prioritizing business risks using mos sustainability...

Prioritizing Business Risks

Using MOS Sustainability Goals

#CRSummit2016

1. Sustainability Trends & Risk Convergence

2. Defining and Assessing Sustainability Risk Using an Innovative Approach

3. Testing the Sustainability Risk Tool at Metalsa, a Global Supply Chain Partner

4. Summary and Conclusion

Prioritizing Business Risks Using

Sustainability

Presentation Flow

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Overall Sustainability Trends

1. United Nations Conference on Climate Change

– Mexico one of 1st Nations to pass climate change law

– Paris Agreement (COP21)

2. Banks - To decrease their exposure to environmental liability and to improve risk management, bankers look more closely at the environmental performance of their clients. They assess the environmental risk exposure of their customers, and to protect themselves from potential losses.


Sustainability

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Overall Sustainability Trends

3. Insurance Industry – Over 75 major global insurance industries have signed on to the “Principles of Sustainable Insurance” by integrating sustainability issues into:

– Developing products and services which reduce risk, have a positive impact on ESG issues and encourage better risk management

– Investment decision-making and ownership practices

– Identification and selection processes for suppliers


Sustainability

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Customers are responding to market pressures to be more transparent with their sustainability impacts:

1. How sustainability connects with governance?

2. What are significant environmental impacts?

3. Define how social issues are addressed.


Sustainability

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Most automotive suppliers have basic regulatory compliance programs in place, some have an environmental management system (EMS) that sets environmental objectives and targets.

Very few of the regulatory compliance and EMS programs are in alignment with the new direction of the global automotive industry regarding sustainability and its implications to the supply chain.


Sustainability

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Regulatory compliance and EMS programs are typically viewed as external to the normal management or quality process and does not address health, safety, security, greenhouse gases, global working conditions

(social aspects) and other programs or requirements.


Sustainability

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1. Public and customer disclosures becoming routine.

2. Reducing risk to reduce regulatory and brand costs.

3. Value gained in continually improving strategic leadership.

4. Improved performance is now embedded in ISO 14001.

Why Should a Company Incorporate

Sustainability into its Business Processes?

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Experience has shown that few Tier 2 or 3 suppliers have implemented sustainability plans.

The major reasons, include:

1. Lean operations with limited resources;

2. Customers are not currently asking; and

3. Don’t know how to begin.


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1. Public and customer disclosures becoming routine.

Customer supplier surveys

Annual reports

Regulatory submittals (EPA, SEC etc.)

Investor requests



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2. Improved performance.

Trend from mass to push production

From lean manufacturing to pull production

Elimination of all forms of waste

Lower cost to customers



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3. Reducing risk to reduce regulatory costs.

Current driver for action is regulatory compliance at manufacturing operations

Risk reduction cuts across the entire enterprise and can pay large dividends in reducing a wide range of costs



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4. Value gained in continuously improving

leadership

Move from emergency reaction to emergency prevention

Reduced waste; increased profit

Reputation leads to increased sales volume



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A Sustainability Management System or SMS takes the foundation developed by an EMS and incorporates risk analysis across multiple business functions, such as:

Environmental

Energy

Health & Safety

Social Responsibility

But, how do you efficiently go about identifying SMS Risks?

Increase the Company’s Effective Performance

by Upgrading your EMS to an SMS

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Sustainability

Defining and Assessing Sustainability Risk

Wendy Schlett

Senior Sustainability Manager

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The International Standards Organization defines risk as:

"the effect of uncertainty on objectives“

A SMS using the risk assessment approach would help prioritize business aspects with the greatest risk across all covered programs.


Sustainability

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• Correlating Business Risks with AIAG Sustainability Self Assessment Survey

• Human Rights

• Environmental

• Compliance & Ethics

• Diversity

• Health & Safety

• Security

• Building Assets

• Brand & Reputation


Sustainability

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Sustainability

SSSA

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Chrysler 2013 Sustainability Report


Sustainability

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• How to Achieve Sustainable Risk Reductions:

• Multi-Step Process

Company-Wide Pre-assessment

Detailed Assessment

Project Assessment

• Utilize a PDCA system approach to systematically reduce risk over time while improving performance measures


Sustainability

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Figure 2. Development of the Risk

Register Process, Developing and

Populating a Risk Register Best

Practice Guidance, Feidhmeannacht

na Seirbhise Slainte Health Service

Executive, Revision 11, April 2009

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• Managing Operational Risk :

• Risk Identification

Value stream mapping

Process flow diagrams

AIAG Sustainability Survey

• Risk Quantification

Risk analysis and evaluation

ISA diagrams (Fishbone)


