20131003 Erste Group Procurement Supplier Relationship Management

1. Erste Group Procurement (EGP) The Procurement Company of Erste Group (EG) Robert SEMETHY 2013-10-23

2. EGP – Member of Erste Group © 2013 All rights reserved Page 2  Erste Group went public in 1997 with a strategy to expand its retail business model into CEE  Acquisition of more than 10 banks between 1997 and 2008  Erste Group now runs market leading retail banking operations in the new EU member states, which remain underpenetrated compared to their Western European markets 2000 2001 2005 2006 2007 1997 2004 2003 New holding structure improving Group Governance 2008 History: Austria‟s first savings bank: Founded in 1819  Erste Group‟s customer base grew from 600 000 in 1997 to 17,3 million in 2011

4. EGP – Member of Erste Group © 2013 All rights reserved History: Erste Group Procurement (EGP) Page 4 2006 2007 In the new Erste Holding structure s Proserv reports to the CFO (previously to the COO). 2011 s Proserv renamed to Procurement Services GmbH in HQ and Erste Group Procurement on group level 2012 Groupwide roll-out of: • Procurement Policy • Procurement Handbook Foundation of s Proserv 100% subsidiaries in • AT (HQ) • CZ • HU • SK 2009 `07-`09 Onboarding further subsidiaries: • HR • RO • RS Proc. Dept. Start of NGPS project (New Group Procurement Solution) 2013 `09-`10 `10-`11 Onboarding of • UA Proc. Dept. • ME Proc. Dept. 2010 Start implementation of Lean Enterprise Order Management (LEO) New reporting tool (Qulick View) Service optimisation • SRM Management • Category Management Increase the value of a centralised procurement company • Transparency • Service Quality in Sourcing and Procurement • Cost Reduction and Cost Avoidance • Ethical Standards • Fraud Prevention Finalisation of new structure and documents: • Business plan in place • Alignement with Procurement Handbook `11-`12 • New RFx and eAuction tool (Electool) • New Project Tool (CAP)

5. EGP – Member of Erste Group © 2013 All rights reserved Page 5 Erste Group Procurement: Procurement of the Erste Group Functional LeadershipbyEGP Erste Group Bank AG - Holding Board CEO CFO COO CRO Group Markets Group Retail Group Property Group Org/IT Erste Group Procurement (Procurement Services GmbH) Operations/Processing EGP AT (incl. Centre Functions, as Finance, HRM, Org/IT) EGP RO EGP CZ EGP SK EGP HU EGP HR Procurement RS Procurement ME SPV DRUCK Erste Group Procurement Facts & Figures:  Central procurement function within Erste Group  Headcount approximately 180 employees  Process owner for group-wide S2P process  AT: Warehouse with more than 3 000 sqm GCIB Source: http://www.sparkasse.at/erstebank Finance Sourcing AT Sourcing CZ Sourcing SK Sourcing HU Sourcing HR Sourcing RO Erste Group Procurement RO Erste Group Procurement SK Erste Group Procurement HU Erste Group Procurement AT Erste Group Procurement CZ Erste Group Procurement HR RS3) 1) Department of Erste Bank AD Podgorica – Montenegro 2) Department of Sparkasse Bank Makedonija AD Skoplje 3) Department of Erste Bank Novi Sad SPV – DRUCK EBSPK Sourcing RS Sourcing Board Division Team in Matrix Org/ITHRM ME1) Management Board Erste Group Procurement – (Procurement Services GmbH) MK2) Procurement MK

6. EGP – Member of Erste Group © 2013 All rights reserved Page 6 Clearly defined EGP in Erste Group EGP Cooperation with customers based on:  Contract (SLAs)  Responsibility (NDAs)  Code of conduct  Purchasing Policy & Handbook Aligned priniciples within Erste Group: …The central and single competence for procurement activities within Erste Group lies in Erste Group Procurement (EGP)… …EGP has to be involved in any external spend of any Erste Group majority owned entity. Any exception has to be agreed between EGP and the respective Erste Group entity… …All external spend should follow the principle of Total Cost of Ownership (TCO) and Quality, Cost and Delivery. In balance with socio- economic, ecological and customer relationship factors the assignment of a contract has to follow the highest added value for Erste Group principle… …EGP owns, defines and aligns with the local entities the procurement processes within Erste Group...

