secure, because the ICS concentrates only of good planning and coordination the SWX includes information and control very narrowly on financial processes.
with clients at all management instruments for management. The "Swiss Numerous risks that a company must levels – starting with the Board Code of Best Practice for Corporate Gov- manage if it wants to be successful are not of Directors and the Audit Commit- ernance" issued by the Swiss Business covered by the SOA and certainly not by tee – this task can be achieved. Federation economiesuisse also deals with Intensive and regular communica- the subject of internal controls. The draft of tion among all parties involved the new auditing law published in June Seen from this vantage, it would be a pity and careful implementation 2004 also includes the ICS as an additional- not to replicate in other areas of the enter- of all project steps will be critical ly prescribed audit object. In the past prise the concepts introduced in internal for success. In addition, an internal controls were examined as part of a control (COSO I) as the starting point for an important foundation stone will risk-oriented audit approach only insofar as ERM and to extend the scope in the sense have been laid for the develop- the auditor intended to rely on them, of COSO II. In this way the resources invest- ment of an ERM.
ed in SOA compliance can certainly createadditional benefits for the company. // Important SOA prescriptions for audit firmsAuditors are affected in particular by the following additional provisions: Registration with the newly created Public Company Accounting Rotation obligation for the Lead Engagement Partner every Oversight Board (PCAOB), which is established and supervised One year cooling-off period for employees of the auditing firm Observance of PCAOB standards; quality controls and before taking up certain key positions (CEO, CFO, etc.) with a inspections of the auditing firm and disciplinary measures Submission of working papers, also of foreign auditing firms, Examination of reports prepared by management about the on whose reporting as part of the group audit reliance is placed effectiveness of the ICS (on demand of the PCAOB) Sanctions by the PCAOB against the auditor (fines, reprimand,ban on acting as auditor) ceo/pwc expertise 33 Governance, Risk & Compliance Operating Model: Vision & Business Objectives Information technology: The CIO as risk manager Rapid technological development compels IT managers to pay greater attention to operational risks, to IT Governance, to improving service and to optimising costs. Today right at the top of the CIO's agenda are risks thatcan have a negative impact on a company's reputation. networked business processes, but at the additional investment has to be carefully More rapidly than anyone could have ex- same time it is faced with the task of rein- weighed and operating costs overall pected, the information society envisioned venting itself. We are all learning to adapt reduced. The general opinion today is that by a few technology enthusiasts has our behaviour to the possibility of perma- expensive technology alone does not become everyday reality. Information nent accessibility and unlimited mobility. necessarily contribute to making one's own technology (IT) unobtrusively permeates all products better and more competitive. aspects of modern life, is constantly Only a short time ago more and more funds changing them and is far from reaching its in Swiss companies were flowing from year limits. Many industries – for example music to year into corporate IT. One consequence and films – face radical revolutions in their was that IT became a resource critical to a Three examples of significant risk factors: business models. The telecommunications company's existence; if it is not available industry enables creation of globally and reliable, scarcely any larger undertaking Is your IT organisation under control? can survive operationally. But IT costs have A company's IT assets are not only tangible also now reached the point where every and intangible assets; increasingly theyrepresent liabilities that can incur bothunexpected and substantial costs. For example the cost of searching for, process- ing and analysing all information relevant to a specific transaction increases propor-tionately with the number of electronicdocuments. Uncertainty as to what is busi-ness-relevant and where in the companysuch documents are to be found, if needed, Pierre V. Brun is Partner, Advisory, Zurich.
is widespread. In one of the few cases thatbecame public during the last year morethan 22 million e-mails and documents had 34 ceo/pwc expertise For good Corporate Govern- ance the wheels of the "Govern-ance, Risk & Compliance Oper-ating Model" must engage withone another. Together with employees and processes, tech-nology is an important "transac-tion belt" in this area. It plays a decisive role in all phases in achieving a compa-ny's vision and business objec-tives – from targeting through development, to implementation and sustainable safeguarding.
to be processed, which alone resulted in locally. One encounters this "shadow" IT organisations is for all involved a very costs exceeding EUR 100 million. particularly frequently where business complicated task both technically and with processes have scarcely been standardised respect to governance. IT management is An up-to-date inventory of the systems, and high flexibility or quick reaction to here confronted by new tasks, for the solu- applications, data and the personnel and market developments are called for. tion of which at present there is little posi- contractual IT resources in use and avail- tive experience and scarcely any "best able would have been useful in this case – practice" examples. The CIO does have but up to now only about 10 percent of all available a growing number of comprehen- businesses have been able to successfully The risks involved in such self-made solu- sively conceived control frameworks and implement IT asset management, although tions have not as yet been systematically standards. But these collections of controls the additional benefit for virus protection, recorded, but the effects can be consider- overlap or contradict themselves in many emergency planning and the control of able. In a few well-known cases companies respects and therefore cannot be adopted systems and applications is obvious. The have had to subsequently correct their indiscriminately. The dynamics of legal and quantity of all kinds of electronic information already published quarterly results because regulatory requirements also hampers in a company is increasing incessantly. New errors in complicated spreadsheets had not implementation of effective IT governance. legal possibilities permit the complete aban- been recognised in time. The costs of, and In any event the company retains the overall donment of hard copies. Vast storage time spent on, change management, safety responsibility for the operational risks systems and clever search algorithms alone precautions and system controls are not accepted in the course of outsourcing. will not be adequate protection against the included in such self-made solutions. That The CIO will therefore wish to understand numerous surprises that will occur when makes them attractive in the short run, but exactly and to communicate the responsi- searching for, finding and processing in the longer term they become a major electronic information in years to come. Do-IT-yourself with error potential Yet there are ways and means for even Reductions in IT budgets, in some cases smaller departments to ensure data massive, during the last few years are to a integrity. In such cases the CIO is in large extent the result of genuine rational- demand as risk consultant. As a rule risks are measured along isation measures. Projects that do not the axes "likelihood of occurrence" demonstrably contribute to the company's Loss of control over the extended and "impact". But for IT risks this success have been terminated, investments matrix is inadequate – risks must in state-of-the-art technology postponed, Whether outsourcing or only outtasking – first be discovered in the company the number of external staff cut. A less well- the tendency to optimise corporate before they can be addressed. known consequence of this development capacities by links to suppliers and dealers The CIO has an exciting and not is that enterprising end-users are increas- is unbroken. IT is concerned in two entirely riskless task ahead of him. ingly taking the initiative and handling respects. First, parts of IT itself are transactions that are critical to the business frequently outsourced to third parties, while via e-mail, with the help of Excel tables, or at the same time third parties' systems and by means of other applications procured applications should be linked to theoutsourcing organisation's own infrastruc-ture. Managing processes, roles, responsi-bilities and technology over two or more ceo/pwc expertise 35 The 5-minute expert: Topical business terms illustrated with examples from research byPricewaterhouseCoopers Property prices in Europe have in the past Most enterprises invest a great deal of few years increased disproportionately by time and energy in mergers and takeovers, comparison with average incomes in the while too little, or too late, attention is respective countries. In the European frequently paid to exit options. Yet divest- region prices are expected to rise by 1.75 ments are becoming more important percent in 2004 and 2.25 percent in 2005.
