SAP Streamwork Collaborative Decision Making, SAP ...sig.org/docs2/SIG Ariba 10222015...

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Finding tomorrow's supply chain professionals today

Supplier Risk is Your Risk: Are You

Prepared?

October, 2015

11© 2015 Ariba - an SAP company. All rights reserved.

Speakers

Kelly WatsonPrincipal Solutions

Consultant

Ariba, an SAP Company

Padmini Ranganathan Vice President, Product Management

Ariba, an SAP company

Ryan Flynn Principal

Deloitte Consulting, LLP


Agenda• Need for Supplier Risk Management and Why is it Challenging

• Addressing Supplier Risk with Ariba Solutions

• Best Practices in Supplier Risk Management – Deloitte

• Solution Demo

• Q&A


In an Integrated Global Economy, Supplier Risk Is Your

Risk

Geo-Political

Movements

Regulatory &

Compliance Changes

Financial

Instability Natural

Disasters

Mergers &

Acquisitions

Supplier disruptions create multiple pitfalls for executives• Loss of revenue

• Diminish shareholder value

• Tarnish brand repute

Corporate

Restructuring

Operational

disruptions


Ariba Solution: Extending Supplier Information &

Performance Management with Risk Insights

Ariba Supplier Information & Performance Management (SIPM) and Supplier Infonet help enterprises

monitor, measure, and mitigate supplier risks by enabling them to manage the full supplier lifecycle

spectrum and as well as delivering continual real-time insights on all risk events that affect the supplier

ecosystem.

Aggregate supplier

information and risk

profiles from external

insights and a

configurable web-

based supplier

questionnaire and

document portal

On-board Engage Analyze Qualify

Synchronize

supplier information

with existing

systems, manage

supplier approval

workflows and

certifications

Engage suppliers

and establish

performance

measures and risk

thresholds

Analyze supplier

performance and

supplier risk using

out-of-the-box and

custom reporting

tools

Monitor

Monitor multi-tier

supplier risks on

real time basis and

trigger mitigation

workflows

Supported by external risk insights, compliance checks and early warnings


Helping You Manage Risk Across the Full Spectrum of

Your Supplier Base

3

2

1

Actions

• Initiate supplier performance and risk management tasks to evaluate

suppliers on a recurring basis

• Define user tasks, workflows and analyze supplier performance

• Map supplier tiers and track risk across all risk parameters

• Enrich existing supplier information with third party scores for

additional validity

• +Tier 2 and Tier 3 actions

Actions

• Qualify and onboard suppliers

• Allow supplier to maintain information using self-service

• Track reputational and brand risk

Actions

• Assign supplier groups to category managers

• Selectively roll-out of supplier performance and risk assessment

initiatives

• Define supplier risk events/ exposures of relevance and initiate

workflows for risk alerts

• Track operational, financial, regulatory and location risks real-

time

• + Tier 3 actions Tactical Engagement

Suppliers

Business Critical

Suppliers/ Partners

Preferred Suppliers/

Operations Critical Suppliers


Key Elements in the Ariba Offering Network-Driven Visibility, Real-time Insights, Robust Performance Management

Supplier Qualification and Onboarding

Customer website integrated supplier questionnaire that

facilitates self-service registration

Synchronization between Ariba Sourcing and supplier

profile to ensure information is current

Supplier ease of use through a unified seller console

that allows single supplier login across all Ariba solutions

Supplier Performance Measurement Built-in supplier performance measurement project

workspaces with recurring tasks

User defined workflow triggers for out-of-threshold

scores,

Best-Practice expertise on building Key Performance

Indicators/ Key Risk Indicators, scorecards and surveys

Real Time Supplier Risk Visibility

Sematic analysis of web data to identify risk events that

the supply base is exposed to

Predictive intelligence to assess risk potential and

impact

Supply base risk profile that extends to supplier parent-

child and n-tier supplier levels

Multi-tier Supplier Risk Visibility

Supplier Management Dashboard


In-Depth Supplier Risk Visibility

Receive early alerts on risk events

affecting your supplier ecosystem using

semantic analytics of data from over

200,000+ sources

Track suppliers based on user defined

thresholds on risk event types and

frequency

Calculate risk exposure and impact,

based on performance and risk

indicators

Ability to assess risk in a multi-tier

supplier hierarchy

Interactive geo-map visual based on

user-defined parameters to compare

suppliers and regions at risk

Intuitive risk views on supplier parent-

child, suppliers’ operating locations for

risk traceability


Example : Identifying Slavery in the Supply Chain

There are an estimated 20 – 30 million forced laborers in

global supply chains today


Example: Identifying Slavery in the Supply Chain


Poll Question

Which functions in your organization does your supplier risk

management processes serve currently ( Select all that apply )