7. EGP – Member of Erste Group © 2013 All rights reserved Page 7 EGP Focus Before RFxP/RFQ RFx Supplier Relation Management Contract Management Category Management Today Foundation and Core Supplier Relation Management Contract Management Category Management Implemen- tation

8. EGP – Member of Erste Group © 2013 All rights reserved Page 8 Clearly defined EGP Services in Scope based on Lean Enterprise Order Management (LEO) Principles Sourcing International/Local Tactical Purchasing Order Management Business Process Outsourcing Operations of support processes for the local entities, i.e. • Print Shop • Warehouse Provide cost-efficient services Purchasing Project Contract Creation Category Mgmt Vendor Mgmt Contract Mgmt Requisition & Ordering Documentation & CR/CA Calculation Receipting & Evaluating Invoice Processing Erste Group Procurement Purchasing Project Contract Creation Category Mgmt Vendor Mgmt Contract Mgmt Requisition & Ordering Documentation & CR/CA Calculation Receipting & Evaluating Invoice Processing Purchasing Project Contract Creation Category Mgmt Vendor Mgmt Contract Mgmt Requisition & Ordering Documentation & CR/CA Calculation Receipting & Evaluating Invoice Processing Customised Procurement Services Additional requirements requested by customer and are not in the scope of procurement Customer Satisfaction Compliance with Outsourcing Policy Provision of Outsourcing Project Documentation Compliance to regulatory and internal requirements Outsourcing Competence Center Strategic, monitored purchasing in a team approach Ensure fast, easy and efficient execution By EGP By EGP or Customer On Customer‟s Demand Additional Services for the customer‟s benefit Invoicing as a % of 3rd party spend Invoicing in a separate fee (SLA) In Scope Out of Scope LEO principles

9. EGP – Member of Erste Group © 2013 All rights reserved external data • Analysing supplier sales data Page 9 Sourcing internal data • Analysing spend of entity/ supplier/ category • Strategic basis for purchasing projects Reporting Package (SAP FI / QLIKVIEW) • Allows the linking of information to a 360° view of projects, contracts, product categories and suppliers. • “In-house” development supplier / Country / Project Management tool (“CAP”) • Live eAuctions • Collecting of informationen (RfI*) and offers (RfQ*) in a defined specification form eAuction, RFx (Electool) Sourcing is the strategic process of identifying potential suppliers, conducting negotiations, and agreeing on supply contracts in order to achieve a sustainable cost reduction and meet the customer‟s expectations. Supporting tools *RfI = Request for Information *RfQ = Request for Quotation Demand analyses based on Category Management Supplier Management Contract Management Identification of potential suppliers to conclude a GMA support through eAuction/RFx/negotiation GMA Cross – checking internal vs external data LEO principles

10. EGP – Member of Erste Group © 2013 All rights reserved Page 10 Sourcing International/Local Supplier Relationship Management Tools • Standardised Questionnaire for Assessment and Self Assessment • Document Management System, Reminders periodically and automatically • Scoring through Business Line • Risk Management (restricted party screening & financial screening) • Ethics Supplier Audits • Similar to Category Management • Long Lists and Short Lists Supplier Strategies • Escalation management • Single Point of Contact and coordination of all participants (Business Line, Legal, Countries, Suppliers) • Identification of disqualified suppliers Escalation Identify and focus on key suppliers. Implement supplier relationship model in cooperation with Business Line. • HYR/QBR • Standardised presentations • Participants: Business Line, Supplier and EGP • Measuring the cooperation • Search out further cooperation/collaboration Business Reviews • Standardised Questionnaire for Assessment and Self Assessment • Document Management System, Reminders periodically and automatically • Scoring through Business Line • Risk Management (restricted party screening & financial screening) • Ethics • Similar to Category Management • Long Lists and Short Lists • HYR/QBR • Standardised presentations • Participants: Business Line, Supplier and EGP • Measuring the cooperation • Search out further cooperation/collaboration

11. EGP – Member of Erste Group © 2013 All rights reserved Supplier Relationship Management Tools Standardised Questionnaire for Assessment and Self Assessment Page 11 Supplier Audit Scorecard Weighting • Financial Healthcheck – 30% • Quality & IT System – 25% • Governance – 15% • Social – 15% • Environmental – 15% Scoring • < 2.5 - failed the audit, no business • 2.5 - 5 opportunity to do business, but should provide a plan for correcting the areas where they performed weakest. Supplier Evaluation Scorecard Weighting • Quality – 15% • Delivery – 15% • Costs – 15 % • Responsivness – 15% • Innovation – 15% • Risk – 10% • Company & Corporate Social Responsibility (CSR) – 15% Any supplier who fails to obtain a score of 75% or more, maybe put on probation or even removed from an preffered supplier. Supplier Audit Questionnaire Type of data collected • Company Information • Financial Information • Operational • Governance • Social • Environmental • Business Reference • Additional Information

