© Evalueserve, 2006. All Rights Reserved - Privileged and Confidential Global Risk Management.

© Evalueserve, 2006. All Rights Reserved - Privileged and Confidential

Global Risk Management

© Evalueserve, 2006. All Rights Reserved - Privileged and ConfidentialSlide 2

Presentation Plan

1 Risk Defined

Risk Management Process

Risk Management pertaining to the Business Environment

Risk Management in New Product Development

1.2

2

3

Risk Management pertaining to Data Quality4

1.1 Drivers of Key Risks

Risk Analysis Methods and Techniques 1.3


Drivers of Key Risks

Financial RisksInterest Rates

FOREX

Credit

Regulations

Culture

Board Composition

Operational Risks

Contracts

Natural Events

Supplies

Environment

Hazard Risks

Strategic RisksCompetition

Customer Changes

Industry Changes

Customer Demand

M & A Integration

Recruitment

Supply Chain

Liquidity & Cash Flow

Products & Services

Public Access

Employees

Properties

R & DIntellectual Capital

Accounting Controls Information System

Internally Driven

Externally

Driven

Externally Driven

Some risks can have both external and internal drivers. Hence, those risks overlap in two areas.

To combat these risks, Risk Management has become a core business process.

Risk is the probable damage, which may happen for any ongoing process or some future event.



The Organization's Strategic Objectives

Risk Assessment

Risk Reporting

Threats and Opportunities

Decision

Risk Treatment

Residual Risk Reporting

Monitoring

Data

Analysis

Business

Research

Risk Analysis

Risk Identification

Risk Description

Risk Estimation

Risk Evaluation


FMEA(Failure Mode & Effect Analysis)

Profitability and

Productivity Analysis

Cluster Analysis

Fault Tree Analysis

Pricing Optimization

Risk Analysis Methods and Techniques

Data

AnalysisHAZOP

(Hazard & operability Studies)

Asset Management

Scenario Analysis


Incident Investigation

Business Impact

Analysis

Business

Research

Modeling

Risk Analysis Methods and Techniques

PESTLE(Political Economical Social

Technical Legal Environmental)

Secondary

Research

Primary

Research

SWOT(Strengths Weaknesses

Opportunities Threat)

Market Survey


Presentation Plan

1 Risk Defined




1.2

2

3






Why research and analysis before

new product development

New product development is linked with very limited historical or preliminary data. Hence, risky

Risk can be in form of market, technical, or organizational issues. Risk analysis solves the problem through flexible modeling, primary and secondary research.

A good strategy is a must for evaluating and dealing with the associated and unavoidable risks.

Research conducted to understand customer needs and develop a new product is different from research required to launch a new product.

Product development research is focused on needs of customers while launch research focuses on understanding the motivation and attitudes of early adopters. Successful targeting of early adopters builds the fountain for new product success.

New product have a very high failure rates.

Products fail, not because of technical shortcomings, but due to absence of market.

Over 60% of new product fail before entering the market, and out of the remaining 40% that do see the ray of light, 40% fail to yield profit and are withdrawn from the market.

Timely and reliable knowledge about customer preferences is most important. Such data is obtained from business research.


Business Research at Kellogg’s

Kellogg’s investment in new product development resulted in strengthening its global brand.

Kellogg’s carried out business/market research to understand the market

1000 consumers were questioned about the Kellogg's brands

• Effect of the market changes on the product

• Effect of new technology on the business

• Future market trends

• Market opportunities

• New categories appealing to the target market

• Consumers’ view on stretching the brand into new categories

• Kellogg's launched Special K Red Berries in the UK followed by Special K Peach & Apricot

• Good performance with very little damage to the core brand.

• Quantitative tests of product ideas across a range of products was conducted to tap further opportunities to develop “Special K” as a healthy snack.

• Hence, business/market research helped the company to develop variants of Special K, resulting in a low risk project offering prospect of a good rate of return.

Understanding how ‘Special K’ could be extended into different variants to grow the brand, keeping the core product strong.


