Managing Risk of Supply Chain Disruption
-
Upload
santayan-banerjee -
Category
Documents
-
view
228 -
download
0
Transcript of Managing Risk of Supply Chain Disruption
-
8/13/2019 Managing Risk of Supply Chain Disruption
1/34
Managing the Risk ofSupply Chain Disruption
Supply Chain Management and Financial Management Webinar
June 19, 2013
Speakers:Mary Driscoll, APQC
Eric Gerner and John Hejka, Experis
Michael Miedema, Baker Hughes
Thank you for
attending. We willbegin at 11:00 a.m.
(Central Time)
Audio is available
through your
computers speakers
or through direct
dial-in
If you have technical
questions or need
assistance contact
GoToMeetingcustomer support at:
(888) 259-8414 or
+1-805-690-5751
-
8/13/2019 Managing Risk of Supply Chain Disruption
2/34
22013 APQC. ALL RIGHTS RESERVED.
Housekeeping Audio is available through your computer speakers or
through dial-in. All lines are muted.
You can submit questions/comments at any time. We willaddress all questions during the Q&A session at the end oftodays presentation.
Links to the slides and recording will be made availableand sent to all attendees via e-mail.
-
8/13/2019 Managing Risk of Supply Chain Disruption
3/34
32013 APQC. ALL RIGHTS RESERVED.
Todays Speakers
Mary Driscoll, Senior Research Fellow, APQC
Eric Gerner, Director of Risk Advisory Services, Experis
John Hejka, Finance Transformation COE, Experis
Michael Miedema, Director of Strategic Sourcing,Baker Hughes
-
8/13/2019 Managing Risk of Supply Chain Disruption
4/34
42013 APQC. ALL RIGHTS RESERVED.
Overview
In April 2013, APQC conducted a survey to test the extentto which supply chain executives and finance managers at
large global organizations are concerned about three
macro-level, external risk factors to supply chain stability: High-impact natural disasters such as major tsunamis, earthquakes,
volcanoes, or floods; Extreme weather such as devastating droughts, wildfires, or cyclones;
and
Political turmoil in vitally important world regions.
APQC also asked about the frequency and adequacy offormal risk assessments involving various tiers of supply
chain participants.
-
8/13/2019 Managing Risk of Supply Chain Disruption
5/34
52013 APQC. ALL RIGHTS RESERVED.
APQC Research Most organizations caught off guard by unexpected supply chain
disruption.
77%
16%
6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Yes No Don't know
Has your organization experienced at least one
unexpected supply chain disruption in the last 24
months?
N = 195
-
8/13/2019 Managing Risk of Supply Chain Disruption
6/34
62013 APQC. ALL RIGHTS RESERVED.
APQC Research
73%
21%
6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Yes No Don't Know
Was this disruption serious enough to draw the
sustained attention or intervention of the top
executives at your organization?
N = 151
Supply chain disruption draws the attention of senior executives.
-
8/13/2019 Managing Risk of Supply Chain Disruption
7/3472013 APQC. ALL RIGHTS RESERVED.
APQC Research The majority of large, global organizations are now concerned about
the risk of serious physical disruption of their supply chains due to
high-impact natural disasters, extreme weather, or political turmoil.
87%
13%
87%
12%
86%
14%
0%
20%
40%
60%
80%
100%
Concerned Not Concerned
In your opinion, how concerned are your organizations
leaders today about high impact natural disasters, extreme
weather, or political turmoil.
High-impact natural disasters (N=192) Extreme weather (N=191) Political turmoil (N=192)
-
8/13/2019 Managing Risk of Supply Chain Disruption
8/3482013 APQC. ALL RIGHTS RESERVED.
N = 196
63%
28%
9%
0%
10%
20%
30%
40%
50%
60%
70%
Yes No Don't Know
Does your organization have key supply chain partners in
areas of the world known for high-impact natural disasters,
extreme weather, or political turmoil?
APQC Research
-
8/13/2019 Managing Risk of Supply Chain Disruption
9/3492013 APQC. ALL RIGHTS RESERVED.
APQC Research Among survey participants who have had at least one unexpected
disruption in the last 24 months, 56% have added rigor to the process
of assessing supply chain resiliency.