Sustainability

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• Managing Operational Risk (continued): • Risk Prioritization

Impact/Control Quadrant

Evaluate using environmental and safety qualifying filters

• Risk Mitigation

Risk treatment (eliminated, substituted, and/or controlled)

Monitor and review


Sustainability

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Preparation

Team composition and Process

Mapping

Tools:

Reference Documents

Phase I: Risk Identification

Identifying the processes and activities that

incur a risk

Tools: ISA diagrams,

Cause and Effect Analysis

Requirement Summary


Phase II: Risk Quantification

and Prioritization

Top Impact/Control Quadrant Risks

Tools:

Impact / Control Quadrant

Phase III: Deep Dive Analysis

Prioritized Risk will be Further Evaluated to

Identify Improvement

Options

Tools: FMEA

JSA Fault Tree

Analysis, etc.


Sustainability

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• Preparation:

• Conduct at a “process level”; not at the detailed level.

Risk indicators such as regulations, customer standards, insurance requirements, business initiatives are documented for each identified risk.

• Develop a process flow diagram and conduct a preliminary hazard analysis.


Sustainability

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Sustainability

Link to Risk Register - Review Process Flow

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Utilize a Process Flow Diagram:


Sustainability

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http%3A%2F%2Fwww.pcimag.com%2Farticles%2F93430-innovation-drives-compact-paint-process-for-waterborne-automotive-oem-coatings&ei=W64ZVYrlMc-1yASVu4LACQ&psig=AFQjCNFNHj9HHLL-4k1mItXIOsjeidBY7w&ust=1427832642545012

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Preparation


Mapping

Tools:

Reference Documents



incur a risk



Requirement Summary



and Prioritization


Tools:



Prioritized Risk will be Further Evaluated to

Identify Improvement

Options

Tools: FMEA

JSA Fault Tree

Analysis, etc.


Sustainability

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• Phase I: Risk Identification • Use Sustainability Criteria:

Profit

People

Planet

• Correlate with Risk Categories: Profit: Product, Assets

People : Safety , Health, Social Relations (employees and community)

Planet: Energy and Atmosphere, Natural Resources, Eco-system health, Water


Sustainability

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– Phase I Extra emphasis was added on Social Engagement to include the following risk filters:

• Employees

• Family

• Community

• Supply Chain

• Customers

• Other Stakeholders


Sustainability

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Sustainability

Link to Risk Register to Review Generic Risk Summary

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Preparation


Mapping

Tools:

Reference Documents



incur a risk



Requirement Summary



and Prioritization


Tools:



Prioritized Risk will be Further

Evaluated to Identify

Improvement Options

Tools: FMEA

JSA Fault Tree

Analysis, etc.


Sustainability

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• Phase II Risk Quantification and Prioritization:

• Likelihood of risk event x impact of risk event = operational risk

• Ranking

• Utilize tools (i.e. risk register) to organize information and actions


Sustainability

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Risk Ranking and Prioritization


Sustainability

Uncontrolled / Exposure

Short Term

Long Term

Controlled / No Exposure

1

4

3

2

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Sustainability

U:\Business Case & Contracts Office\Risk Register

Templates\Risk Register Template VIU.docx

Last Printed: Wednesday, April 01, 2015 at 3:27 PM

Link to Generic ISA Diagram Review Filters, Quadrangle

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Sustainability

Results of Pilot Testing the Sustainability Risk Tool

Karina González Bret Corporate Sustainability Coordinator

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Metalsa Challenge: Fast grow,

global approach

Global Approach

Proeza acquires

100% ownership

of Metalsa

The Saltillo plant starts

production and a new

Technical Center is

opened in Detroit

Metalsa

Foundation

Association with

A.O. Smith

Start of operatins in

the Apocada plant

Partnership with

Tower Automotive

Opening of offices

in Japan and India

Opening of an office in

Russia.

Starting construction of a

plant in Thailand.

A Mexican company

is acquired in San

Luis Potosi

The commercial vehicles

business of Tower

Automotive is acquired

with a manufacturing

facility in Roanoke

Acquisition of Dana

Holding Corporation’s

Structural Products

Business.

The Jamshedpur plant in

India starts operations

Acquisition of the

ISE Automotive

GmbH (“ISE”)

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Metalsa Overview

Main products

.

