Managing IT Risk during a Global Business Merger

1. Managing IT Riskduring a Global Business Merger Cheryl Danson April 2005

2. Managing the IT challenges and risks in a Global Business Merger • My presentation is about Managing the IT challenges and risks in a Global Business Merger • What are the IT challenges and risks to be addressed in a global business merger? • What precautions should be put in place to manage these? • What are the priorities for IT integration to support the new business? • How should these be managed before, during, and after the merger?

3. My career • 1967 - Vauxhall Motors, IT apprentice • 1972 - F International, IT consultant • 1981 - Lipton Export (Unilever PLC) • Roles included IT manager, Supply Chain Logistics Manager, Head of business systems • 1992 - Lever Industrial, Global IT Director applications and development • 1997 - DiverseyLever Global IT (Unilever PLC) • Roles included, Head of the Project management office including Help desk, Head of IT security, IT Director for emerging markets, IT Director Global Account Management Supply Chain • 2002 - DiverseyLever acquired by Johnson Wax to form a new company Johnsondiversey • My current role is IT Director, Functional Account manager IT for Global Supply Chain and EMA Research and Development

4. Overview • Integrated approach to IT systems management • Integration steps • People • Costs and risks • Potential benefits • (some of) the risks • Summary

5. Business & Strategy Integrated approach to IT risk management Processes People Systems & data

6. Pre-plan 1 Integrate 2 3 Assimilate Best Practice 4 Integration steps

7. Retain 1 Re-organise 2 3 Restructure Retrain 4 People

8. Merged companies spend about 12% of their IT budget on training, consulting and severance at the outset of the merger;* source: Forrester research Process People During a merger cost spend increases from 2% NPS to typically 4% NPS. This will reduce with the implementation of improved business processes Systems & data Cost and risks

9. Merged companies spend about 12% of their IT budget on training, consulting and severance at the outset of the merger;* source: Forrester research Process People Systems & data IT Benefits to be gained: Opportunity to improve people, processes and systems Retain best IT resources IT savings in applications and infrastructure synergies IT Organisational efficiency Centralisation of data centre facilities IT Contract negotiations and Buying power Shared IT disaster recovery Best practice processes Do more for less During a merger cost spend increases from 2% NPS to typically 4% NPS. This will reduce with the implementation of improved business processes Potential benefits

10. Risk 1 • Risk: • External and Internal Customer’s experience reduction in service • Risk Management: • Inform them about what is happening and what to expect • Web systems • Customer Invoicing • Service level definition and monitoring internal and external

11. Risk 2 • Risk: • IT resources become unsettled and leave • Risk Management: • Get to know each other, ‘Face to face’ • Keep everyone busy • Set up Retention schemes and Delivery bonus • Selective use of contractors/consultants • Ensure fair treatment in selecting people for roles in the New organisation

12. Risk 3 • Risk: • Customers and employees have inadequate Communication • Risk management: • Implement quickly the internal IT communication systems, for example office applications and Email • Communicate regularly and appropriately to employees • Communicate regularly and appropriately to customers

13. Risk 4 • Risk: • IT costs escalate and loss of control over IT spend • Risk management: • Align IT to business strategy • Stop non priority projects • Define the Governance processes and procedures • Project priorities • Project budget • Project monitoring

14. Risk 5 (i) • Risk: • IT applications and infrastructure do not support the merged business • Risk management: • Prepare Applications and Infrastructure Inventory • Determine interim Application and infrastructure systems strategy • Stop projects • Ensure quick integration of operations • Safeguard Financial reporting

15. Risk (5) ii • Risk: • IT applications and infrastructure do not support the merged business • Risk management: • Determine location for Servers • Define standards for PC’s and management • Set up Help desk support for: • Application and system issue reporting • Define Service level • Monitor performance

16. Risk (6) • Risk: • UnclearIT processes and ways of working • Risk management: • Define the IT ways of working • Set up a Project Management office • Be clear on Roles and Responsibilities • Monitor the implementation

17. Risk (7) • Risk: • Business becomes vulnerable due to out of date IT security systems and tools • Risk management: • Ensure IT security is safeguarded • Identify IT risk and control • Set up Disaster recovery plans and testing

18. Risk (8) • Risk: • Inadequate Management reporting to support the merged business • Risk Management: • Define the Key business statistics and KPI’s • Define and implement the business data structures • Standards • Products • Hierarchies • Develop reporting systems

19. Summary • A merger is hard work and stressful for IT and the business • Pre merger planning • Conduct Due diligence • Learn as much as possible about both companies IT systems • Ensure early involvement of IT • During the merger • Determine the IT priorities • Safeguard the external and internal customer interface • Retain IT resources • Implement Governance and controls • Merge as quickly as possible • After the merger • Improve people, systems and processes