56%
44%44%
56%
0%
20%
40%
60%
Yes, experienced at least one unexpected supply
chain disruption (N=126)
No, did not experience at least one unexpected
supply chain disruption (N=27)
Yes, we have taken steps to add rigor No, we have not taken steps to add rigor
-
8/13/2019 Managing Risk of Supply Chain Disruption
10/34102013 APQC. ALL RIGHTS RESERVED.
APQC Research Only 26% of organizations have a continuity plan that is sound and
meets business needs, or is well managed. That leaves 74% exposed
to the risk of disruption of physical assets in their supply chain,
whether at a company-owned facility or at a key vendors facility.
31%
43%
26%
0%
20%
40%
60%
No supply continuity plan/under
construction
Supply continuity plan being
revamped or needs further
improvement
Continuity plan is sound and
meets business needs/
sophisticated and well managed
plan
Majority Not in Good Shape
N = 195N = 195
-
8/13/2019 Managing Risk of Supply Chain Disruption
11/34112013 APQC. ALL RIGHTS RESERVED.
APQC Research Top 3 obstacles that can undermine management of supply chain
disruption risk.
Poor visibility into risk factors among Tier 2 and Tier 3 suppliers
Lack the resources needed to assess risks at supplier sites
Lack a single process owner for management of supply chain disruption risk
Yes No Dont
Know
N
We have poor visibility into risk factors among Tier 2
and Tier 3 suppliers 64.8% 21.2% 14.0% 193
We lack the resources needed to assess risks at
supplier sites 47.4% 41.3% 11.2% 196
We lack a single process owner for management of
supply chain disruption risk 43.8% 44.8% 11.5% 192
-
8/13/2019 Managing Risk of Supply Chain Disruption
12/34122013 APQC. ALL RIGHTS RESERVED.
All APQC member registrants will receive a
free copy of the final whitepaperandnon-
member registrants will receive the
whitepaper at a discounted price of $50.
Whitepaper Forthcoming
-
8/13/2019 Managing Risk of Supply Chain Disruption
13/34
EnterpriseRiskManagement
Experis | Wednesday, June 19, 2013 13
Risk Management
FrameworkSupply Chain
considerations
APQC Webinar
June 19, 2013
Eric Gerner
Director of Risk Advisory Services
-
8/13/2019 Managing Risk of Supply Chain Disruption
14/34
14
Enterprise Risk Management
Structured Risk Management Drivers Volatility in performanceshock losses
Regulatory scrutiny
SECincreased reporting requirements for risk-related Governance
and Compensation practices and policies, risk identification and analysis
(Rule 33-9089)
Regulatorsassessing formal Risk Management programs as a
component of corporate governance and sustainability
Rating Agencies considering Risk Management practices
(Moodys, Standard & Poors)
Legal
Board of Directors and management exposure Fiduciary responsibility to stakeholders
Shareholder activist groups
Reputation and market cap preservation
-
8/13/2019 Managing Risk of Supply Chain Disruption
15/34
15
Enterprise Risk Management
Risk Management according toStandard & Poors
An approach to assure the organization is attending to all risks
A set of expectations among management, shareholders and the board
about which risks the organization will and will not take
A set of methods for avoiding situations that might result in losses
that would be outside the organizations tolerance
A method to shift focus from cost / benefit to risk / reward
A way to help fulfill a fundamental responsibility of a companys board
and senior management
A toolkit for trimming excess risks and a system for intelligently selectingwhich risks need trimming
A language for communicating the effort of the organization effort to maintain
a manageable risk profile
-
8/13/2019 Managing Risk of Supply Chain Disruption
16/34
16
Enterprise Risk Management
What Risk Management is NOT(according to S&P)
A method to eliminate all risk
A guarantee that the company will avoid losses
A crammed collection of longstanding and disparate practices
A rigid set of rules that must be followed under all circumstances
Limited to compliance and disclosure requirements
A replacement for internal controls of fraud and malfeasance
A replacement for sound management judgment
Exactly the same from year to year
-
8/13/2019 Managing Risk of Supply Chain Disruption
17/34
17
Enterprise Risk Management
Reporting
Execution
Strategy
Tolerance
and Policy
Is there a process
for assessing supplier
risk and capabilities?
Is Board advised of
mission-critical risks?