throughout the world. This area is the In Switzerland 2004 saw an increase of subject of the PricewaterhouseCoopers 1.75 percent, the result of low interest study "Divestment for Growth", which rates and the global economic recovery.
evaluates the experience of CEOs and For 2005 an increase of 2.0 percent is managers of leading businesses in expected. Source: "European Economic Public Private Partnership (PPP) is an inte- Europe, Asia, Africa and the Middle East.
Outlook, October 2004", Pricewaterhouse- grated approach to providing public serv- 47 percent of managers hold the view that ices. The decision for a PPP is as a rule the majority of divestments are initiated www.pwc.ch -> Press Room -> Press Releases made following an appropriate economic because the parent company concerned comparison. PPP projects can result in has no other choice. These unavoidable substantial time savings in realisation as divestments of unprofitable business well as cost savings. Furthermore PPPs divisions are the result of the parent Stock exchange listings also have the potential to avoid planning company's need to reduce its debt According to PricewaterhouseCoopers' failures on major projects. At Pricewater- burden, the increasing competitive strug- analysis "IPO Watch Europe, Q3", during houseCoopers' suggestion a PPP Initiative gle within the industry and recession.
the period from July to September 2004 Switzerland was launched in spring 2004.
57 percent of managers see divestments the European stock exchanges recorded The basic study is being undertaken and growing within their industry. 89 percent the largest number of new listings in a financed equally by seven partners from of managers hope for competitive advan- quarter for years. From July to September the public sector and private industry. The tages from mergers and takeovers and 118 companies ventured to become operational project management is the 83 percent from divestments. On the other members of European stock exchanges; responsibility of PwC Advisory, with the hand 71 percent state that an optimal in the prior year, by comparison, only 34 help of a UBS team and a support group sales price for the business division is did. The number was also significantly from business, politics and the administra- achieved in less than half of all transac- higher than in the second quarter, when tion. The study is designed to demonstrate tions. Only 42 percent of enterprises 96 new listings were added. In Switzerland what PPP is, its development and benefit have a divestment strategy; a mere Ypsomed was quoted with an issue potential in Switzerland and what is need- 3 percent have a team of experts to deal volume of EUR 122 million. Information ed to help PPPs to flourish in Switzerland.
with the disposal of unprofitable business about "IPO Watch Europe, Q4": Publication of the basic study is scheduled www.pwc.ch -> Press Room -> Press Releases for the end of the first quarter 2005. www.pwc.ch -> Press Room -> Press Releases 30 ceo/pwc spektrum 36 ceo/pwc expertise Transfer pricing: The taxman is interested inhow you implement your strategies!Management decisions with global effects are now everyday events. The tax authorities look closely at every change – supported by local and globaltransfer pricing rules.
As a consequence it is absolutely essential Many enterprises review their strategies for companies to include transfer pricing and structures critically in order to align in all their activities – from planning to In most cases operational changes offer a themselves with changes in the business operational implementation of changes. "window of opportunity" to optimise trans- environment. Opening up new markets, A four-stage procedure is recommended: fer pricing and to present a business case relocating functions or divisions to other to push through the tax authorities sustain- countries (e.g. Eastern Europe, Asia), able adjustments. In the optimisation stage introducing new organisational and questions dealt with may consider in par- management structures or acquiring new ticular how the transfer pricing structure is businesses are frequently the consequence.
This first stage is a matter of gaining a to be designed in the areas of production, Such changes have a direct impact on detailed overview of the current transfer sales, intellectual property (trademarks, the exchange of values and assets within a pricing situation within the company. know-how, etc.) or management costs company – and that is where the transfer Questions relate mainly to the following against the background of operational pricing problem begins.
areas: transfer pricing policy, value creation changes. Especially for companies with chain and business model, transfer pricing existing operations in Switzerland or activ- Transfer pricing policy: A compulsory risks resulting from existing inconsistent ities planned for foreign, tax-advantageous subject for the management of companies business models, charging of services locations, interesting global or regional with international operations that do not meet the "arm's length" test planning models (e.g. principal or hub and observance of local rules relating to structures) exist.
