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The Rising Global Offsets Challenge
Tuesday, October 23, 2012
2
Agenda
• 3:00 pm Welcome and Introduction
George Grammas, Partner and Chair of the Aerospace &
Defense Industry Group, Squire Sanders
Henry Lavine, Retired Partner, Squire Sanders and Chair,
Sawyer & Co., LLC.
• 3:10 pm Perspectives on the Future of SatisfyingOffset Obligations
Admiral Vernon E. Clark, Retired Chief of Naval Operations,
United States Navy and Member of the Fleishman-Hillard
International Advisory Board
• 3:30 pm Half Trillion Dollar Offset Obligations andAvascent's Global Offset Obligations Report
Jon Barney, Partner, The Avascent Group
3
Agenda (cont’d)
• 3:40 pm – Panel Discussion: Satisfying OffsetObligations Through Public-Private PartnershipOpportunities
Philip Ewing (Moderator), Defense Editor, POLITICO Pro
Laura M. Creswell, Director, International Operations &
Corporate Offset, ATK
Bruce Lemkin, Founder, LEMKIN International, LLC and
former Deputy Under Secretary of the Air Force, International
Affairs
Paul A. O'Hop, Partner and Co-chair of the Renewable
Energy Industry Group, Squire Sanders
John E. Wyand, Attorney and member of the Healthcare
Industry Group, Squire Sanders
4
Perspectives on the Future of SatisfyingOffset Obligations
• Admiral Vernon E. Clark Retired Chief of Naval Operations, United States Navy
Member of the Fleishman-Hillard International Advisory
Board
5
Half Trillion Dollar Offset Obligations andAvascent's Global Offset Obligations Report
• Jon BarneyPartner, The Avascent Group
THE RISING GLOBAL OFFSETCHALLENGE
OCTOBER 23, 2012
ADDRESSING THE HALF TRILLION DOLLAR QUESTION
New Reality: With U.S. and European budgets in decline,procurements are increasingly occurring in new markets…
U.S.
$200
$300
$400
$500
$600
$700
$800
20
00
20
01
20
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20
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Rest of World
Flat Defense Budgets Growing Economic Power
Europe
$-
$100
$200
$300
$400
20
08
20
09
20
10
20
11
20
12
20
13
20
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20
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$-
$100
$200
$300
$400
$500
$600
20
08
20
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20
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20
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050SOURCE:
Countries included: Australia, India, Japan, Malaysia, Pakistan,Singapore, South Korea, Taiwan, Indonesia, Thailand, Saudi Arabia,Egypt, Iraq, UAE, Qatar, Kuwait, Jordan, Turkey Algeria, Morocco,South Africa, Oman, Mexico, Colombia, Chile, Brazil
+ All figures in Billions of USD
…which has led to a new set of drivers and challenges for stakeholders
Companies focusing on global expansion due to US andEuropean belt-tightening
• Challenge: Limited experience by US and European A&Dcompanies in approaching markets truly globally
Increasing expectations by governments to produce economicdevelopment results
• Challenge: Delivering positive economic results andcommunicating these results to citizens
Evolving country organizations that are aligning offsets withnational economic development goals
• Challenge: Differing expectations between companies andcountries regarding in-country investment
What does this mean?
New Risks, Missed Opportunities
Significant change to the business
Increased scrutiny = increased risk to reputation
Positive outcomes falling short
• Current offset approach is opaque, inefficient, not
strategic, and lacking in data
• Suboptimal for Western companies, countries, local
partners, and citizens
• Now is the time to rethink how offsets are constructed,
communicated, and discharged
• Current offset approach is opaque, inefficient, not
strategic, and lacking in data
• Suboptimal for Western companies, countries, local
partners, and citizens
• Now is the time to rethink how offsets are constructed,
communicated, and discharged
A New Approach and Methodology – Avascent Analytics
050
Avascent Analytics
• Comprehensive web basedforecasting tool of global A&Dmarkets
• Market size, segmentation,forecasted growth, competitormarket share, and new opps
• USA and 35 global countries,across C4I, Sensors,Weapons, Platforms,and Services
Offset Data & Methodology
• Bottom-up approach
• Obligations analyzed byyear, country, andcompany
• Group past and forecastedcontractor sales by country
• Apply offset threshold andrules for each country
How large is this challenge today?
www.strategicoffsets.com
How large will this challenge become?
www.strategicoffsets.com
Obligations are growing worldwide, with MENA and Asia/Pacificrepresenting the largest volume and LatAm the fastest growth
Latin America Obligations
$-
$5
$10
$15
$20
$25
Millio
ns 9.6%
Europe & Canada Obligations
$-
$5
$10
$15
$20
$25
Millio
ns 4.6%
Asia/Pacific Obligations
$-
$5
$10
$15
$20
$25
Millio
ns 6.5%
MENA Obligations
9.0%
$-
$5
$10
$15
$20
$25
Millio
ns
Wrap-Up and Looking Ahead
Key Takeaways
– The size of offset obligations worldwide is larger than commonly realized and is ona path to grow considerably in the coming years
– Analysis and strategy remain largely absent from the discussion and hinderssuccess
– Current approach towards offsets is suboptimal for companies, countries, partners,citizens, and employees
– Change brings new opportunities for forward-looking companiesand governments – successful offset approaches equals competitive differentiation
Actions
– Elevate offsets to become a company-wide and country-wide strategic priority
– “Offset Audit” of communications, capture, and business development processes
– Deeper partner and offset concept due diligence
– Broaden partners across sectors
15
• Philip Ewing (Moderator),POLITICO Pro
• Laura M. Creswell, ATK
• Bruce Lemkin, LEMKINInternational, LLC
• Paul A. O'Hop, Squire Sanders
Panel Discussion: Satisfying OffsetObligations Through Public-PrivatePartnership Opportunities
• John E. Wyand, Squire Sanders