Sustainability timeline at Metalsa

Social

Responsibility

Guideline

Main focus:

community

Valuable

initiatives NOT

identified as

Sustainability

customer

Sustainability

Self-assessment and

industry benchmarks

Stakeholder

interviews

2010 Metalsa

Sustainability

model

Mission: sustainable solutions

for the global transportation

industry

2011

Sustainability

performance pilot

2012

Community

policy & SPARK

Memberships

Global CO2

tracking

Code of conduct

redesign

2014

2013

CDP reporting

Conflict Minerals

2015

Integrative

sustainability

model

Suppliers Code

of Conduct

Suppliers

Development

Program

Sustainability

under Metalsa

Operative

System

Sustainability

KPI

Risk

Management

Sustainability

MOS audit

2016

2008

Armonizing indicators

• With Sustainability being now under the umbrella of the whole Metalsa Operative System, it’s easier to integrate diverse areas into the Sustainability Vision, beyond a traditional CSR approach.

Armonizing indicators

• Four main aspects are focus of whole organization, and related KPIs have been set as common objectives for the organization

Community

Employees’ Families

Customers

Suppliers

Employees

Environment

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Sustainability Risk Assessment Tool

at Apodaca Plant

• The Metalsa HQ are found at the Apodaca plant

• It is the biggest plant of all Metalsa operations worldwide

• Almost one third of the whole Metalsa production is set in Apodaca.

• We chose one of the biggest product lines to run the first excersise.

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Sustainability Risk Assessment Tool

at Apodaca Plant

• Pilot was done with cross-functional teams from within different areas of the plant.

• The intention was to validate how useful the SRG Sustainability Risk Tool was for the organization

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Validation of the tool experience

• The developed tool made it easier to understand risk for administrative areas, that are not use to making FMEA analyses.

• SRG’s quadrant tools helped reduce ambiguity and subjectivity in the assessment.

• Crossfunctional teams gave a better landscape of the different interactions and issues that Metalsa areas haven’t previously considered.

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• It helped identify lead and support functions between departments.

• Excercise increased awareness for the different areas on how Sustainability is related to their own activities.

• It is now seen as a best approach to assign priorities.

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• The tool is very eye opening, since it provides an overview of several potential risks found in all areas, that otherwise would not have been identified if individual departments completed assessments alone.

• The tool was seen as more comprehensive than the currently existing Risk Management tools, in terms of sustainability.

• General comments after the exercise, were very positive, “we were missing the interactions and other impacts beyond well known tasks”

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Tool improvement

• A Manual is being created to reduce the ambiguity of the concepts, including clearer concepts for “frequency”, “severity” and “controls”.

• List of risks is now being shared worldwide to improve the accuracy and applicability of the impacts.

• Next exercises will start in small knowledgeable groups and the cross functional team will end the process, by validating interactions and risk values.

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Next Step

• The tool will now be a prerequsite for new project launches, including changes in processes.

• Tool will be automatized once everybody knows how it’s working, to reduce working time. The risks list would be customizable for each area and checkboxes for interactions will be added.

• Tool will be able to identify the common risks amongst all processes, to prioritize actions.

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Sustainability

Future Sustainability Risk Tool Enhancements,

Summary and Conclusions

Bill Stough President/CEO

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Preparation


Mapping

Tools:

Reference Documents


Identifying the processes and

activities that incur a risk



Requirement Summary



and Prioritization


Tools:



Prioritized Risk will be Further

Evaluated to Identify

Improvement Options

Tools: FMEA

JSA Fault Tree Analysis,

etc.


Sustainability

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Future Path Forward:

• Verify scoring of risks categorized as a level 1 and 2

• Complete Phase III by conducting a deep dive analysis using standard risk assessment tools such as FEMA, Decision Tree Analysis, Cause and Effect Analysis or other effective risk assessment tools

• Work to mitigate prioritized risk to a level that is acceptable to the company.


Sustainability

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• Phase III Deep Dive Analysis:

• Begin the process of determining what needs to be done to reduce the high prioritized risk (risk mitigation)

• Use tools to further evaluate root cause of risk and its impacts

ISO 31000 (Operational Risk) lists 31 different risk analysis tools and provides the pros and cons of their use


Sustainability

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• Further Risk Evaluation and Mitigation

• Avoiding risk

• Accepting or increasing the risk to pursue an opportunity

• Removing the risk source

• Changing the likelihood

• Changing the consequences

• Sharing the risk with another party or parties

• Retaining the risk by informed decision


Sustainability

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Presenters

Karina González Bret, Metalsa Corporate Sustainability Coordinator

[email protected]

Wendy Schlett, SRG, Senior Sustainability Manager

[email protected]

Bill Stough, SRG, President

[email protected]

mailto:[email protected]