Tax administrations and organisations, such as the OECD, are endeavouring to stop the Issues such as utilisation of tax loss carry- outflow of local tax substance or to distrib- When acquiring a company, especially forwards, retention of existing rulings with ute it among states based on generally during due diligence it is important to iden- tax administrations, minimisation of trans- accepted principles. The recently published tify differences between the acquirer's and action taxes or tax-effective capital gains on draft on the allocation of profits to perman- the acquiree's transfer pricing policies. Such asset transfers and customs questions may ent establishments and the introduction in differences may for example be the conse- have a crucial impact on the final transfer the near future of new US service regula- quence of different management structures pricing policy. Furthermore, the future trans- tions are only a few important development or production and distribution strategies, fer pricing structure may critically affect the steps in this direction.
which in the ensuing integration process acquisition structure when purchasing new must be brought into harmony with the businesses or companies.
transfer pricing policy and methodology. 3. Implementation Proper implementation of transfer pricing inconnection with operational changes orcompany acquisitions can make a decisivecontribution towards a later sustainabledefence against local tax authorities andtowards the avoidance of risks with corres- ponding financial consequences. Norbert A. Raschle is Partner, Tax & Legal, Zurich.
ceo/pwc expertise 37 Transfer pricing management for reorganisations and acquisitions: Analysis Optimisation - Existing transfer pricing - Evaluation of alternative - Transfer pricing - Documentation of global transfer pricing models transfer pricing policy - Business model/ - Localisation of the - Fulfilling local documen- global transfer pricing - Documentation of oper- - Existing risks and - Treatment of tax - Negotiation with tax "conversion issues" - Minimisation of risks - Transfer pricing policy - Impact on acquisition - Systems / change of the target for It is a matter inter alia of adapting the global shareholders in individual group companies model to local circumstances, establishing (e.g. joint ventures) or support for the trans- Transfer pricing should already be the price-setting mechanism or negotiating fer pricing policy by local management, taken into account by the compe- with tax administrations. Valuations in should not be underestimated. tent management at the planning connection with asset transfers (e.g. intel- and decision stage in connection lectual property, customer lists, markets, with major corporate changes and etc.) or strategies for defending the non- acquisitions. This strategy ensures payment of compensation are other that transfer pricing rules to which Proper optimisation and implementation the substance of the business also create the basis for efficiently drawing model is subject are fulfilled glob- During the implementation stage as well up the documentation required to fulfil local ally, that tax optimisation potential impacts on other areas, such as the adapta- rules that apply in most cases. It is sensible is exploited efficiently and that tion of IT systems, the interests of minority to differentiate between documentation of later, more expensive tax reorgani- operational changes (e.g. under German sation can for the most part be legislation the documentation of extraordin- ary business transactions) and annuallyrecurring transfer pricing documentation. An important matter in this connection isthe onus of proof, which, if documentationis available for a tax audit, usually lies withthe tax authorities. // 38 ceo/pwc expertise Events, publications and research.
PricewaterhouseCoopers: "Where we stand" Swiss Economic Forum: Setting the Right The Annual Report of Pricewaterhouse- Coopers (PwC) in Switzerland on the finan- Over the last six years the Swiss Economic cial year 2003/04 follows the ValueReport- Forum has become one of the most ing Framework that PwC has developed in important events for entrepreneurs and order to provide a framework for value- innovators in Switzerland. Sponsored oriented corporate reporting. It includes illu- by PricewaterhouseCoopers, the theme of minating information about the market envi- this year's meeting is "Setting the Right ronment, strategy and objectives, and the Priorities". A highlight of the forum will development of PwC's value drivers.
be the presentation of the Swiss Economic "Where we stand" can be ordered free of Transparency in annual reports Award, the most prestigious prize given charge in three national languages and in The sixth edition of the brochure "Trends to new companies in Switzerland. English from [email protected].
2005 – Good Practices in Corporate Report-ing" by PricewaterhouseCoopers gives an "2004 Global Annual Review" of insight into exemplary annual reports of Thun and Interlaken: 26/27 May 2005 PricewaterhouseCoopers International is companies throughout the world. The published in English and can be ordered brochure can be used by companies as a For further details, forum registration and free of charge from [email protected].
tool in developing future-oriented reporting.
award application guidelines: It demonstrates the sovereign approach to www.swisseconomic.ch transparency and communication – againstthe background of ever more complicatedrequirements and international regulations.
In "Trends 2005" for the first time two Swissexamples are included: UBS and Swiss Re.
"Trends 2005 – Good Practices in CorporateReporting" is published in English and can 2004 Global Annual Review be ordered for CHF 90 [email protected].
A comparison platform for risk management Global CEO Survey 2005 Worldwide businesses are increasingly PricewaterhouseCoopers has published taking a close look at various aspects of The authors of the topics covered in the the eighth "Global CEO Survey". For Enterprise Risk Management. Up to pwc expertise section of this issue of ceo this study, 1,300 renowned CEOs worldwide now, however, a common platform and magazine can be contacted directly at the were surveyed on current business chal- general principles have been lacking. e-mail addresses given in their article.
lenges. The publication "Global CEO Survey With the book "Enterprise Risk Manage- For a comprehensive overview of Price- 2005 – Bold Ambitions, Careful Choices" ment – Integrated Framework" in collabor- waterhouseCoopers publications, please is in English and can be ordered free via ation with PricewaterhouseCoopers, the visit www.pwcglobal.com. You can order Committee of Sponsoring Organizations PwC publications and place subscriptions of the Treadway Commission (COSO) has by e-mail [email protected] now created a knowledge base. The book or fax 044 630 18 55.
is published in English, costs USD 50 and can be ordered at www.coso.org.
