PricewaterhouseCoopers in Slovakia. Industry Focus. October *connectedthinking

PricewaterhouseCoopers in Slovakia Industry Focus October 2008 *connectedthinking Real Estate Our team of real estate specialists includes exper...
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PricewaterhouseCoopers in Slovakia

Industry Focus

October 2008

*connectedthinking

Real Estate

Our team of real estate specialists includes experienced professionals from our Tax, Advisory, and Assurance business lines. We advise large and mid-sized real estate clients, investors, developers and finance providers about a range of financial and tax matters.

Main Industry Issues

We can assist with

• Real estate development in Slovakia has boomed over the last few years, but the current economic crisis has significantly reduced the volume of real estate projects and deals. • International Financial Reporting Standards (IFRS) are now compulsory for some companies. • Careful planning can optimize the tax position for real estate projects. • Cost control and strong project management are essential to maximize potential returns on real estate projects. • Measures to optimise cash flow can reduce the impact of the global economic downturn. • A strong focus on quality and compliance maximises financing and sale opportunities.

• buy-side due diligence (pre- and postacquisition) and sell-side due diligence on real estate companies; • pre- and post-acquisition project structuring for a cost-effective and tax-efficient structure; • tax and related advice on real estate investments in Slovakia; • advice on designing exit strategies – optimizing the commercial and tax position; • cost reduction advice; • advice on cash flow and working capital management; • VAT advice, including maximising VAT reclaim opportunities; • financing advice to borrowers and lenders; • managing tax, accounting, and legal aspects of international real estate projects; • advice on inward investments, including establishing companies in Slovakia; • financial and tax forecasts; • dispute resolution with contractors, suppliers, and buyers and sellers or real estate; • reviewing investment prospectuses, share purchase agreements, and other documents from a financial, tax and legal perspective; • audit services; and • tax and accounting compliance services.

Our Team

Clare Moger Team Leader tel.: +421 2 59350 617 [email protected]

PricewaterhouseCoopers in Slovakia

Radoslav Krátky tel.: +421 2 59350 630 [email protected]

Peter Vážan tel.: +421 2 59350 472 [email protected]

Eduard Vacula tel.: +421 2 59350 470 [email protected]

Industry Focus

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Public Sector

The Slovak public sector, including the healthcare system, is facing increasing pressure, due to the efforts to work more efficiently while embracing new or broadened responsibilities, such as EU funds administration, Euro conversion, sustainability, or innovative methods of supplying services. In the public sector, the demand for efficiency is constant, be it in regard to management, infrastructure, or healthcare. Furthermore, the public sector is the scrutiny not only by Slovak citizens, but by the European Union as well. Our consultants can contribute to the success of governmental, regional, or municipal projects by offering: • an independent view and perspective; • technical expertise; • public and private sector experience; • proven, effective methodologies; and • project management skills. As a member of the largest network of its kind, we have access to the best global experts and to proven solutions that we can adapt to Slovak-specific conditions. Our work in this field is supported by a specialized institution – PwC’s Public Sector Research Centre (www.psrc-pwc.com).

Main Industry Issues • Do you need advice on accounting or consolidation? • Can you increase the income of your organization? • Do you manage the risks of your organization? • Is the turnover of your staff attributed to low salaries? • Are you engaged in preparing a longterm, customer-oriented strategy? • Do you want to know how your organization is performing compared to others? • Do you want to streamline the management of your office and reduce bureaucracy? • Are you interested in a Balance Scorecard and performance management? • Are you preparing some large public procurement, such as IT or PPP? • Can you do something related to sustainable development? • Do you want to make changes or have to make them, for example as a result of new legislation? • Do you want to manage and implement structural funds better and in a more cost-effective way? • Do your projects always lead to the expected results within the given deadline and at the budgeted cost? • Is your Euro conversion smooth? • Do you think that your IT systems could be more helpful to you? Are they safe? • Are you engaged in e-government? • Do you want to improve the management of your assets?

• Do you want to check the activities of individual departments or subordinate organizations?

We can assist with • audit services, accounting advice, including IPSAS and IFRS; • Cash Finder; • advice on funding; • making management more effective, including finance and HR management; • implementing incentive systems and performance-oriented remuneration; • strategic management; • a Balance Scorecard; • programme budgeting; • managing, monitoring, and evaluating performance; • innovative solutions for providing public services; • benchmarking; • public procurement; • managing, reporting, and verifying data on greenhouse gases; • project management; • advice on government funds and state aid; • outsourcing services; • public-private partnerships (PPP); • Euro conversion; • information technology (IT); • e-government; • feasibility studies; • advice on asset management; • evaluation and quantification of fraud risk; • investigating fraud and corruption; and • preparing lawsuits and arbitration.

