Supplier Risk Is Your Risk. Are you prepared?
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The document summarizes a panel discussion on supplier risk management. Kurt Albertson of The Hackett Group, Julius Rusnak of Semantic Visions, and Rob Conti of First Niagara Bank discussed their organizations' approaches to identifying, monitoring, and mitigating supplier risks. Semantic Visions uses semantic analysis of big data to detect various supplier risk types from multiple global sources. First Niagara Bank implemented Ariba solutions to improve supplier performance monitoring, contracting, and spend analysis capabilities for managing regulatory risk. The panelists encouraged organizations to take a proactive, integrated approach to supplier risk management.
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Supplier Risk Is Your Risk. Are you prepared?
- 1. #AribaLIVE @ariba Supplier Risk Is Your Risk. Are You Prepared? © 2015 Ariba – an SAP company. All rights reserved. Speakers • Kurt Albertson – The Hackett Group • Julius Rusnak – Semantic Visions • Rob Conti – First Niagara Bank Moderator • Keertan Rai – Ariba, an SAP Company
- 2. #AribaLIVE @ariba Agenda © 2015 Ariba – an SAP company. All rights reserved.2 • Overview and Introductions • Panel Presentations ♦ Kurt Albertson, Principal – Procurement Advisory, The Hackett Group ♦ Julius Rusnak, Chief Technology Officer, Semantic Visions ♦ Rob Conti, Vice President – Strategic Sourcing & Purchasing, First Niagara Bank • Q&A
- 3. #AribaLIVE @ariba Supplier Risk Is Your Risk. Are you Prepared? © 2015 Ariba – an SAP company. All rights reserved.3 Why do cars have brakes? So you can drive faster
- 4. #AribaLIVE @ariba Panelists © 2015 Ariba – an SAP company. All rights reserved.4 Kurt Albertson Principal – Procurement Advisory The Hackett Group Julius Rusnak Chief Technology Officer Semantic Visions Rob Conti Vice President - Strategic Sourcing & Purchasing First Niagara Bank
- 5. #AribaLIVE @ariba Agenda © 2015 Ariba – an SAP company. All rights reserved.5 • Overview and Introductions • Panel Presentations ♦ Kurt Albertson, Principal – Procurement Advisory, The Hackett Group ♦ Julius Rusnak, Chief Technology Officer, Semantic Visions ♦ Rob Conti, Vice President – Strategic Sourcing & Purchasing, First Niagara Bank • Q&A
- 6. #AribaLIVE @ariba The Hackett Group A leader in organizational effectiveness and best practice insight © 2015 Ariba – an SAP company. All rights reserved.6
- 7. #AribaLIVE @ariba Examining Procurement’s 2015 objectives shows that reducing supply risk and improving ability to react are major/critical objectives 7
- 8. #AribaLIVE @ariba Protecting supply continuity, ensuring compliance and supplier financial stability are the top drivers of supply risk mgmt programs 8
- 9. #AribaLIVE @ariba Events with the highest risk exposure for all study respondents © 2015 Ariba – an SAP company. All rights reserved.9
- 10. #AribaLIVE @ariba About 20 percent of indirect suppliers are being actively monitored for supply risk and category classification is most common trigger © 2015 Ariba – an SAP company. All rights reserved.10 “Scope changes are falling through the cracks at many companies”
- 11. #AribaLIVE @ariba $500K is the median spend threshold that triggers a supplier risk assessment; Median has 4.5 FTEs supporting © 2015 Ariba – an SAP company. All rights reserved.11
- 12. #AribaLIVE @ariba Satisfaction levels with existing data sources is low in the most important areas © 2015 Ariba – an SAP company. All rights reserved.12
- 13. #AribaLIVE @ariba Many technology solutions support the risk management process, but the use of niche risk software and business intelligence is on the rise © 2015 Ariba – an SAP company. All rights reserved.13
- 14. #AribaLIVE @ariba The ability to segment suppliers by risk category, criticality or other user-defined fields* is a critical feature © 2015 Ariba – an SAP company. All rights reserved.14 Q5.3 Please rank the importance of each feature below when selecting a supplier risk management software solution. * e.g., geography, spend size, data privacy