- Legal

- Sourcing and Supply Chain

- Finance

- Compliance and CSR

- IT





• Solution Demo

• Q&A

Deloitte Consulting LLP

October 2015

Supplier Risk Management

- 23 -

ClientLogo

ClientLogo

Supply chains are continuously exposed to a multitude of risks, emanating from

within and outside of their value chains

Supply Chain Risk Framework

Note: Though not depicted above in order to maintain simplicity, risks are often highly inter-related with impacts spanning across functions internal to the company and externally within the extended value chain.

Macro environment risksHave potential effects across the entire supply chain

Economic

€$ ₤¥

Geopolitical Hazards

!

Regulatory

Functional risksExist among enabling functions that support supply chain processes

Finance Human Resources LegalInformation Technology$$$

Extended value chain risksOriginate in upstream and downstream supply chain partners

Operational risksRelate to internal process risks

Develop Plan Source Make Deliver/Return

Tier N End Users

Supply Demand

Environmental/Socia

l Responsibility

Tier 1 Distributors3rd Party

Services

SecurityInfrastructure /

Resources

- 24 -

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ClientLogo

A Supplier Risk Management program should effectively monitor and manage all key

third party relationships across an organization

Sales

Finance

Operations

IT

HR

Procurement

Logistics

Marketing

Direct Materials

Suppliers

Indirect Suppliers

Tier N Suppliers

Corporate Functions Buy Side Partners

Other Third Parties

Contract

Manufacturers

Outsourced

Service Providers

Supplier Risk Management Program

Provide central visibility to business relationships

Measure, monitor and manage relationships risk,

performance, and compliance

Manage relationships proactively vs. reactively

Deepen and improve key relationships

Improve top ad bottom line performance

“Agents”

Alliance Partners

- 25 -

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ClientLogo

A key first step in building a capability to manage supplier relationships is to define

the type of risks you want to measure, monitor and manage

Compliance Risk

Vendor actions are

inconsistent with legal,

regulatory, or policy

requirements

Strategic Risk

Vendor is not aligned to

organization’s strategic

objectives

Financial Risk

Vendor cannot meet

contractual obligations due

to financial difficulties

Transaction /

Operational Risk

Vendor is unable to deliver

products / services

appropriately

Credit Risk

Vendor is unable to make

payments it is obligated to

Contractual Risk

Service / product provided

by the vendor is

incompletely defined in the

contract

Reputation Risk

Vendor’s issues effect

company brand

Geo-political Risk

Country-specific factors

(e.g., government, climate)

affect vendor performance

Info Security Risk

Vendor is able to access

information outside of

defined business

requirements

Business Continuity

Risk

Vendor is unable to

continue providing

products / services

Supplier Risk Domains

1

2

3

4

56

7

8

9

10

- 26 -

ClientLogo

ClientLogo

A repeatable, scalable process is required to efficiently and effectively identify,

monitor and manage supplier risk

Assess

Inherent Risk

Identify Risk

Mitigants

Assign Residual

Risk Rating

1 2 3

Ongoing Testing

and Monitoring

Evaluate engagement

based on agreed-upon

risk criteria, including

identification of risk

areas present,

materiality, and IR rating

Determine risk mitigants

(contract or operational

controls) to apply based

on inherent risk and

engagement type

Review effectiveness of

risk mitigants and

determine residual risk

rating, which drives

ongoing monitoring

Evaluate and monitor

the effectiveness of risk

mitigants and update

residual risk rating if

needed

4

Due Diligence and

Strategic Sourcing

Supplier Negotiations

and Contracting

Supplier Onboarding

and Management

Ob

jecti

ves a

nd

Ou

tpu

ts

Supplier Risk Management Processes

- 27 -

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ClientLogo

Since risk may not be tied to criticality or spend, risk profiling and tiering is used to

identify high risk suppliers up front and focus risk mitigation efforts on them

Supplier Risk Profiling and Tiering

Identify highest risk suppliers among the broader population

Define specific risks and level of risk to understand risk exposure and mitigation strategies

Vendor Segment DefinitionAppropriate Number of

Vendors

Pre-Selection Risk Management

Activities

Post-Vendor and Ongoing Management

Activities

High Risk Vendor

(10-15%)

Approved vendor that may cause:

Significant financial loss (e.g., >$1M)

Long-term / irreparable reputational damage

….