Subscriptions:ceo, the magazine for decisionmakers, is published by PricewaterhouseCoopers. The 52-page magazine is published three times a year in English, German and French. To order a free subscription, please e-mail [email protected] specifying your desired language.
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32 ceo/pwc spektrum ceo/pwc expertise 39 ETH Zurich has big plans – according to the motto "open for society, open for business", Switzerland must open up as a think tank and become networked worldwide.
How to become world class:ETH Zurich manages through continuous improvement.
Downsizing, production outsourcing and competition from aspiringthreshold countries even in the services sector – what does all thismean for Switzerland's future? As an economic location this much iscertain – Switzerland will undergo dramatic changes in the years tocome. The best-case scenario is that once this development is complet-ed, it will be an economy with added value that relies more strongly onthe production factors of knowledge and innovation than it does today.
The essential engine for change is an institution which is of decisivesignificance for the future of this country – namely ETH, the SwissFederal Institute of Technology in Zurich. It is a Swiss trump card in theinternational struggle for prosperity in the 21st century. Here we will show how this flagship Swiss university maintains its course.
BLUE-C enables worldwide telecollaboration.
Thanks to this technology, Professor GerhardSchmitt is present in 3-D in virtual space. Helectures his students in the USA or "appears" as a delegate at conferences.
Text: Kaspar Meuli scape will undergo fundamental changes.
The 30 or so new appointments each year There will only be a small group of world- are indeed the main concern of Olaf Kübler.
Gerhard Schmitt has welcomed around class universities, and the revered Zurich "If a university succeeds in headhunting 11,000 people into his office in the last institution, which is currently celebrating its excellent people," says the ETH president, seven years. This is an incredible number – 150th anniversary and which used to be "it achieves greater respect as an institution but Schmitt estimate has to be correct for affectionately called "Poly", will be one of – very much like a football club." he is, after all, a professor of architecture as There is a substantial difference though well as the university's vice-president, and it between the stadium and the campus – is due to his role within senior management 21 Nobel Prize winners to date money. A top researcher is not going to be that he receives this never-ending stream of The actual benchmark for the success of lured to Zurich with a megasalary, for ETH is visitors. The office of the ETH vice-president ETH as a knowledge management institu- unable to negotiate with regard to earnings for planning and logistics, with its view over tion is the "scientific output", as Gerhard as they have to follow certain rules. No the rooftops of Zurich, deals with everything Schmitt puts it – the quality of research professor earns more than CHF 250,000 per that constitutes the lifeblood of ETH, from publications, degree examinations and annum. The leading American universities, budget and space planning and new pro- theses. According to the head of planning at which, as private institutions, are not tied jects to the vision of its future.
ETH Zurich, in contrast to businesses no into salary scales, tend to be considerably According to a recent article in "Das Maga- quantitative goals can be set in this core more generous.
zin" about power and influence in Zurich, area. Nevertheless he indicates figures What makes top people sit up and listen ETH is an "underrated giant". The university which prove an enormous increase in effi- when an offer is made from Zurich is the could be compared to a company with ciency – in the past ten years the number of location. The scientific environment for each regard to size. With a budget of CHF 1.1 scientific publications has risen by over 90 subject and its related areas is particularly billion, it employs 6,000 staff, including 360 percent, and completed theses by more stimulating at ETH. There is also the urban professors, and currently has 12,500 than half, and all this has taken place with a quality of life which European scientists students enrolled. financial increase of only 10 percent. sorely miss in America, despite all the Can this huge educational institution really And there is yet another figure which the career opportunities. "In the USA even be compared to a large company? "In many university is pleased to highlight – this "Big smaller state universities can offer crazy areas, it can", says Schmitt. There are League in a Small Country", as they money," suggests the Austrian head of the strong parallels in strategic direction. "We describe themselves on the homepage of Institute for Particle Physics at ETH, Felici- have to recognise future developments in their website, has produced 21 Nobel Prize tas Pauss, "but who wants to grow old in research and make investments as appro- winners up to now. Incidentally, with only a priate, but because these developments few exceptions all of them were conducting cannot be anticipated, we take the same research in physics or, like Kurt Wüthrich – Ideal conditions for professors risks as a company." According to Schmitt, the last ETH Nobel Prize winner in 2002 – However, the rush to move to Zurich is not the ETH has to re-consolidate its strengths usually determined by the lake and the time and again. Examples of recent It is no wonder that ETH is proud to con- cultural aspects but by the university's changes in direction are the massive exten- gratulate itself upon this prestigious re- terms and conditions – factors such as sion of the entire systems biology depart- search record, because what really counts laboratory equipment and support staff, ment and the establishment of a depart- for this flagship of the Swiss universities is which have a major effect on the scientific ment for management, technology and something that is more or less indefinable, success of a top researcher. With the namely its reputation. This standing is attractive packages that ETH can secure in important not only from the perspective of this area, it has been dealt a good hand.
World-class research and science the business world, i.e. the future employers Zurich offers generous space as well as The objective which ETH is pursuing in of the students, but also in the sphere of technicians who supply customised equip- constantly improving its structures is clear – politics, which grants the school its means, ment for experiments, which professors research and teaching at a world-class and especially in the realm of academe. For elsewhere can only dream of. But even level. ETH Zurich wants to be the best and what keeps the star of ETH bright is the more important is the number of staff, who is declaring this aspiration in a downright attraction which it holds for brilliant profes- are mostly permanently employed at ETH, non-Swiss manner. "What do we have to do sors and gifted post-graduates from all over thus precluding the permanent searching to become even better?" asked ETH presi- for external research funds which character- dent Olaf Kübler, for example, in the 2003 It is only logical then that the recruitment of ises the everyday life of professors in the annual report. "Our international image new professors is a matter for senior staff.