Is opportunity-seeking
behavior balanced with
risk-taking?
Are boundaries andlimits adequately
defined?
Is there a process
for reporting supply
chain risk and
performance?
Does the organization
structure support
risk reporting?
Are key uncertainties
being managed?
Are there assurances that
supplier capabilities are
effective?
Is a risk-sensitive culture
in place?
Supply Chain GovernanceKey Risk Questions
-
8/13/2019 Managing Risk of Supply Chain Disruption
18/34
18
Enterprise Risk Management
RiskUniverse
RiskAppetite
RiskTolerance
Organizational
Structure
AuthorityPolicy
Ownership
InformationalFlow
7 - Monitor andAnalyze Risk
1 - EstablishGoals andObjectives
2 - Identify,Assess and
Prioritize Risks
3 - DevelopResponse
Strategies andOptions
4- AssessCapabilities &Information
5 - DevelopPlan of Action
6 - Execute
Plan of Action
RISK MANAGEMENT FRAMEWORK
-
8/13/2019 Managing Risk of Supply Chain Disruption
19/34
19
Enterprise Risk Management
Risk AppetiteResidual risk tolerance
Universal Acceptableexposure to
volatility of
outcome
Management
and Control
StructureRisk Universe - Key Supply chain issues
Quality 4 5Cost structure 3 4
Capital Requirements 1 2
Changing economic/political conditions 3 4
Natural Disasters, business interruption 1 2
Reputation 2 3
Information Security and accuracy 2 3
Timeliness 1 2
Fraudulent/unethical activity 1 1
Key customer/capacity 3 4
-
8/13/2019 Managing Risk of Supply Chain Disruption
20/34
20
Enterprise Risk Management
Risk Assessment (The Basics )
Timing?
Build risk universe first
Risk in uncertain future event, not auditable entities
Rating criteria
Impact (qualitative vs. quantitative)
Likelihood
Management Effectiveness/Process maturity
Velocity
Inherent and Residual Risk evaluation
Management processes that address inherent risks reduce the residual risk
Inherent risks inadequately addressed by management processes result in
heightened residual risks to the organization
Analytical results for prioritizing exposure areas
-
8/13/2019 Managing Risk of Supply Chain Disruption
21/34
21
Enterprise Risk Management
Dealing with Residual Risk
Who owns SLAs
Leverage internal audit (audit clause)
SSAE 16 Type 1or 2
Ongoing assessment
Risk rating
Capabilities
Alignment with goals
Risk tolerance Interrelationship of risks
Monitoring
Constant communicationview as extension of your team
-
8/13/2019 Managing Risk of Supply Chain Disruption
22/34
Supplier Risk Management &Mitigation
June 2013
-
8/13/2019 Managing Risk of Supply Chain Disruption
23/34
Disclaimer
This document (together with its content) is the property of Baker HughesIncorporated. 2013 Baker Hughes Incorporated. All Rights
Reserved.
No part of this document may be reproduced, transmitted or otherwisedistributed in any form or by any means, electronic or mechanical, includingby photocopying, facsimile transmission, recording, rekeying or using anyinformation storage and retrieval system, without the prior written permissionfrom Baker Hughes.
Neither Baker Hughes, nor any of its employees, endorse any ofthe products or services referenced in this document.
The views expressed are not necessarily those of Baker Hughes.
Baker Hughes expressly disclaims any liability in connection with thisdocument, its contents or its use by any third party.