12. EGP – Member of Erste Group © 2013 All rights reserved Supplier Relationship Management Tools Document Management System Page 12 DMS Supplier ‚A„ on Group Level Content: • Business Reviews Documentation (ppt, minutes, approvals, tasks) • Reports, Questionnaires, Scorecards • Financial Reports Supplier ‚A„ local country Contract System Supplier ‚A„ on Group Level Content: • Contracts (e.g. GMA) • NDA Project Tool Supplier ‚A„ on Group Level Content: • Project Documentation • CR/CA Supplier ‚A„ local country Supplier ‚A„ local country Content on local level: • Project documentation Content on local level: • Business Reviews Documentation (ppt, minutes, approvals, tasks) • Reports, Questionnaires, Scorecards • Financial Reports Content on local level: • SLAs Supplier ‚A„ local country Supplier ‚A„ local country Supplier ‚A„ local country

13. EGP – Member of Erste Group © 2013 All rights reserved Supplier Relationship Management Tools Risk Management Page 13 Process • All supplier records from all systems are compared to the lists • A fuzzy algorithm returns a list of technical matches • The results are manually vetted and • False positives are marked to avoid next run • Positives are rechecked (on additional dimensions) and if confirmed escalated to Compliance Manager • Part of the „know your business line resp. counterpart‟ process • Flags a compliance issue against up-to-date information on embargoed country, restricted party, and business rules lists. SAP Suppliers Electool suppliers Other Contractors Query List (automatic search) US Consolidated Screening List - Dept. of Commerce - Dept. of State - Dept. of the Treasury EU Financial Sanctions AT National Bank (Terror List) Restricted Party List

14. EGP – Member of Erste Group © 2013 All rights reserved Page 14 Q3/2013 CR/CA 3rd party managed spend ~ 4% CR ~ 1,36% CA 3rd Party Spend Cost Reduction / Cost Avoidance In Q3/2013 – 4,6% CR as credible, transparent and auditable savings achieved. → Real and permanent reduction in the unit cost of goods manufactured or services rendered without impairing their suitability for the use intended or diminution in the quality of the product. Peer Group Benchmark*: 1.80%, World Class Benchmark*: 3.00% In Q3/2013 - 0,95% CA achieved. → A purchasing action by means of which certain material/supplier increases are not incurred by the purchasing firm. Peer Group Benchmark*: 0.20%, World Class Benchmark*: 1.39% Savings resulting from structured purchasing activities How much do we save? EGP Cost Reduction/Cost Avoidance evolution since 2011 *based on Hackett Report ~ 4,6% CR ~ 0,95% CA ~ 2,5% CR ~ 0,6% CA 2011 CR/CA 2012 CR/CA Positive trend as outcome of structured procurement processes.

15. EGP – Member of Erste Group © 2013 All rights reserved Page 15 Drove continuous high level of customer satisfaction while at the same time decreasing budget and Cost of Acquisition. 3% 2% 1,5% 1,4% 1,2% 1,1% 87% 93% 98% 92% 93% 2008 2009 2010 2011 2012 2013 Cost Development In Mio € CoA Customer Satisfaction* *completely satisfied and satisfied cumulated Erste Group Procurement (EGP) KPIs since 2008

16. EGP – Member of Erste Group © 2013 All rights reserved Page 16 Thank you! Erste Group Procurement Procurement Services GmbH Robert SEMETHY Managing Director Chief Procurement Officer Email: robert.semethy@erstegroup.com

17. EGP – Member of Erste Group © 2013 All rights reserved Maverick Spend: Identification Page 17 Maverick Spend is any spend of money to any external supplier/company covered by the EGP “In Scope” definition, where EGP was either too late or not at all involved* in the set-up of the commercial agreement. EGP Maverick Spend Report Covered by Purchase orders Covered by contracts Spend to be processed by EGP Maverick spend Maverick Spend Definition graph 1. Based on SAP/FI, Contracts, Purchase Orders 2. Responsible is EGP 3. Considering • Spend relevance • Involvement of EGP • Service Agreements Maverick Spend Calculation *currently not measuring late involvement • The numbers have to be understand in a full context. • Periodically reviews with the customers • Ensures alignment and agreement on Maverick Spend data. • Reporting to show progress on data clean-up. • Agreement with customers, on concrete actions in order to decrease the Maverick

