What to Watch: Global Risk Update, Q1 2015

WHAT TO WATCH: GLOBAL RISK UPDATE Q1 2015

Christine Ferrusi Ross, Partner & SVP, Neo Group March 26, 2015

© 2015 Neo Group Inc. Proprietary

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•  Globalization Strategy •  Sourcing •  Location Strategy •  Health Checks •  Renegotiations •  Governance

"   Since 1999, we have been helping clients accelerate benefits and minimize risks associated with global talent and sourcing.

"   We have a singular focus on the global services supply chain.

"   We achieve outcomes through deep IP, real-time analytics, globally recognized experts, proven methodologies and co-creation with our clients.

"   We focus on clients' end business goals, not global talent as an end in itself.

NEO GROUP’S SINGULAR FOCUS SINCE 1999

We deliver results through three distinct and linked solutions and services:

ADVISORY SERVICES GOVERNANCE SOLUTIONS

•  Design •  Run and Support •  Ongoing Resource,

Contract and Performance Management Services

SUPPLY MONITORING & ANALYTICS

•  Country •  City •  Supplier •  Real-Time Event Alerts •  Subscription-Based

Monitoring


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TODAY’S PRESENTER

Christine Ferrusi Ross Christine is a senior vice president at Neo Group. She’s passionate about helping clients solve complex global risk, sourcing, and supplier issues to achieve better business results. Christine has helped some of the largest companies in the world operationalize their supplier risk efforts, and she’s a recognized expert in the space. She’s been quoted in the Wall Street Journal, on CNBC, and other national media regarding supplier risk, outsourcing, and globalization.


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Ø Major global events that affected location risks

Ø Using location-specific information to lower supplier-related risk

Ø Taking action on location risks

AGENDA


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THE RISK MANAGEMENT PROCESS

What risks matter?

Assign responsibility for tracking and taking action on the risks

Decide the risk indicators (with specifics

like percentages, not “declining”)

Create an action plan for what to do for each risk

as it happens Track risk data

Take action as pre-determined

Feedback loop, including process changes and

supplier/contract changes


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A FRAMEWORK HELPS STRUCTURE RISK MANAGEMENT

Supply WisdomSM Real-Time Risk Model

RISK RATING

NEGLIGIBLE LOW MODERATE HIGH EXTREME

SUPPLIER RISKS

FINANCIAL CLIENTS PEOPLE ALLIANCES

SERVICE CAPABILITY GOVERNANCE INFRASTRUCTURE THOUGHT

LEADERSHIP

CITY RISKS

MACRO-ECONOMIC FINANCIAL BUSINESS INFRASTRUCTURE

GEO-POLITICAL LEGAL SCALABILITY QUALITY OF LIFE

COUNTRY RISKS

MACRO-ECONOMIC FINANCIAL BUSINESS INFRASTRUCTURE

GEO-POLITICAL LEGAL SCALABILITY QUALITY OF LIFE

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SAMPLE TRIGGER EVENTS

•  Credit Ratings / Downgrades •  Changes in Budget •  Stock Market Volatility •  Tax Changes •  New Special Economic Zones •  Cyber Legislation •  Visa Changes •  Power Imbalances •  Geopolitical Events •  Labor Union Formation & Strikes •  Key Policy Changes •  New Center formation

GEOGRAPHIES


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Q1 UPDATE: GLOBAL LOCATION RISKS

Q1 Risk Events

High Impact Medium Impact Low Impact

Source: Supply Wisdom Q1 2015


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Q1 UPDATE: GLOBAL LOCATION RISKS

•  All of the high-impact events were in geo-political risk category

•  Medium-impact events were spread across categories, like macro-economic risk, infrastructure risk, and geo-political risk

•  Risk categories that had only low-impact events included scalability risk


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THE RISK MANAGEMENT PROCESS

What risks matter?

