Alengis Strategic Consulting
Alengis Risk Management Approach Member of
Bertrand Maltaverne November 2014 29.04.2015
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Supply chain is a risky business‌
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Source: The Deloitte Global CPO Survey 2013 29.04.2015
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Risk is more & more a priority for organizations…
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risk
This year, has been identified as the most important business issue driving investment in SRM. While cost reduction & cost avoidance remain priorities, customer of choice related business drivers have also gained in importance.
”
Source: 2013 SRM report; exec summary – State Of Flux 29.04.2015
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Because it is “worth” it!
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In the near future, we expect many more procurement masters to strengthen their risk management capabilities. Our studies have determined that the most common and potentially dangerous procurement risk areas relate to supplier reliability and price volatility. They also show that risk issues have a greater cost impact – and take up far more time – than most buyers’ effort to capture savings through negotiation.
”
Source: Accenture - Compulsive Contributors - More is asked and more is delivered, research and insights into high performance procurement
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Procurement plays a key role in Risk Management! Procurement’s influence
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But Procurement does not have all the required capabilities!
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Supply risk [...] is frequently, if not generally, viewed as a traditional procurement process; nonetheless, it is a newer responsibility for a majority (59%) of procurement teams. This is evidenced by the relative lack of sophistication in assessing and managing supply risk within the typical procurement department. The process remains fairly rudimentary with most groups still focused on defining basic risk metrics and parameters and centralizing their information.
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Source: CPO Rising 2014: Convergence – Ardent Partners, March 2014
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But Procurement does not (yet) have all the required capabilities!
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Risk management will become an increasingly central and critical component of FUTUREBUY, encompassing not only specific suppliers but also entire territories, geographies, weather related patterns, natural disasters, terrorist events, pandemics, geopolitical uprisings, currency movements, and multiple other possible disruptions. Rather than trying to predict these supply disrupting events, procurement organizations will begin to build organizational capabilities to derive meaningful possible case scenarios, impact analyses, vulnerability threat warnings, and mitigation strategies.
�
Source: FUTUREBUY: The Future of Procurement 25 in 25: Delivering procurement value in a complex world, KPMG
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Let’s fix that! Now!
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Follow the Alengis Risk Management Approach to find some peace of mind!
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A 3-steps approach 1 - STRATEGY
2 - DEFINITION
3 - EXECUTION
Input • Business strategy & values • Current organization & processes
Techniques • Qualitative & quantitative assessments (risk score) • Risk database
Techniques • 360° in POOL4TOOL’s SRM • Risk governance (status meetings) • Risk audits
Techniques • Interviews & Questionnaires • SWOT analysis
Output • Risk governance (org. & process) • Risk profile (risk score) • Risk registry • Watch lists • 360° in POOL4TOOL’s SRM w/ D&B and/or Riskmethods integration • Mitigation strategies
Output • Risk management objectives • Risk tolerance
Output • Update / refresh of risk tools • Lessons learnt
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Our Risk Management Process
Identify
Monitor, evaluate, adjust
Assess risk areas
Risk Mgmt. by Alengis
Implement strategy
Select a strategy
Measure likelihood & impact
Our “toolbox”: • Risk Library • Watch lists • Risk Registry • Partners
Rank risks
Develop options
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It all starts with identification of risky areas! It covers both internal & external sources of risks. Example of questions that you should ask yourselves (and your suppliers): – – – – – – –
– – –
“How early and often are you collaborating with suppliers? Are you sharing forecasts?” “Do you have true visibility into key events in the production lifecycle, into WIP [work in progress]?” “Do you have accurate information regarding inventory and raw materials?” “Do your suppliers have access to capital? At what rates are they borrowing? Are they leveraging your credit strength to eliminate capital costs? Are you aware of your suppliers’ financial health?” Do you have a supplier code of conduct? If so, are suppliers required to sign and attest to meeting its guidelines? What is your process for onboarding suppliers and maintaining current supplier information (e.g., insurance, certifications)? Do you understand geographic concentration of lower tier supplier for raw or base materials? Are they coming from the same region? Do you have any “sole source” items or categories? If so, do alternative suppliers exist and have you pursued relationships with them? Do you have supplier performance management (including KPI-based measurements) and supplier development programs formally in place? Have you had supply disruptions in the past ten years? If so, please explain the situation(s) and what was done to address the challenge(s). 29.04.2015
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Like exposure to risk, our approach is multi-dimensional. Environment
Supply
Demand
EXTERNAL
Exposure Governance & Controls
Process
INTERNAL
Design
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Each risk needs to be “sized” to define priorities and critical areas. Risk Profile = Nb of risk item / Score
Risk Score = Impact x Probability
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Risks can be reduced / mitigated via actions, and exposure must be frequently reassessed. Actions have the objective to reduce the “risk score” by • Reducing potential impact • Reducing probability
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The tools you will get…
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Our Partnerships: a Key Advantage for Our Customers!
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The tools you will get… Supply Chain Overview
SRM Database of your suppliers Info on suppliers (contact…) Dashboards (360°): • Spend information • Risk information • Add-ons: Contract Mgt., RFx, PO…
Natural risks
Supplier Scorecard
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More than tools, you will increase your capabilities! The evolution of Analytics by
Value How can we make it happen?
Prescriptive analytics Predictive analytics
What will happen? Diagnostic analytics
Why did it happen?
What happened?
Descriptive analytics
Difficulty
Source: The Deloitte Global CPO Survey 2013 29.04.2015
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And position Procurement as even more strategic in your organization! Supplier Coach
Legal Expert
Supply Chain Innovator
Risk Advisor Business Partner
Relationship Broker Internal Consultant
Intelligence Agent
Financial Expert
Cost Saving Enabler
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Final word… Risk Management is not a 1-time effort! This requires a continuous management… This is why our goal is to create an organization that has Risk Mgmt. in its DNA!
“
No battle plan survives contact with the enemy.
”
Helmuth Karl Bernhard Graf von Moltke Chief of staff of the Prussian Army for thirty years, regarded as one of the great strategists of the latter 19th century, and the creator of a new, more modern method of directing armies in the field.
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The Alengis Risk Management Approach, our experience at your service! Identify
What you will get: •
A robust methodology / framework to manage risks.
•
An organization that has risk management in its DNA via adequate processes and roles.
•
Monitor, evaluate, adjust
Assess risk areas
Risk Mgmt. by Alengis
Implement strategy
Measure likelihood & impact
Collaborators with the required skills and tools to continuously apply the approach. Select a strategy
Rank risks
Develop options
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Thank you
Bertrand Maltaverne Sr. Business Consultant bertrand.maltaverne@alengis.com
http://www.alengis.com https://twitter.com/alengisinc 29.04.2015
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