Presentation Plan

1 Risk Defined




1.2

2

3






Environment

External Internal

Socio-

EconomicRegulations Technology Competition Structure Processes Culture

Constituents of the Business Environment

• Companies operate in a dynamic business environment which forces them to adopt risk management measures.

• The business environment is both external and internal to a company and an adverse change in any of the above mentioned constituents can increase the risk levels for the company.


Scenario Analysis at Shell

• Shell makes use of a strategic planning process in which a series of “what if “ scenarios are created

• The management at all levels is made to think strategically about the company’s business environment

Strategy

Shell’s scenario analysis

Testimonial

In early 1986, the price of oil fell to USD 10 per barrel and Shell’s scenario analysis proved successful as it was in a better position than its competitors to face the situation

• Shell has deployed processes and systems to anticipate future scenarios by analyzing the interplay of environmental factors and its impact on Shell’s business

• Scenario analysis presents complex interactions of future in a simplified, easy to understandable form

• By picking the more probable scenarios, the company can brace or prepare itself for exploiting future opportunities and challenges

• It helps the company in formulating strategy and decide the trade-offs required

Identify trends and their drivers

Develop contingent strategies to tackle each scenario

Develop the what, why and how of different scenarios

Identify parameters to monitor the environment


Presentation Plan

1 Risk Defined




1.2

2

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Poor Data Quality - Concerns

• One third of the data in the enterprise level databases are corrupted within a year• Over time wastage of resources and money on the CRM initiatives exceeds the initial

investment• CRM spending has been increasing annually by 15%, but nearly half of all CRM

initiatives have been unsuccessful• Every 100 Euro spent in marketing/CRM initiatives is worth only 66 to start with when

working with poor quality data

19.925.3

47

0

10

20

30

40

50

Bil

lio

ns

of

Do

llar

s

Yr 2000 Yr 2001 Yr 2003

CRM Initiatives – Spending**Data Decay - Typical CRM Database*

28470

3000

8733

14127

19202

23977

0

5000

10000

15000

20000

25000

30000

Jan Mar May Jul Sep Nov

Cu

mu

lati

ve


Poor Data Quality – Causes and Impacts

Causes• Careless data entry• Changes to source systems • Data migration/conversion projects• External data• System Errors• Data entry by customers

Impacts• Time wasted in reconciling data• Loss of System Credibility• Duplicate mailings• Customer Dissatisfaction• Delay in deploying new systems• Compliance Problems

Efficient Solution – Data Cleansing

Data Corruption is

Unavoidable

Impacts your ROI


Inefficiency in Customer Relationship Management Initiatives – Example

Sending promotional offers through mails to incorrect addresses of customers and prospects. (58% wrong mailings)

Challenges Fallouts

Change in location Updating or change in contact

addresses and telephone numbers

Job related changes Change in designation Switching of jobs or

departments Change in the name of the

Organisation

Social changes Change in titles, names or

surnames Change in social status

Mail either reaches the wrong person or organization

The customer might receive the mail with an incorrect designation attached to his name

Targeting the wrong groups

Mail might not reach the probable customer

The customer might be addressed wrongly

The fallouts might lead to maintenance of huge, unwieldy databases, decrease in sales, profits and customers. Companies reputation might also be at stake.

Causes

Lack of routine updating of existing database

e.g. change in communication address


Poor Data Quality – Cleansing as an Efficient Solution

Data Profiling – Inspect data for errors, inconsistencies, redundancies and

incomplete information

Data Profiling – Inspect data for errors, inconsistencies, redundancies and

incomplete information

Data Quality – Correct, standardise and verify dataData Quality – Correct, standardise and verify data

Data Integration – Match, merge or link data from a variety of disparate sourcesData Integration – Match, merge or link data from a variety of disparate sources

DATA

CLEANS ING

&MAINTENANCE

Data Monitoring – Check and control data integrity over timeData Monitoring – Check and control data integrity over time

Data Augmentation – Enhance data using information from internal and external

data sources

Data Augmentation – Enhance data using information from internal and external

data sources


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© Evalueserve, 2006. All Rights Reserved - Privileged and Confidential Global Risk Management.

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Transcript of © Evalueserve, 2006. All Rights Reserved - Privileged and Confidential Global Risk Management.