Assign responsibility for

tracking and taking action on the risks

Decide the risk indicators (with specifics like

percentages, not “declining”)

Create an action plan for what to do for each risk

as it happens Track risk data

Take action as pre-determined

Feedback loop, including process

changes and supplier/contract

changes


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MEDIUM-IMPACT EVENTS: THE TRICKY ONES

•  Low-impact events require further monitoring for trend/pattern identification but need no immediate action

•  High-impact events often present a clear course of action (or if severe enough, prevents a proactive response)

•  Medium impact events aren’t clear cut. They’re neither scary nor forgettable.

•  Do medium-impact events need a response? In what timeframe is a response needed?

•  Too often, the required response is clear in hindsight but not in the moment


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SAMPLE MEDIUM-IMPACT EVENTS: Q1

•  Argentina erupts in protests over mysterious death of prosecutor

•  Brazil’s annual inflation rate hits highest level in almost 10 years

•  China blocks VPN services that helped to users access Google and Facebook

•  Multiple power shortages and power tariff hikes in Manila

•  Swine flu deaths in multiple Indian cities


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ACTION DEPENDS ON RISK TOLERANCE

•  Tolerance for location risk can be determined by items like: –  Whether you sell into that location or only drive

operations there –  If it’s a captive-center or work there is done by a

third party –  Ease of switching to another location –  Familiarity with that location


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EXAMPLE: ACTION PLAN FOR MANILA POWER ISSUES

•  Sample business: UK-based company does business in Asia, but Philippines is primarily a vendor delivery location

•  Event(s): Multiple power shortages and power tariff hikes in Manila

•  Risk tolerance factors lead the company to want to take a moderate approach. It’s primarily a third-party location, but that third party is critical to the company’s operations

•  Action steps: research alternative power generation options, evaluate internal ability to switch work to other third parties that the company already works with, co-create risk mitigation plan with supplier

•  Final outcome: decision to move to alternative location if power shortage happens twice more in six months OR tariff increases again


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EXAMPLE ACTION PLAN FOR INDIA/US: H-1B VISAS

•  Sample business: US-based company that uses Indian resources but sells primarily in the US and Europe

•  Event: US Extends Eligibility for Employment Authorization For Dependents of H-1B Nonimmigrants (H-4 Visas)

•  Risk tolerance factors: High cost of switching resources to other locations, high ability to switch among vendors but not locations, since this is Indian resources in the US, familiarity is high

•  Action steps: discuss with current suppliers how many resources might benefit from the change, proactively look to recruit spouses and dependents immediately (change becomes effective May 25, 2016)

•  Final outcome: TBD


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BENEFIT OF PROACTIVE LOCATION RISK MANAGEMENT

•  Smoother operations: Fewer disruptions to delivery or supply

•  Competitive advantage: Proactive management likely means you were able to achieve a better outcome than your competitors in that location or working with that supplier

•  More options: Faster, more proactive response means you have more options than if you had waited (regardless of what competitors do)

•  Ability to innovate: not all risk-events are negative, some are positive, like a country building more infrastructure in key locations. Looking for risk-lowering events helps you create opportunities for your firm


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QUESTIONS


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THANK YOU

NEO GROUP GLOBAL HEADQUARTERS 6200 Stoneridge Mall Road, 3rd Floor Pleasanton, CA 94588, USA ASIA-PACIFIC HEADQUARTERS No.13, B-2, 1st floor, C Block Embassy Heights, Magrath Road Bangalore-560 025, India AMSTERDAM, NETHERLANDS AUSTIN, TEXAS BOGOTA, COLOMBIA LONDON, UK NEW YORK, USA ATLANTA, USA SAO PAOLO, BRAZIL SILICON VALLEY, USA SYDNEY, AUSTRALIA

CHRISTINE FERRUSI ROSS Partner & SVP [email protected] 781.405.9851 www.NeoGroup.com www.SupplyWisdom.com [email protected]

What to Watch: Global Risk Update, Q1 2015

Business

Transcript of What to Watch: Global Risk Update, Q1 2015