Our Team

Karol Zimmer Team Leader tel.: +421 2 59350 466 [email protected]

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Industry Focus

Branislav Hunčík tel.: +421 2 59350 625 [email protected]

Ivan Kupkovič tel.: +421 2 59350 415 [email protected]

Christiana Serugová tel.: +421 2 59350 614 [email protected]

PricewaterhouseCoopers in Slovakia

Industry Focus

Technology, Information, Communication Entertainment & Media These days, a number of companies are emphasizing the word “communication” in their business names, and do not consider themselves just a telco or cable company anymore. This brings a number of challenges and, of course, more intense competition, and pressure on margins and profitability. Therefore, it is not surprising that the most common words we hear every day are “cost reduction” and “customer growth”. We are witnessing the establishment of a third mobile operator in the Slovak market, and observing the first signs of the impact it has on “communication” companies in regard to innovative products, quality of service, and especially “time to market”. Last, but not least, is the topic of regulation, which is still a major issue. We continue to see strenuous efforts by Viviane Reding, the European Commission member responsible for Information Society and Media, supported by the European Parliament Committee on the Internal Market and Consumer Protection, regarding the influence on and reduction of customer prices.

Main Industry Issues

We can assist with

• Successful market and product strategy. • Is there any space for further growth through acquisitions in Slovakia? • How should we adjust to a world of “convergence”? • How should we internally manage change? • How should we handle a large number of internal projects at the same time? • How should we reduce costs and optimize their structure? • What can we do to serve our customers better? Are we a customerfriendly organization? • Is all the information on customers and product profitability that we need available to us? • How should we make our offerings even more attractive to our existing customers? • What should our priorities regarding technology investments be? • How should we improve our learning and educational programmes for staff? • How should we recruit new high-quality staff and retain current staff? • How should we motivate staff correctly to meet corporate objectives? • How should we ensure that our company complies with the regulatory framework?

• strategic consultancy on the direction of the company as a whole, a certain division of it, or a product; • managing projects or providing qualified resources for a certain period of time; • reviewing and optimizing cost structures; • assessing profitability and submitting proposals for increasing it; • reviewing and optimizing working capital; • testing and improving customer service processes; • advising you on various accounting and tax issues and solutions; • advising you on regulatory issues; • resolving disputes; • forensic and investigation services; • audit services; • advising you on state aid and EU funds; • tax services and consultancy; • advising you on mergers and acquisitions, or valuation of the company; • revenue assurance; • establishing an internal audit function or an independent assessment of its activities compared to best practice; • assessing the effective use of investments allocated for IT and infrastructure development; and • Euro conversion projects.

Our Team

Tomáš Kuča Team Leader tel.: +421 2 59350 423 [email protected]

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Industry Focus

Ivan Kupkovič tel.: +421 2 59350 415 [email protected]

Peter Poliak tel.: +421 2 59350 561 [email protected]

Christiana Serugová tel.: +421 2 59350 614 [email protected]

PricewaterhouseCoopers in Slovakia

Energy, Utilities & Mining

Globalization and the need for a secure, affordable energy supply go hand in hand. Economic development depends on sufficient energy sources – oil, gas, electricity, coal, and others. The availability and security of these resources are on the minds of many, from consumers and political leaders to company executives. Slovakia has undergone a process of harmonization to bring its energy sector standards in line with those of the EU. The country is also seeing a gradual decrease in its dependence on solid fuels as the primary energy source.

Main Industry Issues

We can assist with

• Permanent sustainability of energy sources. • Compliance with legislative and reporting requirements of regulatory authorities. • Supply security, price increases for utilities and services in the energy sector. • Climate change and environmental protection. • Introduction of excise taxes on utilities. • EU Emissions Trading Scheme.

• enhancing the outcome and effectiveness of processes; • transactions and consolidations within the energy and mining sector; • managing financial and political risks; • recruiting and retaining qualified staff; • integrating steps for environmental protection and decelerating climate change into the overall business strategy; • preparing and implementing a carbon emissions trading strategy – from identifying cost-effective emission reduc-tion projects to carrying out transactions with emissions; • ensuring revenues from services in the energy sector and maximizing profitability; • managing the supply chain; • tax compliance reviews; • regulation and legal compliance; and • auditing financial statements prepared under Slovak accounting

PricewaterhouseCoopers has been providing professional services to energy, utilities, and mining companies all over the world for more than 100 years. We help companies confront the industry's most challenging changes and issues.