USA. The comparison with the USA is not must become stronger and more lasting, merely coincidental. In the view of vice- not only discreetly in the scientific arena president Gerhard Schmitt, ETH Zurich is in and through its policymakers but also in direct competition with three large university international public perception." For in the "We have to recognise future clusters – the San Francisco Bay area, the near future, ETH Zurich is convinced that developments in research and Boston group and the British Oxford/ the European university and research land- make investments as appropriate, Cambridge pairing. It is particularly satisfy- but because these developments ing for Zurich when someone transfers from cannot be anticipated, we take the one of these competitors, for example from same risks as a company." Felicitas Pauss is an experimental "The decision to come to Zurich," says David Basin, physicist at the Institute for Particle "was an easy one to make." Since 2003 David Basin has Physics at ETH. In 1997 the Austrian been a full professor of information security, and prior to this he became director of the institute and, in 2000, taught at the University of Freiburg in Breisgau. What was it that led full professor. In the last few years she has to the move? "First and foremost, ETH has a top reputation as one also received tempting offers from other of the leading universities in the world and this also applies to the universities, but she has remained loyal to department of computer science. Second, my area – information ETH. Her reasons for staying in Zurich are the security – is not only a theoretically fascinating subject but is also "stimulating scientific environment", the "very of considerable practical significance. At ETH many opportunities sound reputation of ETH worldwide, particular- have arisen for me to work with people involved in business and ly in the different fields of physics", and last management." Basin had no sooner arrived in Zurich than he was but not least the good quality of life in Zurich.
instrumental in setting up the Zurich Information Security Centre "Finding a top university in a city with an (ZISC). Run by ETH and various companies, the joint project, which attractive cultural offering and good interna- is now managed by Basin, coordinates research and training in the tional transport connections is no mean feat." area of information security. As the professor of computer sciencespoints out, this is a good example of ETH's many years of experi- ence in applied research paying off.
Vision of the future: Switzerland as a centre of knowledge which benefits from synergies between research and business in a worldwide network ofleading universities. Peter Seeberger had just been promoted to full profes- Cell biologist Sabine Werner has sor at the Massachusetts Institute of Technology (MIT).
been a full professor at ETH since "Actually," the German chemist relates, "I had achieved everything I 1999. Why did she take up the call to could in the USA." There followed two offers, one from Munich and come to Zurich? Because the scientific one from Zurich, and Peter Seeberger had to weigh them up. In short, environment is "extremely good", she "ETH really has something quite special to offer". What prompted answers. Various offers from ETH were Seeberger to relocate to Zurich in 2003 were terms and conditions enough to draw her away from her German which would enable him "to undertake truly leading-edge science", homeland, as well as the exciting scientific namely a highly qualified staff, a first-class infrastructure and an envi- cooperation between different institutions ronment that is extremely exciting for an organic chemist. This which is to be found in Zurich. An example includes universities, Zurich hospitals and Basle pharmaceutical of this is the collaboration between ETH and industry. "The pressure to perform at ETH is no lower than it was at the university hospital, where Sabine Wern- MIT," says Seeberger. His bosses and colleagues insinuated that his er has encountered great interest in her departure would mean the end of a promising scientific career, but he specialist field, the molecular mechanisms is now intent on proving that the opposite is true.
of tissue regeneration. ETH won the biolo-gist's heart on her first visit. "During theappointment procedure I felt straight awaythat they had gone to a lot of trouble, andeveryone took the time for detailed discus- sion. This is in contrast to German universi- ties, where there is usually just one presen-tation after which everyone disappears." In Science City various areas will be interlinked –yellow stands for research and science, green foradministration, blue for companies and start-ups,and brown for living and culture.
Planning for Science City in Hönggerberg, Zurich: university campus and academic cultural quarter with ideal working and living conditions. "Our aim is to make Zurich a city of science and Switzerland a the Massachusetts Institute of Technology.
country of science, which will Weiss recently demonstrated what the This is where biochemist Peter Seeberger be as well known around the world commitment of the wealthy might be – came from, and at 38 years he is already for its research as it currently is those "who hold the good of ETH and with it being cited as a potential Nobel Prize Switzerland as a research location close to winner. He was attracted by the outstanding their heart". The chemical engineer made a reputation of ETH in his subject: "There is contribution of CHF 23 million to his former nothing to compare with it in organic chem- appropriate unit is being set up which, university. This is earmarked for the istry within Europe," and one should not above all, will seek to attract talent from construction of a new laboratory for forget the sizeable staff here.
abroad, for a university can only shine inter- computer sciences, a "key area in achieving nationally if it attracts overseas students. international competitiveness" which, Positioning strategy set in motion In spite of all this the managers at ETH according to an ETH communiqué, should In the battle for academic figureheads there emphasise their institution's connection be up and running in 2006. are also defeats. The loss of the English with Switzerland at every opportunity, and geologist Alex Halliday, for example, who with good reason – the university receives Science City in a country of science came to Zurich in 1998. With more than 90 percent of its support from the state and, However, the building of the e-science lab is thirty publications in the prestigious journals in contrast to the cantonal universities, is the impetus for the advent of Science City – "Science" and "Nature", he is a heavy- financed by the federal government. the catchy description of the future vision of weight in his subject, and now he is return- Not so the top English and American univer- the university. This is an ambitious ing to England. His departure to Oxford is sities, which flourish largely through private construction and development plan that will ostensibly for family reasons, notwithstand- funding. Now ETH wants to operate in the make the existing ETH site in Hönggerberg ing the recent investment of CHF 10 million same way. Largely unnoticed by the public, into an "academic cultural district" by the in new laboratory equipment by ETH ac- it founded the so-called ETH Foundation end of the decade. Thanks to investments cording to the wishes of this star player.
