1. Item III.1 Profiling methodology D. FRANCOZ Eurostat
ESTP Course
How to compile statistics on global enterprises
Item III.1 Profiling methodology D. FRANCOZ Eurostat

2. A little bit of terminology and acronyms
Before to start
A little bit of terminology and acronyms
GEG: global enterprise group, also known as
MNE: MultiNational Enterprise group
UCI: Ultimate Controlling Institutional Unit, aka
GDC: Global Decision Center
GEN: Global ENterprise
TEN: Truncated Enterprise
NSI: National Statistical Institute
UCI NSI: main profiler
Partnering NSI: country which has subsidiaries in the profiled GEG, but not the UCI

3. What is profiling Profiling is a method
which analyses the legal – operational and – accounting structure of an enterprise group
in order to establish enterprise units within that group (and their links to legal units)
and explores the most efficient structures for the collection of statistical data.

4. A need for looking at the whole elephant
Why to profile
A need for looking at the whole elephant

5. Why to profile
Need to better take into account the globalisation of the economy
The GEGs organise themselves at the global level
The statistical representation of the GEGs may be different from the GEG’s own vision
National statistics don't take properly into account this global dimension
Need to improve the consistency of business statistics in the EU
Currently, practices differ from one country to another one
In most countries, the legal unit is used for the enterprise as statistical unit
To take into account the global dimension may change the statistics and the economic analysis

6. Why to profile
Need to better take into account the globalisation of the economy
To take into account the global dimension may change the national statistics and the economic analysis

7. Why to profile European Profiling will reconcile
Global vision of the groups on their activity
National needs to observe economic activity
European Profiling is the only way to properly delineate "enterprises" in multinational and complex EG.
describe consistently the same GEG in all EU+EFTA countries
Ensure consistency of treatment between countries
Allow producing statistics at different geographical levels
Fulfil both needs of national statistics and statistics on globalisation
support efficient data collection in SBS, FATS, FDI & if possible in STS

8. The profiling project
Proposes a top down approach to define the new enterprises at two levels:
The global enterprises (GEN) defined regardless of the geographic dimension
The truncated enterprises (TEN): the national parts of the GEN
GEN and TEN delineated in terms of legal units

9. A collaborative process
Profiling:
A collaborative process
1-With the Group
2-Within NSI: between profilers and Business statisticians
3-Between profilers in different NSIs

10. European Profiling consists in
Centrally defining “enterprises” in the frame of multinational enterprise groups (GEG)
Not only delineate the enterprises but also ensure that the enterprises defined are suitable for data collection and follow up
The NSI of the UCI has the responsibility of defining the GENs and TENs
The “partnering” NSIs have the responsibility to confirm the TENs in their country
In both cases: discussion with statistical users is essential
The main process steps are:
Desk profiling (UCI NSI)
Contact with the GEG (UCI NSI)
Assess the UCI proposal (Partnering NSIs)

11. How to profile 2 types of profiling Intensive profiling
For the largest and most complex GEG
600 GEGs in the target
Light profiling
For the less complex GEG but still large enough
1100 GEGs in the target
Differences between intensive and light profiling
Same desk activity
Contact with the GEG not mandatory in light profiling
Partnering exercise not mandatory, but highly recommended

12. The steps of profiling UCI: Preparing for partnering exercise
2d delineation of GENs and TENs
Contact the GEG
Identify GEG for profiling
Visit GEG,
Obtain perimeter, employment and turnover variables
Partnering exercise
Confirmation of TENs
UCI: Desk research
1st delineation of GENs and TENs
Agreement on TENs and GENs
End of the profiling process

13. The tools for profiling
Detailed information per legal units
Current templates:
In the future: an interactive tool (the Interactive Profiling Tool)
All about the profiling process

14. The steps for profiling
Selection of the GEGs to be profiled in the EGR
Target population: the 600 largest and most complex GEG in the EU
Preparation, identification and defining at the global group level centrally by the NSI of the UCI
Defining the UCI, that determines the responsibility for the profiling of the GEG
Theoretically already done in the EGR
Check the EGR information

15. The steps for profiling
Desk preparation:
Collect information on the legal structure, using EGR data
determine the countries in which the GEG operates, and so determine the NSIs involved (partnering NSIs)
collect information on the operational structure of the GEG, using the annual reports and information at GEG websites
Collect the GEG information that is already available at the NSIs (e.g. from surveys)
Derive and classify GENs at the global level as a proposal ( including identification)
Analyse the operational structure of the GEG
Prepare a proposal for the GEN structure
List the legal units for each GEN

16. The steps for profiling
Contact and visit the GEG
To confirm the global perimeter of the GEG, the GENs and their delineation
perimeter of the GEG (consolidation perimeter or list of the controlled affiliates)
Number and name of GENs and TENs (IFRS 8 as a starting point)
To collect data on the GENs and TENs (check the ability to produce consistent data at these levels)
Ability for the GEG to produce at GEN/TEN level the minimum set of variables (employment, turnover, NACE)
Ability to produce SBS variables (SBS are main providers of NA).
Ability to produce other variables such as STS.
Special attention to O-FATS information collected at the GEG level on “country x Nace CODE”, a concept close to “enterprises” in most cases

17. The steps for profiling
Contact and visit the GEG
GEG requests
they know better financial and accounting data than any other
they ask for a priority list and for a common list of variables
they ask for common questionnaires to all European countries
When consolidation is centralised they prefer to provide consistent information for each country at UCI level than at country level.