18. EGP – Member of Erste Group © 2013 All rights reserved Valuable Customer (customers as suppliers) Objective: To clarify WHO is treated as a „valuable customer“ and HOW this group of customers is treated within ERSTE Group as supplier. It shall avoid that special customers are not considered in tenders within product/service classes of their business operations. Basic principles: • Valuable customers are the top customers per country, based on data provided by Large Corporate or Corporate. • The valuable customers are identified and updated in regular intervals Supplier Long List Supplier Short List Selection Valuable customers are automatically on the Long List if they can provide a service in a category/region If a valuable customer is not qualified for the short list, Management Board of EGP can overrule and enforce inclusion If a valuable customer is not the best bidder, the opportunity loss is calculated and the decision is taken jointly by Management Board EGP and an according EG Board Member.

19. EGP – Member of Erste Group © 2013 All rights reserved Page 19 Our Way to World Class Procurement Financial Perspective: - COA < 1% - CR/CA > 4,4% - 20 mio av. spend by buyers Learning Perspective: - A team of good purchasers - Pro-active working - Willingness of responsibility - Good working atmosphere Vision: World Class Procurement organisation in the financial area Customer Perspective: - Our customers adhere to our vision and support it - Our customers see high value added in EGP services and are ready to pay for this - Our strategy supports customers targets Processes Perspective: - Paying PO‟s only - Maverick spend < 10% - Spend coverage > 90% - Delivering core processes - Fully integrated AR/CM/CR-CA/PM/eSourcing - Mature Category Mgmt and SRM

20. EGP – Member of Erste Group © 2013 All rights reserved Page 20 Sourcing International/Local Category Management/Matrixorganisation Sourcing Specialist, the first contact for the customer and groupwide Category Manager and Supplier Relationship Manager. 145 categories divided according to local and international opportunities. Find opportunities, create & implement a strategy in a team approach with the Business Line. Matrixorganisation Category Classification Category Management FM Facility Management (FM) IT Informationstechnology (IT) S&O&M Service & Operations & Marketing (S&O&M) FM FM Maintenancerelated Services/Work IT Personal and Office Computing S&O&M Car Fleet FM FM Investmentrelated Services/Work IT Telephony and Communication S&O&M Cards FM Goods IT Networks S&O&M Consulting FM Energy IT Branch Equipment S&O&M Logistic FM Security Equipment IT Servers/Storage/Host Components S&O&M Marketing FM Property Management IT Infrastructure Software S&O&M Office Equipment & Office Operation IT Direct Application Software S&O&M Personnel Management IT IT Services S&O&M Travel IT Indirect Application Software S&O&M Security Service Sourcing Categories

21. EGP – Member of Erste Group © 2013 All rights reserved Page 21Page 21 Sourcing International/Local Contract Management/Spend Data Analysis/Data Reporting Structure spend by suppliers, categories, countries and entities Real-time Business Intelligence Tool for management Define Spend categories, analyse it (spend & suppliers) In a team approach with the Business Line. Budget and Category Analysis Tool Data Reporting Integrate all supplier contracts in Contract management solution and establish proactive & timely contract activity plan Contract Management

22. EGP – Member of Erste Group © 2013 All rights reserved Page 22 Tactical Purchasing (TP) and Order Management (OM) Purchasing Project • In 3 countries available • Integration with MM / Accounting • Covering about 55% of the spend SAP SRM The fast, easy and efficient execution of routine administrative tasks. These are day- to-day buying activities, which are low volume with no strategic importance or based on agreements that have been set in place. Supporting tools • In all EGP countries available • Efficient eAuction through web based forms • Supplier‟s self registration for saving resources eAuction (Electool) • Standardised articles • Order Processing for low purchases • Integration in Warehouse Management System Catalogue/OM Software (Online E-Shop) Demand (online or catalogue) Purchase requisition through GMA or catalogue(OM) Tender Project (TP) Offer Agreement LEO principles

20131003 Erste Group Procurement Supplier Relationship Management

20131003 Erste Group Procurement Supplier Relationship Management

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20131003 Erste Group Procurement Supplier Relationship Management