last year. According to head of planning of CHF 250 million today's rather bleak Halliday was enraptured by the "best-equip- Gerhard Schmitt, the aim of the charity is campus will not simply be a place to study ped isotope-geochemical laboratory in the "to establish a new tradition in order to and do research but also to live, which will world" at its inauguration three years ago.
ensure long-term expansion". In real terms also embrace the population of Zurich.
ETH Zurich is on its way to the top but it is ETH Zurich wishes to award itself invest- Accommodation for 1,000 students is not immune to setbacks, and it is envisaged ment capital to fund the growth which the planned as well as a conference centre, that it will be some time before it hits the federal government can no longer finance restaurants, sports facilities and places to heights: "We have given ourselves the using the fund's interest. The university objective of being one of the top three primarily has former students in mind, along But this is not all – the vision is even greater.
universities in Europe and one of the top ten the lines of the American model. Erstwhile Its promoters envisage that Science City will in the world within the next thirty years," ETH students have recently been intensively become the platform for networking the says Olaf Kübler, "and we are on the way to canvassed, particularly via the magazine great educational institutions of the city.
achieving this." As CEO of the university, "Alumni Focus" and the "ETH Bulletin", as "Our long-term goal," says Gerhard Kübler, who incidentally stands down at the well as through business lunches and the Schmitt, "is to make Zurich a city of science end of this year, has set a real positioning setting up of alumni networks in the USA and Switzerland a country of science: a strategy in motion. This includes, for ex- country that will be as well known around ample, a "dual career" office, which Gerhard Schmitt does not wish to reveal the world for its research as it currently is supports families of foreign professors in how successful the search for funding has for its banks." And this much is clear – ETH their move to Switzerland. But marketing is been. However, the stakes are high – in the Zurich wants to be the indisputable leader also a current theme at ETH – and an long term the proceeds should contribute of this research strategy. // "at least 20 percent" to the budget – thusnot millions but billions in funding capitalmust be found. The entrepreneur Branco Interview: Franziska ZydekPhoto: Dominic Büttner/pixsil ceo Magazine: Up until 2003 Coop contin- Coop now has a low-cost line of products.
Garantie", Coop own brands, other branded ually won market share and increased its Since January we have also offered the low- items and Coop flagship labels such as turnover. A downturn has been forecast for cost line "Prix Garantie". This provides a Coop Naturaplan. And in the future, Coop 2004. Should you change your strategy? complete range of products at all price will also run a tight point-of-sale network Hansueli Loosli: In 2004 Coop's turnover levels, consisting of the low-cost line "Prix that ensures closeness to the customer and went down slightly. The reasons for this Garantie", Coop own brands, other branded that with its various formats will meet the were the acquisitions of EPA and Waro, items and flagship labels such as Coop needs of consumers. All these measures which resulted in several closures, should differentiate us from and raise us along with decreases in turnover through above our competitors, because neither a reorganisation at the front end. Such What exactly is "Prix Garantie"? basic hard discount range of 700 items nor takeovers always require adjustments, as The low-cost line is essentially made up of a point-of-sale network of eleven supermar- illustrated by the idea of "regrouping for the currently listed products whose cost has kets can adequately cater to the Swiss offensive". Added to this was a 2 percent been lowered but that have not themselves population, which demands wider choice. drop in prices, which benefited customers.
been changed, that is, we do not reduce the The third factor was the economy-driven quality. "Prix Garantie" fish fingers consist And the new plans abroad? decrease in spending among consumers. of white fish fillets and not "fish pulp". The Thanks to the joint venture with the German A complete change of course was therefore "Prix Garantie" shoulder of ham is made company Rewe in the catering and whole- out of the question, because copying others from real ham from the shoulder and not sale field, we are entering into a new but just results in a poor copy. However, it from "cooked pork". nevertheless related area of business which is obviously the case that adjustments are has a good outlook for growth. This move always required, and this is what makes Do Coop sustainability standards apply to means an initial strategic and commercially the job interesting. significant commitment abroad with poten- Since 2003 Coop has had guidelines for tial for development. Coop is associated with quality, organic ecological and social-ethical procurement How will turnover develop with regard to products and sustainability as well as higher which are part of the quality agreement and sustainable products? prices. If Coop wishes to survive in the are therefore compulsory for all our busi- Our vision remains as it has always been – globalised retail sector, it has to bring its ness associates. We have two key themes to achieve a turnover of CHF 2 billion up to prices down. Do organic products, social for implementing and controlling compli- about 2010, with Coop Naturaplan, Coop ethics and low prices go together? ance – on the one hand we want to ensure Naturaline, Coop Oecoplan and Max Have- We are already cutting our prices. We are that our flagship labels in particular laar. We see quite a potential for growth able to do this because reorganising the completely fulfil these requirements; on the here and want to further expand our uncon- Coop Group from 14 regional co-ops and a other hand we proceed based on risk, that tested strong lead position in sustainable headquarters into a single customer- is we concentrate on countries and sectors focused company has made us more effi- where breaches of International Labour cient. We are lowering our margins but we Organization (ILO) agreements are most The Zurich rating agency Inrate places are not compromising our quality – and we likely to be dealt with.