18. The steps for profiling
Derive and classify TENs at the national level (including identification)
List the legal units for each TEN
Discuss the GENs and TENs with the statistical users
Fill the templates that will be transmitted to the partnering countries
Inform the NSIs of EU-countries in which the GEG operates on the draft profile and ask for comments
Pass the TENs (and the lists of legal units) to the relevant NSIs for use as supplied in the national business register and for data collection.

19. The steps for profiling
Partnering NSIs confirm the TEN
receive proposed TENs (and links with leUs) from the leader NSI
validate them through discussion with statistical users
existence,
Contents in terms of LeUs,
suitability for data collection,
organisation of data collection (which unit to follow?)
agreement from the national GEG managers
accept or re-discuss TENs with the UCI NSI
Feedback process between the partnering and the UCI NSI until an agreement is reached

20. Variables to be collected
For the GENs and TENs
NACE
Employment
Turnover
Variables in the BR regulation
mandatory
In addition: core variables
Variables of the SBS regulation, annex1

21. Main output of each step

22. Sources of information
GEG
GENs
TENs
Legal units
BR data
UCI, Partnering
SBS data (surveys or admin data)
OFATS data
UCI
other national data available (STS, …)
GEG annual report or web site
GEG visit
OFATS data is a valuable source of information for profiling and can be used as the source of turnover, employment and NACE to populate TENs' variables
OFATS data supplied at the TEN level can be used alongside published annual accounts to validate national data.

23. Organisation of data collection
Organisation inside the NSI
May differ from one NSI to another
Profiling together with BR and EGR
Profiling together with SBS
Profiling independent from both
In small countries: multi-disciplinary teams (BR, SBS, STS, FATS) working part-time on profiling
In any case, need for a good coordination between all actors
Efficiently update EGR with profiling information
Efficiently collect data for SBS (FATS) purposes

24. Organisation of data collection
Different ways of collecting data for SBS purposes:
Decentralised
The UCI NSI collects only the minimum set of data for GEN and TEN
National collection for SBS:
By specific collection from TENs or GEG's national representative
By consolidation of existing information (surveys or use of administrative data)
Fully centralised
By the UCI NSI for all the partnering countries
On request of the GEG
Requires an agreement with the GEG
Requires a good coordination between involved countries

25. Light vs. Intensive profiling

26. Light vs. Intensive profiling
Light profiling

27. Conditions for light profiling
Availability of the mandatory information of the following documents:
Consolidated annual accounts
With segment information by activity and country
With the delineation of segments in terms of legal units
Answer to the O-FATS survey
That allows to delineate the GENs and TENs
That allows to derive economic information on GEN (and TEN)
These two sources are complementary.
If mandatory information cannot be completed
contact the GEG to complete the profiling. In that case, it will become an intensively profiled GEG
If the GEG is small enough, convert to automatic procedure

28. IPT: a tool to make coordination easier
IPT: Interactive Profiling Tool
Allow profiling teams to smoothly exchange information during the profiling process, but respecting the confidentiality rules in force concerning exchanges of individual data.
Centralise information on the GEN and the TEN for the group under profiling process.
Release information on profiling to the users
Be the central place of guidelines, metadata, templates and other documents related to International profiling.

29. IPT: a tool to make coordination easier
What could be done with the ITP
Exchange information between the EGR and the IPT (direct transfer from EGR to IPT)
Exchange information between the national environment and the IPT (batch procedure)
Modify information online for authorised members (profiling teams of the UCI or partnering countries)
Read information on a given group
Add new legal units
Send notifications to the partnering or UCI countries during the profiling process (this should be done automatically according to some trigger signal)

30. Example 1: SIEMENS Initial operating segments Geographical
organisation

31. Example 1: SIEMENS Going in the detail of segments
Split of the "energy" segment

32. Example 1: SIEMENS Split of the segments Energy segment
Industry segment
Energy segment
Infrastructures &
Cities

33. Example 1: SIEMENS

34. Example 1: SIEMENS
Employment figures

35. Example 1: SIEMENS To be compared with the EGR list
List of subsidiaries: an extract

36. First step: desk profiling
Example 1: SIEMENS
First step: desk profiling
Several options for GEN
Consider only the 4 operational segments (Industry, Energy, Healthcare and Infrastructures and cities) and integrate the activity of the 3 cross-sector segments into them
Requires information to split the activity of the cross sector businesses
Siemens publishes information for these three cross sector businesses, but information is very poor for equity investments

