BusinessChamber

Event Recap: The Importance of Regional Headquarters (By Roland Berger)

Yesterday, May 19 2022, Laurent Doucet, Partner at Roland Berger, made an incredible presentation about Regional Headquarters (RHQ).

Laurent divided this webinar into three main points:

  1. Context and challenges of RHQ
    1. Context
    2. Asian RHQs of Fortune Global 500 companies 
  2. Rethinking RHQ and location assessment framework 
  3. Selected case studies 

Please note that if you are looking for more precise information, the PowerPoint and the video recording will be available either on our website or YouTube. 

Regional Headquarters (RHQs) in Singapore and Shanghai have shown a general increasing trend. Meanwhile in Hong Kong, Chinese companies are continually displacing foreign counterparts as counts stagnate. Indeed, Hong Kong reflects some doubts on its ability to attract and remain RHQs of foreign companies. Thus, there is a net exit of HQ in Hong Kong from 2019. The statistics of the RHQ that stay in Hong Kong show that there is a decrease of the number of people engaged in RHQ and ROs since 2018. There is a visible reduction of staff. 

In 2020-21, financial (Deutsche Bank), fashion (VF) and cosmetics (L’Oréal) companies moved their HQ from Hong Kong to Singapore or Shanghai. These two cities are becoming the key regional locations for HQs for four major reasons: Connectivity, innovation, business conduciveness and taxation. 

Indeed, Singapore attracts most of the 2021 Fortune Global 500 RHQs from the six leading origins (France, Germany, UK, US, China and Japan).

While RHQ location is often a result of the company’s legacies (sector, footprint, business, M&A, origin…) other external and internal factors are equally important in considering set-up evolution. While thinking of relocation, there are four major types of corporate governance that exist along with HQ intervention and subsidiary integration: Financial portfolio manager, strategic architect, strategic controller and operator. Corporate governance models usually result in a balance between business & operation integration. RHQ (re)designs along with associated operation models involve significant evaluation, exploration of scenarios, and subsequent design (E.g., geopolitics, efficiency, legal or market development).

Corporate governance models and Covid induced new ways of working require companies to assess operation models at function level, balancing transactional and expertise activities with business proximity requirements. 

There are four categories that can generally classify RHQ functions and regional supporting activities. It will define if you can or should be centralised or not: Centre of excellence, strategic business partners, shared service centre and proximity services. These four categories can be used in three generic functions: HR, Marketing and Business controlling.

Regarding the case study, we did not have time to explore it. If you are interested in it, please have a look at the PowerPoint slides!

This event has been very pleasant and we hope to have Laurent Doucet again as a speaker next year to update our audience on the latest figures.