Migros slightly higher than Coop in ecolo- will not only defend our position as a gical matters. What is your assessment? successful market leader for organic prod- Where will your company be in five years' It is interesting that Coop, like our rival, is ucts in the future but also expand it. far above the industry average – but all Coop will still be the quality provider in2010, with a large and full range, includingfresh products. Furthermore, Coop will stilloffer a choice between Coop "Prix Coop. Hansueli Loosli, chairman of the board, on competition, innovation, sustainability and thefuture, as well as his conviction that "Copying others makes you a poor copy." other providers are a long way below. At Coop is also in tough competition in terms growth rates for these four brands. These this high level the small differences are of its flagship labels. We have to work every products are as much in demand as they therefore somewhat incidental. What is not day to convince our customers that it is have always been. Consumers are clearly in question is that Coop is the leader with worthwhile paying more for an organically ready to pay more for discernible added regard to sustainable products, and Migros grown apple, for meat from animals that value. For example in 2005, the 10-year is number one from the vantage of technical have been raised humanely or for fair-trade anniversary of Coop Naturaline will accentu- environmental protection. coffee. The higher outlay in the area of ate this brand and benefit it.
communications and advertising for training Obviously, gratifying growth rates will not Where do you see potential for improve- sales staff and for increased efforts in qua- continue unchecked for these products, but lity assurance demands that the absolute the products are and will remain the central Coop has made great efforts in the areas of margin on the flagship labels be higher than bearers of our growth and image. POS and logistics in order to reduce for the standard range. But of course it is resource consumption. However, some of the market which determines the outcome.
For your part, will you increase cost pres- these endeavours have been neutralised by Fruits and vegetables, for example, where sure on branded item manufacturers and a higher level of service, for example longer we intentionally apply the same margin as opening hours and a higher proportion of we do for conventional organic produce, It is clear that we must negotiate more strin- fresh convenience foods, necessitating show that this cannot always be achieved. gently than ever with our suppliers. If we more fridges at points of sale, and two compare the EBIT and profit margins on deliveries of bread and sometimes also of It is a fact that Naturaplan products account large brand item manufacturers with those fresh products per day. We thus effectively for 14 percent of the total turnover of of the retail trade, then the retail margins are have to compromise between our claim to groceries, and 7 percent of these are organ- clearly smaller. In addition, in Switzerland offer our customers the highest level of ic. What are the margins like for them? we have to pay considerably higher prices service and our need to be frugal with It is hard to make general statements about to multinational providers than our competi- resources. We also see potential for margins because they depend on actual, tors abroad. Clearly some believe "the improvements in packaging, but here we seasonally fluctuating product prices and Swiss" are richer and can therefore pay are also in a difficult position vis-à-vis the the market situation. Coop would like to see more. At the end of last year, various large needs of customers on the one hand, who all stages contributing to the added value of manufacturers announced price increases, are placing increasing importance on the Naturaplan products be able to cover their sometimes quite publicly, despite the convenience aspect – resealable, smaller label-related additional costs. general economic situation. If prices are and lighter packaging and changing trends under pressure today in Switzerland, then in catering – and ecological aspects on the How are Coop Naturaplan, Coop Naturaline, not only we but also those before us in the Coop Oecoplan and Max Havelaar develop- chain must do their share so that the Swiss ing in comparison with 2003? Will the high retail sector retains its competitiveness and Where do you stand personally with regard growth rates (+13 percent) for Coop Natura- Swiss consumers are not disadvantaged.
to ecology and sustainability? Are you plan hold in the medium term? That is obvious to us. We conduct these aware of your ecological footprint? For 2004 we can also report double figure negotiations with business associates on In my ten years at Coop I have been lucky the basis of our new "code of conduct". We enough to learn a few things with regard to are the only ones in Switzerland to do this.
sustainability and ecology. I not only standfully behind Naturaplan, Naturaline, Is that consistent with the Coop standards Oecoplan and Max Havelaar, my family and in matters of sustainability? I are also regular and committed consumers The requirements of Coop do not differ of these products. I wouldn't presume to intentionally from other current standards evaluate my own ecological footprint. for the mainstream range. This allows Coop to use synergies with other European retail- clearly ready to pay Coop faces some tough competition. Your ers when implementing their standards.
"sustainable" product lines will have to pay more for discernible Thus Coop requires fruit and vegetable off. Do they do better than the other product providers to have EurepGap certification, and it joined the Business Social Compli-ance Initiative on 1 January 2005. In a few "We cannot and do not wish to years we are expecting the fulfilment of Coop wants to reduce CO2 emissions by a minimum social conditions to be taken for third by 2010. Does this goal still apply? granted, just as efforts in the area of food Coop was the first retail sector company to safety and hygiene are today. All good conclude decreasing target agreements retailers will have to produce evidence that with the EnAW (Industrial Energy Agency), they can guarantee adherence to social which are recognised by the Confederation standards for their product lines – and we and which would free the Coop establish- want to be among the good retailers! ments (28 production plants and distributioncentres) from a CO2 incentive tax. A saving According to its feasibility report, in the of 16 percent was agreed for these opera- compromise between price and sustainabil- tions, while a saving of almost 30 percent is ity Coop wants to offer the best of what is envisaged for the points of sale. This should feasible on a large scale. So where do be enabled by energy-efficient equipment, compromises have to be made? particularly within the context of point-of- Take meat, for example – we have seen that sale reorganisation. we could never provide the amounts oforganic meat required. The only compro- You employ around 50,000 staff. Are wages mise which we have made in this respect is at Coop coming under pressure alongside to do with feed – in the blue Coop Natura- guidelines must be viewed as a process in plan line the feed used does not come from which one business associate is already With CoopForte, Coop has introduced a organically run operations. All other condi- very far advanced but others are still at the fundamental reorganisation of the company, tions such as regular exercise, humane beginning. Our aim is to bring as many busi- which makes us more efficient and compet- rearing and strictly controlled feed and so ness associates as possible into line, intro- itive. This rearrangement should be practi- on are just as strictly adhered to and inde- ducing improvements in stages through cally complete by the end of 2005, except pendently controlled for the blue line as agreed corrective measures and leading for the opening of the new distribution they are for the green. Another example is some of them towards certification accord- centre in Aclens which is to take place in bananas – it has taken considerable efforts ing to SA 8000. Information on these grad- 2006. Being a cooperative, we have no on our part in the fields of procurement, ual improvements should also be put across shareholders to whom dividends must be logistics and quality assurance to be able to with even greater transparency in the future.