- 15. #AribaLIVE @ariba Top Ten Takeaways © 2015 Ariba – an SAP company. All rights reserved.15
- 16. #AribaLIVE @ariba Agenda © 2015 Ariba – an SAP company. All rights reserved.16 • Overview and Introductions • Panel Presentations ♦ Kurt Albertson, Principal – Procurement Advisory, The Hackett Group ♦ Julius Rusnak, Chief Technology Officer, Semantic Visions ♦ Rob Conti, Vice President – Strategic Sourcing & Purchasing, First Niagara Bank • Q&A
- 17. #AribaLIVE @ariba Semantic Visions – Company Intro • Leader in semantic analysis of big data • Automatically understands and synthesizes 90% of the world's news content • Daily 1 million events in world’s top 10 languages from 250,000 global sources are analyzed • Best Open Source Intelligence (OSINT) semantic technology © 2015 Ariba – an SAP company. All rights reserved.17
- 18. #AribaLIVE @ariba Shift from Single-Source to Multi-Source • Long Tail Strategy in Information Collection One source for Many answers is out of date Modern approach: Many sources for Many answers © 2015 Ariba – an SAP company. All rights reserved.18 Sources Audience Low High High Utilization Low Information
- 19. #AribaLIVE @ariba What and where are the many sources? • Global web mining / interconnected world © 2015 Ariba – an SAP company. All rights reserved.19 Content English GDP English Answers English Δ Big Data = Δ Knowledge World
- 20. #AribaLIVE @ariba Discover Answers … and Knowledge © 2015 Ariba – an SAP company. All rights reserved.20 Web Mining Semantics Filter Out Noise Answers & Knowledge
- 21. #AribaLIVE @ariba About the Web Mining © 2015 Ariba – an SAP company. All rights reserved.21 Web Mining Semantics Filter Out Noise Mine 90% of world’s news content Daily 1 million events Multi-Language Advanced algorithms for best signal-to-noise ratio Premium, internal and social sources mash-up
- 22. #AribaLIVE @ariba About the Semantics © 2015 Ariba – an SAP company. All rights reserved.22 Web Mining Semantics Filter Out Noise HEALTH Pandemic | Ebola | Bird Flu | SARS | Swine Flu | Cholera | Plague | Smallpox | Polio | Dengue Fever | Malaria Outbreak | Deadly Epidemic Infection | Food Safety | Food Poisoning | Dangerous Gene Mutations NATURAL Natural Disasters | Earthquake | Volcanic Eruptions | Tsunami | Flood | Landslide | Avalanche | Wild & Forest Fire | Drought & Heat Wave | Storms | Snowstorm | Tornado | Hurricane | Sandstorm | Thunderstorms | Geomagnetic Storm | Meteorite Impact CORPORATE Regulatory Compliance Issues | Fraud & Forgery | Corruption | Insider Trading | Money Laundering | Financial Reporting Fraud | Conflict of Interest | Unethical Practice | Corporate Waste Issues | Workplace Discrimination | Workplace Safety | Child Labor | Extortion | Illegal Trade | Sanctions Violations | Intellectual Property Infringement | Patent/Trademark Infringement | Copyright Infringement | Anticompetitive Behavior | Bankruptcies | Distraint | Debarment | Plant Relocation / Disruption | Senior Management Changes | Ownership Changes | Divestment | Quality Issues | Product Recalls | | Project Failure | Labor Strikes | Insolvency SECURITY Cyberterrorism | Violent Conflict | Terrorist Incident | Bomb Incident | Maritime Security Risk | Civil Disobedience | Rioting & Looting | Illegal Trade | Human Trafficking | Organs Trafficking | Kidnapping | Ransom | Tragedy | Emerging Danger | Weapons Proliferation | Critical Infrastructure Failure INDUSTRY Environmental Disasters | Chemical & Oil Spill | Industrial Accidents | Explosion Accidents | Fire Accidents | Mining Accidents | Maritime Accidents | Railway Accidents | Transportation Delays | Water Contamination Economy Economy Crisis | Credit Rating Downgrade | Financial Mechanism Failure | Liquidity Crisis | Country Default | General Strike | Plant Shutdowns | Plant Disruptions | Project Failure AVIATION Air Traffic Security Risk | Aviation Accidents NEGATIVE SENTIMENT OF ENTIRE COUNTRIESEMERGING TECHNOLOGIES RISKS Not Keywords, but Semantic Concepts
