Chaired by Nissan’s COO, Mr. Toshiyuki Shiga, Nissan’s Pension Committee has appointed Mercer as their global retirement consultant for a second year to gain advice on global pension governance.
In recent years, Nissan has implemented a strong global governance structure to better manage its exposure to pension plans around the world. Under this programme corporate headquarters established global guidelines around how subsidiaries should manage their pension obligations, and any change to the existing plans need to be reported to and approved by corporate headquarters. This marks the first time such a programme has been attempted in Japan. As a part of this initiative, Mercer will support Nissan in ensuring smooth information flow by providing a report summarizing the activities and services that the firm has provided to Nissan’s subsidiaries around the world.
Kazuhiko Ishikawa, Japan business leader with Mercer’s retirement, risk and finance business said, “The global pension plan environment has changed significantly due the credit crunch. This coupled with a shift in the foreign exchange rate, has left Japanese multinationals heavily exposed to potential funding losses in their pension plans abroad. The most apparent impact of such losses will appear on their consolidated financial statements; however the mid- to long-term implications include an increase in deficit contributions and a review of investment strategies. Increasingly, companies in Japan will need to make important decisions to overcome these challenges.”
Shintaro Kitano, senior actuary and account manager for Nissan added, “Nissan’s initiative to strengthen the global governance structure around pensions and other benefits requires not only the timely collection of information in order to ensure an effective decision-making process. Given the degree of turmoil witnessed during the credit crisis, we also require a proactive approach that will help identify any additional challenges well in advance.”
According to Mercer's 2006 Global Governance Survey, around 96% of Western multinationals said they have at least some level of a global governance structure for their pension programmes around the world. This trend is not yet common in Japan however, where local pension managers are usually delegated full responsibility to manage local plans.
With the survey hinting at an increasing need to have a global governance sector and given the increasing importance of examining pension risks to the consolidated corporate accounts, Japanese multinationals must consider concrete action to tackle these emerging issues in the future. The forthcoming convergence/adoption of the pension accounting process with International Financial Reporting Standards will only increase the focus on consolidated pension risk.
Paul Arkwright
Publisher