paid, and the efficiency profit therefore make the complete switch to certified fair- We will only break off business relationships benefits staff as well as customers. As one trade bananas under the Max Havelaar if suppliers have no understanding of our of the few retail companies with a collective label, because we cannot and do not wish expectations and make no effort from their employment agreement, we are aware of to compromise the end quality of products! side. With this procedure we are conforming our responsibility. Indeed, there is great to the principles of the BSCI, where efforts pressure to compete, and we cannot fulfil You have explained that, for example, in the fields of sensitisation, training, advice excessive wage increases. But nor should suppliers from the Far East but also a large and regulation can be packaged together.
the price war be conducted at the expense vegetable supplier from southern Spain do We also see the need for close cooperation of pay. This should be secured by increases not fulfil the Coop codex for sustainability.
with the public sector and NGOs. The great in productivity. Since 2003 there have been Coop guide- challenge consists directly in helping busi- lines for "social, ethical and ecological ness associates to comply with the national One final question: Will you still be working procurement". What are the actual conse- laws in force. If this is secured first then we for Coop in five years' time? are one important step further! I have no intention of leaving Coop. I have Experiences since 2003 in the fields of an exciting job which continues to challenge textiles and horticulture have shown us that The proportion of truck kilometres for the me, and I want to bring this company even the implementation of our procurement distribution of Coop goods has risen further forward. My vision is governed by constantly, but for the first quarter of 2004 the general principle of wanting to reach the Coop recorded an increase in rail kilometres top together. Coop must become the best – has this reverse trend been corroborated? major wholesale distributor. // This trend reversal has been corroboratedfor the whole year and should also hold forthe next two to three years. The reason isthe new logistics strategy, with centralwarehousing and active promotion of railtransportation by Coop, as well as improvedservices from SBB (Swiss Federal Railways)Cargo. The Global Fund supported expansion of delivery of tuberculosis DOTS treatments at the Holy Trinity Medical Centre, Accra, epitomises the Ghana programmeobjective of scaling up provision of services through private-public partnership in areas where access to public resources is limited. Global partnership: Seeing a window of opportunity in Ghana A small, tropical nation, Ghana suffers from Three factors have proven key to Ghana's Grant progress against milestones a serious shortage of resources necessary success in using Global Fund grants - 153 people living with HIV/AIDS have to combat the triple disease threats of to establish solid foundations for its been trained to provide home-based care malaria, tuberculosis and HIV/AIDS.
programme: long-standing experience in their communities.
With a per capita healthcare expenditure of with public-private partnerships, a relatively - 6,698 people have received voluntary USD 7 and only one doctor for every 23,000 decentralised government and top-level counselling and testing services for HIV. people, Ghana's ability to fight infectious political support provided to Global Fund - 332 pregnant women and, later, their diseases is limited without international financed efforts. babies received treatment to prevent mother-to-child transmission of HIV.
Ghana, which in 1957 became the first With the support of the Global Fund, Ghana - 1,173 people living with HIV/AIDS country in colonial Africa to become inde- is scaling up its prevention efforts and received antiretroviral treatment.
pendent, was the first recipient country launching more effective treatment - 2,000 health staff were trained in the to fulfill the Global Fund's conditions and programmes in a redoubled effort to save DOTS treatment strategy for TB.
received its first disbursement of funding in lives. The country's efforts to date using - 94 TB clinics were renovated and January 2003.
Global Fund resources provide enormous In December 2002, Ghana signed grants hope for the future. - More than 4,440 people were treated for with the Global Fund for HIV/AIDS (USD 5 TB under DOTS in the public and private million over two years) and tuberculosis (USD 2.3 million over two years). A latergrant in July 2003 was signed for malaria(USD 4.6 million over two years). Ghana met all the Global Fund's requirements fordisbursement in record time, receivingmonies within a month of signing the grantsfor tuberculosis and HIV/AIDS. The first two grants are now entering the renewalprocess to extend the grants into theirsecond three-year phase, which requiresproofs of performance to date validated bylocal fund agents such as Pricewaterhouse-Coopers. Extension of these two grants will release a further commitment of USD12.6 million. To ensure that the money is channelled properly, the fund has appointed local fund agents (LFAs). PricewaterhouseCoopers acts as LFA all over the world.
Lars-Christer Olsson Walter Knabenhans "We are proud to be viewed as a trans- "To some extent, the parent and open organisation – UEFA legitimate desire for has never been accused of corruption!" protection in the private sphere also applies to acompany."08

Source: https://www.pwc.ch/de/publications/2016/pwc_ceo_05-03_e.pdf