Finance Support

Roles and Responsibilities of the Finance Support Team Policy Setting Define Savings/Benefits Provide tools for financial analysts and BBs DMAIC Process: Financial Support Project Selection and Review Project Evaluation Track Savings/Benefits Post Completion Validate/Audit Financial Results Forecasts Management Reporting Program costs and SSA relationship Will cover key points of Finance role in Six Sigma Program: Policy & Guidance Finance involvement in projects – including monitoring & auditing benefits after project “Control” phase & Management reporting

Savings Definition TFS6s definition of “project benefits” is grounded in P&L impact “Hard” Savings Measurable, controllable and contribute to earnings Sources Margin improvements directly attributable to Six Sigma projects Reduction of operating expenses Lower carrying cost related to CAPEX reduction EBIT contribution from revenue enhancement projects “Soft” Savings Difficult to measure or not tied directly to earnings Examples Customer satisfaction Safety or regulatory compliance Cash impact of reduced CAPEX This program is driven from the bottoms-up, project by project. Each project will target specific benefits, usually more than one benefit. Program emphasizes “Hard” savings that Tyco can Realize – bottom line. – Aligned with TFS goals. “Soft” savings will be tracked, where applicable & appropriate for comparison purposes.

Savings Definition - Examples Hard Savings EBIT impact of Revenue increases from Six Sigma Projects Decrease in Labor cost (FTEs) or Overtime Paid Decrease in Office Supply Expense Decrease in Travel Expense Decrease in Late Payment Fees Decrease in Rent/Lease Expense Decrease in Utilities Expense Decrease in Repair Costs Soft Savings Increase in Customer Service Increase in Customer Satisfaction Increase in customer/employee Safety Aid in Regulatory Compliance Give examples of Hard/Soft savings categories – use slide for reference.

Project Benefits Template Project tracking system being developed, in the interim we will use a stand-alone Excel template to Charter projects & identify/quantify project benefits & cost. Example To Be Tailored To Tracking System And Environment

Roles and Responsibilities Black Belt vs. Financial Analyst Data Collection Original Analysis Cost Analysis Financial Analyst Provide Budget Information by Cost Center Cost / Benefit Analysis Review / Validation Budget Adjustment Finance supports and engages with Black Belt as project progresses through DMAIC process. Black Belt’s responsibility to drive project, Finance Analyst assists with review & validation of benefits estimates & validation of actual benefits

Finance Involved At Every Stage Of Project Project Process Map DMAIC – Finance Involvement Define Measure Analyze Improve Control BB/MBB Draft Charter High Level Problem statement, process definition, potential financial benefits & cost Update Charter as necessary while progressing through project phases. Engage Finance, Process Owner as needed. Request Steering Committee Approval if Method of measuring benefits OR significant change to benefits forecast is required. Implements Control Plan Validates benefits with Finance Presents to Steering Committee for Sign-Off Review assumptions, High level estimates, Consider up-stream/down-stream effects Categorize as hard/cost benefits Review measurement proposals Identify appropriate sources & uses of financial data to measure, estimate & validate as project progresses Engaged by BB as needed to update measurements, financials Validate actual benefits with BB/MBB Update forecast if necessary Sign-off Project Finance In the define phase, the BB proposes a project including high-level financial estimates. Finance reviews, validates or modifies accordingly – are the high level assumptions correct, sources & uses of data correct, scope of project benefits make sure we understand the impact to Tyco, not just portion of company – e.g. inter-company sales do not necessarily increase Tyco sales Review with Finance Champion prior to Steering Committee Meeting – Finance Champion Approves before Steering Committee Meeting Measure Analyze & Improve phase Finance Analyst may be called on to assist in updates and validation to measurements and/or resulting benefits/cost calculations Control phase: Final review by Finance Analyst of project Financials Finalize plans to monitor/audit results Validate “Actual” Hard Realized Net benefits. Where and how do I measure, which budget is impacted? Review with Finance Champion prior to Steering Committee Meeting – Finance Champion approves before Steering Committee Meeting Finance Champion Approves Steering Committee Review Approve or re-direct Review Approve or re-direct Finance Involved At Every Stage Of Project

Finance Team Mark Schmitz Executive Steering Committee Steve Finney Divisional Finance Champion Ron Eicholtz Divisional Finance ADT Finance Champion SimplexGrinnell Finance Champion Tyco Safety Products Finance Champion Each Business Units has assigned a Finance Champion – Sits on BU Steering Committee Finance Analysts will be identified to support individual BB projects as previously discussed Financial Analyst Financial Analyst Financial Analyst Financial Analyst Financial Analyst Financial Analyst Financial Analyst Financial Analyst Financial Analyst