-
8/13/2019 Managing Risk of Supply Chain Disruption
24/34
Purpose & Process
Purpose:
Identify Risk in relation to key suppliers and products Quantify the level of Risk
Develop a plan to mitigate the Risk based on the
overall score or where a single Risk is unacceptable
Approve a mitigation plan at the appropriate
management level
Process: Utilize a Risk Analysis Worksheet to determine the Risk Score for
each key supplier
Where the overall risk score is not acceptable or not acceptable for anysingle element develop and execute an approved mitigation plan
-
8/13/2019 Managing Risk of Supply Chain Disruption
25/34
Areas for Evaluating Risk in Suppliers
SixRiskareas
Single Source/Sole Source (IP)
Financial Stability -Privately or publicly held
Markets Served
Key Customers
Complexity/Critical Processes/Capability
Business Continuity
Capacity/Performance (acceptable KPIs)
Political, Security, HSE, Trade Compliance
-
8/13/2019 Managing Risk of Supply Chain Disruption
26/34
Review & Rating Process
The Commodity Group is responsible for conducting the
risk assessment and mitigation planning, if neededWhere a suppliers products cross multiple CommodityGroups, the Commodity Group with the greatest spend isresponsible for the risk assessment
The risk categories may be adjusted by the CommodityGroup as required to properly evaluate the risk
A whole number value is to be assigned from 1 (lowestrisk) to 5 (highest risk) for each risk category. Wherevera 5 risk is indicated a comment field is to be filled in withan explanation of the reason for the risk level
-
8/13/2019 Managing Risk of Supply Chain Disruption
27/34
Supplier Risk - Example Ratings
PL = PlantSS/SS (IP) = Single Source/Sole SourceFin. Stability = Financial Stability
Vendor
Name
2009
USD(millions)
Vendor
Category
PL SS/SS
(IP)
Fin.
Stability
Complexity/
CriticalProcess
Capability
Succession
Plan
Capacity/
Performance
Political and
AssociatedRisks
Overall
Risk
Comment
Supplier A $5 StrategicPartner
PLTA
1 1 1 1 1 1 6
Supplier B $4 CriticalSupplier
PLTB
5 1 1 1 1 1 10
Supplier C $3 Strategic
Partner
PLT
C1 3 4 4 3 3 18
Supplier D $2 StrategicPartner
PLTD
1 3 3 3 3 3 16
Supplier E $1 StrategicPartner
PLTE
1 4 4 4 4 4 21
Supplier Risk Evaluation Form
-
8/13/2019 Managing Risk of Supply Chain Disruption
28/34
Supplier Risk - Review and Rating Process
Using the risk analysis form to measure the 6 areas of risk, a combined score of the 6 areas between 6and 30 will be assigned to each supplier. 6 being the lowest risk possible and 30 the highest.
Rating Color Combined Score Highest Singlearea Risk Score
Risk Action
Green
-
8/13/2019 Managing Risk of Supply Chain Disruption
29/34
Supplier Risk Rating Form
Vendor Category Key Product Li ne
Single Source/Sole
Source (IP) Financial Stability
Complexity/Critical
Process Capabil ity Succession Plan
Capacity and
Performance Compli ance/Securi ty Overal l Ri sk Score
-
8/13/2019 Managing Risk of Supply Chain Disruption
30/34
302012 APQC. ALL RIGHTS RESERVED.
Final Q & A
-
8/13/2019 Managing Risk of Supply Chain Disruption
31/34
312013 APQC. ALL RIGHTS RESERVED.
Presenter Contact Information
Eric Gerner, Experis
Director of Risk Advisory Services
John Hejka, Experis
Finance Transformation COE
Michael Miedema, Baker Hughes
Director of Strategic Sourcing
Mary Driscoll, APQC
Senior Research Fellow, Financial Management
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected] -
8/13/2019 Managing Risk of Supply Chain Disruption
32/34
322013 APQC. ALL RIGHTS RESERVED.
For More
Visit www.apqc.org/knowledge-baseto see
more APQC events and browse content.
Have a suggestion? Let us know what topics
you would like future webinars to cover at
www.apqc.org/feedback.
http://www.apqc.org/knowledge-basehttp://www.apqc.org/feedbackhttp://www.apqc.org/rss.xmlhttp://twitter.com/http://www.youtube.com/user/APQChttp://www.facebook.com/pages/APQC-American-Productivity-and-Quality-Center/57081210980http://www.linkedin.com/groups?mostPopular=&gid=74711&goback=Egdr_1271775615421_1http://www.apqc.org/feedbackhttp://www.apqc.org/knowledge-basehttp://www.apqc.org/knowledge-basehttp://www.apqc.org/knowledge-base -
8/13/2019 Managing Risk of Supply Chain Disruption
33/34
APQC Contact Information
US: 1 (800) 776-9676
INTL: +1 (713) 681-4020
FAX: 713-681-8578
www.apqc.org
mailto:[email protected]://www.apqc.org/http://www.apqc.org/mailto:[email protected] -
8/13/2019 Managing Risk of Supply Chain Disruption
34/34