Our Team

Alexander Šrank Team Leader tel: +421 2 59350 587 [email protected]

PricewaterhouseCoopers in Slovakia

Katarína Somogyiová tel.: +421 2 59350 422 [email protected]

Peter Poliak tel.: +421 2 59350 561 [email protected]

Peter Havalda tel.: +421 2 59350 440 [email protected]

Ľudovít Sýkora tel.: +421 2 59350 469 [email protected]

Industry Focus

7

Financial Services

Nárast nákladov spojených s vysokým The current course of events stupňom regulácie, vstupom Slovenska on the global markets has brought do Európskych štruktúr, rovnako ako great pressure to bear on monitoring vysoko konkurenčné prostredie costs, evaluating risks, and optimizing a segmentácia podnikateľského operations in all sectors prostredia vytvárajú vo finančnom of the economy. The financial sector sektore tlak na efektivitu obchodu is the most sensitive in responding a minimalizáciu nákladov. Naopak, to changes in trends. Advanced pokročilá konsolidácia trhu, kladie dôraz market consolidation means na rast výnosov. limitations on the organic growth Spoločnosti s vôľou stať sa lídrami na of a number of customers. trhu musia venovať všetky sily na realizáciu potrebných zmien v stratégii Increased costs due to a high level a prevádzke tak, aby boli včas of regulation and Slovakia’s accession pripravené čeliť výzvam meniaceho sa to the European Union, as well as okolia a rastúcim požiadavkam klientov. the highly competitive market and the segmentation of the business environment, create pressure on business effectiveness and revenue growth. Companies that are willing to become market leaders should exert all their efforts to accomplish the required changes in their strategies and operations, so as to be ready to promptly face the challenges resulting from the changing environment and clients’ growing demands.

Banking The way to achieve set targets in a period of global changes is to increase the performance of products, to focus on the most attractive product areas, and to demonstrate readiness to take advantage of emerging opportunities. Key factors that enable banks to adopt new strategies include a client-oriented model and a unified view of client data, the consolidation of distribution channels, product benchmarking, the identification of leading products, client segmentation, and a focus on targeted campaigns.

Main Industry Issues • Pressure on revenue growth and cost optimization. • Client orientation, unified view of client data through all systems and distribution channels. • CRM transformation. • Focus on preventing fraud and money laundering. • High degree of regulation. • Need to increase management reporting performance, to support the decision-making process and management predictions.

We can assist with • implementing strategic, client-oriented models that enable a single customer view, advanced client segmentation, client campaign planning, and effective cross selling; • benchmarking the performance of client staff, as well as the quality and intensity of services provided; • advising you on consolidating internal systems, making operations more effective, and optimizing processes; • strategic decision-making;

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Industry Focus

• implementing advanced planning methods, capital adequacy management, and providing consultancy on developing an overall strategy by using ROE (return on equity), RORC (return on regulatory capital), RORAC (return on riskadjusted capital), and other models; • optimizing managerial and regulatory reporting; • advising you on financial regulations and compliance, as well as providing advisory and implementation services related to BASEL II and MIFiD; • money laundering prevention, fraud investigation, and forensic accounting; • auditing or reviewing financial statements; • accounting and IFRS consultancy; • efficient tax recapitalization and balance sheet restructuring; • developing tax-effective retail and commercial products (such as cash pooling and derivative financial instruments) and financial arrangements (such as leasing and factoring); • optimizing valuation allowances and provisions resulting from changes in accounting and tax legislation; • finance structuring – local and international group financing through subordinated debts, profit-share loans, hybrid financing, and analyzing transactions with securities and shareholdings; • advising you on financing and managing treasury operations; • reviewing the tax implications of investments in hedging transactions, bonds, and other types of investments; • tax and legal assessment of financial instruments (such as derivatives, hedging, syndicated loans, securities, and life-insurance products); • advising you on HR issues, remuneration, and know-how management; and • the PayWell Remuneration Study for the financial services sector.

PricewaterhouseCoopers in Slovakia

Insurance

We can assist with

Although still lagging behind EU average levels, insurance penetration has been constantly growing in Slovakia. From the strategic perspective, insurance companies must adapt to global trends in the sector, and focus their attention on clients. This trend brings the need to implement new, client-oriented models allowing a unified view of customers, segmentation, and cross selling.