37. First step: desk profiling
Example 1: SIEMENS
First step: desk profiling
Split the Industry, Energy and Infrastructure segments into several global enterprises
Segment information presented in the annual report detailed by sub-segments
Requires checking the autonomy of enterprises defined in the frame of the segments
Consider 6 global enterprises in line with the segments
exclude equity investments
Consider transversal activities in a segment "others"
Need for a contact with the group

38. A possible operational structure:
Example 1: SIEMENS
A possible operational structure:
GEN
NACE 3Digit
employment
turnover (external revenue) in M€
Energy
351
86,000
27,302
Healthcare
266
51,000
13,600
Industry automation 27
105,000
9,563
Drive technologies
281
9,640
Instrastructures&Cities
302
89,000
16,731
financial services
649
3,000
859
others
701
36,000
1,031

39. Example 1: SIEMENS
French
organisation

40. Example 1: SIEMENS
French
organisation

41. Example 1: SIEMENS
French
organisation

42. Example 1: SIEMENS
French
organisation

43. Operational structure: Legal structure:
Example 1: SIEMENS
Operational structure:
a national restriction of the GENs
Legal structure:
Transversal to the economic structure
One sub-holding which controls the most part of LeUs
One LeU with activity in the 5 GENs
Should be split into the different TENs
6 LeU which directly depend from SIEMENS AG
GEN structure should be suitable for national purposes
Way to collect information on TENs:
See if SIEMENS SAS or SIEMENS SA could report for all the TENs

44. Suitable for light profiling:
Example 2: BRICORAMA
Suitable for light profiling:
Medium size group: 3510 employees
Active in 3 other EU countries
Quasi monoactive
Detailed segmental information incl. by country
Detailed list of subsidiaries
Possibility to delineate the global enterprises in terms of legal units

45. Example 2:
BRICORAMA
Legal structure of the GEG

46. Example 2: BRICORAMA
Detailed list of subsidiaries

47. Example 2: BRICORAMA
Intra-group flows

48. Example 2:
BRICORAMA
Income statement by TEN

49. Example 2: BRICORAMA
Balance sheet by TEN: assets

50. Example 2: BRICORAMA
Balance sheet by TEN: liabilities

51. Conclusion: Example 2: BRICORAMA 1 GEN 5 TENs
NACE: 475 "Retail trade of other household equipment in specialised stores"
Additional activity: windmill (NACE:3411: production of electricity)
Currently side activity
5 TENs
France, Belgium, Netherlands, Spain, Hong-Kong (small activity)
Central collection of data at the UCI level is possible

52. EGR and profiling: two different visions of the same "object"
Profiling and EGR
EGR and profiling: two different visions of the same "object"
EGR: legal structure of the global enterprise group
Profiling: economic structure of the global enterprise group

53. Interactions between the EGR and the profiling project
Profiling and EGR
Interactions between the EGR and the profiling project
The EGR: a fundament for profiling
EGR: starting point of profiling
Profiling population selected in the EGR
UCI in EGR defines the profiling country
EGR perimeter starting point for profiling
Profiling: a fundament for EGR quality
Global economic information on the GEG
Delineation of GEN and TEN in terms of legal units and economic information on GEN and TEN
Updated information on legal units

54. Principles for a coordinated view between EGR and profiling
Profiling and EGR
Principles for a coordinated view between EGR and profiling
The perimeter of the groups treated in the IPT should be identical in the EGR and the IPT database at the beginning of the profiling process and at the end (when the country of the UCI considers the profiling to be achieved).
The EGR should be updated by the IPT data (set of information to be defined).
The common units in the EGR and on the IPT should be identified with to the same ID number
It could be the LEID number for the legal unit and the group ID number for the group.

55. Profiling and FATS
FATS among the main statistical users for profiling (with SBS)
Analytically:
Same statistical unit "enterprise" followed in FATS and defined through profiling
TEN are defined not only in EU, but worldwide
TEN allow to produce information by country and activity
Operationnally
FATS can help profiling
To delineate the GENs and TENs: especially for light profiling complete the annual report information to produce data by country and activity
Profiling can collect information for FATS purposes
Information collected on TENs (turnover, employment, NACE) also available for non-EU countries

56. Thank you for your attention

57. Annex: core variables
1- Strategic need: the main aggregates of the P&L by nature:
needed as proxies of the GDP (productive analysis and NA providing)

58. Annex: core variables
2- Completion of the P&L: useful to check consistency between operating and net results

59. Annex: core variables
3- Identification, through the Financial Assessment, of the « investment »