- 23. #AribaLIVE @ariba About Filtering Out the Noise • The technology enabler • Threat detection logic in the database layer • Real time intelligence value • More action time © 2015 Ariba – an SAP company. All rights reserved.23 Web Mining Semantics Filter Out Noise SAP HANA
- 24. #AribaLIVE @ariba Key Differentiator © 2015 Ariba – an SAP company. All rights reserved.24
- 25. #AribaLIVE @ariba About Finding the Answers © 2015 Ariba – an SAP company. All rights reserved.25 Critical Infrastructure Failure Health Hazard Legal Regulatory Issue Quality Incident Ebola Ebola Ebola Ebola Ebola Labor Strike Labor Strike Labor Strike Labor Strike Conflict Conflict Conflict Conflict Flood FloodFlood FloodEbola
- 26. #AribaLIVE @ariba Supplier Risk Types Detected from Semantic Big Data © 2015 Ariba – an SAP company. All rights reserved.26 Geo Threat Trend-based Threat Direct Threat Industrial Accident at Supplier’s Facility Flood at Supplier’s Location Supplier’s negative sentiment growing
- 27. #AribaLIVE @ariba Supply Chain Use Cases • Source of external global knowledge • Combined with data from Ariba Business Network • Real time supplier situation awareness • Pre-select suppliers for a new RFP (historic data) • Check supplier when opening a new purchase order • Research details in case of an emergency © 2015 Ariba – an SAP company. All rights reserved.27
- 28. #AribaLIVE @ariba Agenda © 2015 Ariba – an SAP company. All rights reserved.28 • Overview and Introductions • Panel Presentations ♦ Kurt Albertson, Principal – Procurement Advisory, The Hackett Group ♦ Julius Rusnak, Chief Technology Officer, Semantic Visions ♦ Rob Conti, Vice President – Strategic Sourcing & Purchasing, First Niagara Bank • Q&A
- 29. #AribaLIVE @ariba Introduction • Robert Conti Experience/Background • First Niagara Bank Headquarters: Buffalo, NY (Footprint: NY, PA, CT, & MA) Top 25 US Bank: $38B Assets; 400 Branches, 6,000 Employees OCC Regulated: – OCC Bulletin 2013-29: Risk Management Guidance © 2015 Ariba – an SAP company. All rights reserved.29
- 30. #AribaLIVE @ariba OCC Bulletin 2013-29 • “…an effective risk management process includes…” Proper due diligence in selecting a vendor Written contracts that outline the responsibilities of all parties Ongoing monitoring of the vendor’s activities and performance Contingency plans for ending the relationship effectively Clear roles managing the relationship and risk management process Documentation of oversight, accountability, monitoring Managing the Vendor Life Cycle © 2015 Ariba – an SAP company. All rights reserved.30
- 31. #AribaLIVE @ariba Prior State • Poor information due to antiquated and ineffective tools Non-integrated eSourcing tool Performance monitoring with Excel SharePoint used as contracts repository Spend analysis via Pivot Tables Use of Google Alerts Disconnected PO and A/P solutions © 2015 Ariba – an SAP company. All rights reserved.31
- 32. #AribaLIVE @ariba Why partner with Ariba? • Prior industry experience and best practices insights • Widely accepted/used by vendor pool • Future integration into core (GL) • Breadth of integrated upstream management tools • SAP InfoNet and integration with Supplier Information and Performance Management (SIPM) © 2015 Ariba – an SAP company. All rights reserved.32
- 33. #AribaLIVE @ariba Current State • Improved information and consistent process Non integrated eSourcing tool Ariba Sourcing Pro Performance monitoring with Excel Ariba SIPM SharePoint used as contracts repository Ariba Contract Mgmt Pro Spend analysis via Pivot Tables Ariba Spend Visibility Pro Use of Google Alerts SAP InfoNet Disconnected PO and A/P solutions (Future Update) © 2015 Ariba – an SAP company. All rights reserved.33
- 34. #AribaLIVE @ariba Case Study: Manufacturing • 2011 Japanese earthquake and tsunami Polled suppliers – 1st-tier suppliers – 2 weeks – no issues – 2nd-tier suppliers – 4 weeks – 1 issue » PTFE component sourced from company near Fukushima nuclear plant PTFE used in a resin extrusion – Storage issues – PTFE must be refrigerated – Regulatory issues – FDA approval required on any change © 2015 Ariba – an SAP company. All rights reserved.34