• implementing strategic, client-oriented models that enable a single customer view, advanced client segmentation, client campaign planning, and effective cross selling; • benchmarking the performance of client staff, as well as the quality and intensity of services provided; • advising you on consolidating internal systems, making operations more effective, and optimizing processes; • implementing advanced planning methods, capital adequacy management, and consultancy on developing the overall strategy; • strategic decision-making; • optimizing managerial and regulatory reporting; • advising you on financial regulation and compliance; • advisory and implementation services related to the Solvency II concept; • money laundering prevention, fraud investigation, and forensic accounting; • investigating fraudulent claims; • advising you on money laundering prevention; • auditing or reviewing financial statements; • accounting and IFRS consultancy; • advising you on IFRS compliance;

Main Industry Issues • Pressure on revenue growth and cost optimization • Identification of profitable products, product benchmarking, benchmarking and analysis of product costs • Market potential identification and benchmarking of services • Implementation of planning and effective capital management based on ROI and RORAC • Implementation of IFRS standards (IFRS 4 and IFRS 7 have a fundamental impact on financial reporting of insurance companies) • Solvency II concept • Further consolidation of the insurance market

• developing tax-effective structures for insurance companies; • settling insurance claims, defining and implementing precautions for loss prevention and control; • quantifying direct and indirect losses; • preparing specialized insurance contracts; • technical audit of procedures that the Insurance Claims Settlement Department uses; • reviewing internal controls and preparing the corporate risk management system; • advising you on issues related to the ratio of costs and fees collected – profitability increase; • outsourcing the internal audit function; • advising you on HR issues, remuneration, and know-how management; and • the PayWell Remuneration Study for the financial services and insurance sector.

Our Team

Juraj Tučný Team Leader tel.: +421 2 59350 565 [email protected]

PricewaterhouseCoopers in Slovakia

Michaela Gábiková tel.: +421 2 59350 622 [email protected]

Eva Hupková tel.: +421 2 59350 414 [email protected]

Michal Kopanič tel.: +421 2 59350 518 [email protected]

Industry Focus

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Automotive and Processing Industry

In 2007, three car makers in Slovakia – VOLKSWAGEN, PSA, and KIA – produced more than 570,000 cars, which is 106 cars for every 1,000 inhabitants, more than anywhere else in the world. Due to the expected financial crisis, experts have identified key factors that should help mitigate its adverse impact on Slovakia: the country’s strategic position, its relatively available and skilled labour force, as well as the product portfolio of the new market players – PSA and KIA. These two companies focus more on medium-sized and small cars, which might help positively diversify the Slovak car industry.

Main Industry Issues

We can assist with

Decision-makers in the Slovak automotive sector face high strategic risk and uncertainty in several areas:

• inward investment advice, such as searching for a suitable site; • market analysis, competitor analysis, and analysis of macro- and microeconomic relations; • restructuring the dealer network; • recruitment and professional development of executive staff; • procurement and supply chains, and optimizing the just-in-time chain; • consolidation of legal entities; • tax optimization of cross-border manufacturing, mainly VAT-related issues; • the right to draw investment incentives and the respective consultancy; • HR advice, such as benchmarking studies on wages and salaries, optimization of remuneration systems, and employee benefit schemes; • reviewing systems and processes; and • comprehensive advice and training courses related to IFRS.

• Lack of a qualified labour force. • Interdependence with neighbouring economies. • Application of the Slovak tax and labour legislation. • Overall Slovak competitiveness in production costs. • Inventory management. • Changes in accounting regulations.

In the fairly long term, research and development must be represented more widely, ensuring sustainable growth even after the advantage of an available labour force disappears.

Our Team

Matthew Pottle Team Leader tel.: +420 251 152 006 [email protected]

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Industry Focus

Jens Hörning tel.: +421 2 59350 432 [email protected]

Eva Fričová tel.: +421 2 59350 613 [email protected]

Todd Bradshaw tel: +421 2 59350 600 [email protected]

PricewaterhouseCoopers in Slovakia

PricewaterhouseCoopers provides assurance, tax, and advisory services to both public and private organizations in various economic fields. More than 155,000 people in 153 countries across our network share their knowledge, experience, and ideas to build public trust and enhance value for its clients and their stakeholders. We opened our office in Slovakia in 1991 and currently have more than 350 employees.

Country Managing Partner Todd Bradshaw, Tax Partners Mária Frühwaldová, Assurance Alica Pavúková, Assurance Alexander Šrank, Assurance Christiana Serugová, Tax Tomáš Kuča, Advisory

PricewaterhouseCoopers Nám. 1. mája 18, 815 32 Bratislava Tel.: +421-(0)2-59350 111, Fax: +421-(0)2-59350 222 Hlavná 108, 040 01 Košice Tel.: +421-(0)55-3215 311, Fax: +421-(0)55-3215 322 Email: [email protected] www.pwc.com/sk

© 2008 PricewaterhouseCoopers. All rights reserved. "PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking* is a trademark of PricewaterhouseCoopers LLP.

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