Top 50 vendors by spend

10% of highest-risk vendors

Vendor Risk Assessment

Business Continuity Review

Financial Stability Review

SSAE 16 Review

Completion of all required risk assessments

Specific contractual language

….

Medium Risk

Vendor

(20-25%)


Moderate financial loss (e.g., $100K - $1M)

Temporary reputational damage

….

Next 20% of highest- risk vendors Vendor Risk Assessment Completion of necessary risk assessments

Vendor self Assessments or SSAE 16

….

Low Risk Vendor

(55-65%)


Insignificant financial loss (e.g., <$100K)

Little to no reputational damage

….

70% of lowest-risk vendors Annual rating review

Trigger event monitoring

Ongoing Risk Management

What

How

Why

Assess each supplier against a pre-defined set of questions to understand the inherent risk

Determine residual risk through additional due diligence

Focus on highest risk suppliers by bucketing suppliers into risk ‘tiers’

Determine level of ongoing monitoring and management to reduce risk

- 28 -

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ClientLogo

A robust SRM program is based on adoption of key governance building blocks

supported by enabling technology and data

A formal strategy defining the SRM role within the enterprise risk management

function exists for a single view of supplier risk across the organization

Well defined roles and responsibilities exist to develop an optimized

organizational structure to manage the supplier assessment lifecycle,

including termination activities

Policies, procedures and guidelines defining risk assessment

methodology and activities, risk tolerance levels and integration

points with other supplier and risk management functions exist to

ensure consistency and quality in program activities

Coordinated communication channel exists to inform stakeholders

of SRM and the business value of the program

Programs to educate stakeholders of responsibilities at all stages of

the supplier management lifecycle

Formal processes exist to assess the effectiveness of

the EBRM program against program requirements and

organizational requirements

Metrics and reporting requirements exist for risk

assessment activities and program operational

components to ensure data quality and

accuracy and audience specific reporting.

Tools and technology drive groups to use common

risk management processes, which enhances the

effectiveness and efficiency of the program.

Strategy

Organization

Communications, Training and Awareness

Technology and Tools

Metrics and Reporting

Procedures Guidelines

Policies

Audit &

Compliance

Supplier

Assessment

Program

Assessment

Govern

Manage

Operate

- 29 -

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ClientLogo

A SRM solution must fit within the broader source-to-pay technology landscape, with

integrations to contract lifecycle management, procure-to-pay and other systems

Line Item Pricing

and Terms

Contractual pricing,

terms and conditions

Opportunity identification and

assessment

Virtual project workroom

eRFX: RFI, RFQ, RFP

On-line negotiations

Reverse and forward auctions

Online collaborative scoring

eSourcing

Centralized contract repository

Automated monitoring for

contract expiration

Automated contract authoring

with approval workflow

Contract controls enabled in

standard templates

Contract Management

Electronic catalogs and

transactional contracts

Requisition and Purchase

Order approval routing

Real time transaction status

Electronic receipt

eProcurement

Electronic invoices / payments

Manual invoice scanning

capabilities

Approval and query resolution

workflow

Online supplier queries

Electronic archiving

Invoicing

Approved PO’s,

electronic invoices

Source to Contract Modules Procure to Pay Modules

Spend Analysis & Reporting

Sourcing opportunity

identification

Sourcing process reporting

Real-time contract usage

Contract compliance reporting

Spend tracking and

management reporting

Purchasing behavior insight

Tax compliance, spend

information

Supplier Management (Onboarding and Risk, Performance and Data Management)

Supplier qualification and on

boarding

Relationships segmented by

inherent and residual risk

Contract controls applied

based on risk presence

Supplier account creation and

info/document management

SLA tracking and performance

management

Flexible role-based approval

workflow

Automated alerts and

notifications

Supplier management

dashboard and reporting


Poll Question

What types of supplier risks are you most interested in

tracking ( Select all that apply )

- Regulatory and Compliance Risk

- Operational Risk

- Location and Geo-Political Risk

- Reputational Risks

- Financial and Credit Risk

- 31 -

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ClientLogo




• Solution Demo

• Q&A


User Request


Processing User Requests


Vendor Risk Review


Supplier Qualifications


Supplier Infonet


Search and Reporting


Q&A


Contact Information:

Padmini Ranganathan

[email protected]

Ryan P Flynn

[email protected]

Kelly Watson

[email protected]

Keertan Rai

[email protected]

Thank You

mailto:[email protected]




SAP Streamwork Collaborative Decision Making, SAP ...sig.org/docs2/SIG Ariba 10222015...

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