- 35. #AribaLIVE @ariba Managing Risk in Financial Services • SPM is used to manage oversight of the vendor Vendor Relationship Managers (VRMs) describe their activities – “Review the vendor’s business strategy…comment on analysis.” – “Assess vendor’s reputation (utilize InfoNet)…comment on analysis.” – “Assess vendor’s ability to retain key personnel…comment on analysis.” Compliance, InfoSec and Vendor Risk Governance assess… – Insurance coverage, financial condition, data controls, etc. – Quality of the VRM oversight activities © 2015 Ariba – an SAP company. All rights reserved.35
- 36. #AribaLIVE @ariba First Niagara’s Planned Use of SIPM and InfoNet to Manage Risk • Evaluating Vendor due diligence SIM: Vendor Risk Assessment Questionnaire (VRAQ) SIM: Vendor Due-Diligence Documents SPM: Vendor Assessment Surveys & Scorecard • Vendor monitoring via InfoNet Pressing highest risk vendors to provide 1st-tier subcontractors Future InfoNet integration with SIPM © 2015 Ariba – an SAP company. All rights reserved.36
- 37. #AribaLIVE @ariba Agenda © 2015 Ariba – an SAP company. All rights reserved.37 • Overview and Introductions • Panel Presentations ♦ Kurt Albertson, Principal – Procurement Advisory, The Hackett Group ♦ Julius Rusnak, Chief Technology Officer, Semantic Visions ♦ Rob Conti, Vice President – Strategic Sourcing & Purchasing, First Niagara Bank • Q&A
- 38. #AribaLIVE @ariba © 2015 Ariba – an SAP company. All rights reserved.38 “Even a correct decision is wrong when it’s taken too late.” - Lee Iacocca
- 39. #AribaLIVE @ariba © 2015 Ariba – an SAP company. All rights reserved.39 Contact Us Contact Information: (Panelists) Kurt Albertson kalbertson@thehackettgroup.com Julius Rusnak julius.rusnak@semantic-visions.com Rob Conti Robert.Conti@fnfg.com Contact Information: (Moderator) Keertan Rai Keertan.rai@sap.com
Editor's Notes
- Note the Low ranking of price fluctuations but the relative high exposure we identify later on. Define what we mean by continuity of supply.
- Fiscal crises in key economies – 2.59 Unexpected regulatory changes, non-compliance – 2.35 Large-scale cyber-attacks – 2.26 Environmental disasters (e.g., storms, floods, fires, power outages) – 2.13 Supplier competitive events (acquisitions, mergers) – 2.04 Purchase price escalation (including currency/inflation) effects – 1.93 Price and supply volatility (sudden price and capacity changes) – 1.91 Unfavorable currency movements – 1.87 Loss/theft of sensitive/private data – 1.85 Data loss/theft (i.e., the unauthorized modification, deletion, or disclosure of confidential and/or personal information) – 1.75
- Note the relatively low ranking of supplier stakeholder survey results. That’s a red flag. Also note how despite the hype around being able to decipher new feeds to sort through the chatter and see what events might impact a company, this is clearly not being done effectively yet.
- Top used today: Office, financial risk providers Top used future: Same Biggest delta: show on the left. Talk about why Excel is not the right tool for the job.
- Recently, many companies started to work in the field of semantic analysis. We’ve been working on it for over 10 years. When two do the same, it is never the same. The triangle synergy results into an unmatched scope, speed and precision.
- Not easy to recognize the knowledge from the noise Not everyone realizes that issues are discussed a lot at conferences. Or that there could be a report that nothing new happened during the last 30 days. Or they can reference an old case. It is always a real thing but not a new alert not a new threat. It's easy to say "everyone knows about it". It's difficult to be the first one to know a to report relevantly. Thinking back, we all know what happened. But to detect relevant events from the big data of events is a challenge. Especially because one cannot just search. To search, you have to know what you're looking for. We detect.