risk assessment in the supply chain
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Risk assessment in the supply chain. Supply Chain Risk Leadership Council Developments in Insurance January 30 2008. Confidential – Do Not Forward Outside SCRLC. Survey (What capability we shall focus on). - PowerPoint PPT PresentationTRANSCRIPT
Confidential 1
Risk assessment in the supply chain
Supply Chain Risk Leadership CouncilDevelopments in Insurance
January 30 2008
Confidential – Do Not Forward Outside SCRLC
Confidential 2
Supp
lier B
usin
ess
Con
tinui
ty P
lan
Inte
rnal
Mat
eria
l Con
tinge
ncy
Plan
Indu
stry
Ana
lysi
s
Sust
aina
bilit
y/R
egul
ator
y
Cap
acity
Ana
lysi
s (C
:D tg
t set
ting)
Inve
ntor
y Ta
rget
Set
ting
Stra
tegi
c M
ater
ial P
lann
ing/
RC
CP/
Mat
eria
ls a
t Ris
k
Mat
'l C
hang
e M
gt P
roce
ss
Initi
ativ
e M
gt P
roce
ss
Lane
Ris
k A
sses
smen
t
Supp
ly n
etw
ork
visi
bilit
y (a
lerts
, GPS
)
Supp
lier C
apab
ility
Ass
essm
ent
Inte
rnal
Cap
abili
ty A
sses
smen
t
Supp
lier B
usin
ess
Inte
rrup
tion
Ris
k In
sura
nce
Supp
lier R
elat
ions
hip/
Partn
ersh
ip
Cris
is M
anag
emen
t/Res
pons
e
Ris
k an
alys
is (d
ata,
mod
elin
g, m
easu
rem
ent,
etc)
(*) Key Capability 3 2 0 1 0 0 1 0 0 0 2 0 0 2 0 0 2
TSMC 3 4 3 3 2 4 3 5 5 3 2 3 4 2 3 5 2
Boeing 2 3 5 5 4 4 5 5 5 2 2 5 4 1 4 4 2
Cisco 5 2 3 3 4 3 4 2 4 4 5 4 3 5 5
P&G 4 5 4 4 3 4 3 3 5 2 2 4 4 1 5 2 1
Jabil 3 4 4 2 4 3 3 5 5 3 3 5 4 3 4 3 3
Average 3.4 3.6 3.8 3.4 3.4 3.6 3.6 4.0 4.8 2.8 2.8 4.2 3.8 1.4 3.2 3.8 2.6
(*) Key capability = high-linkage capability counts related top 3 risks
Survey (What capability we shall focus on)
Top 3 risks (supply chain complexity, supplier capability, recovery capability) have high-linkage to 7 key capabilities, but no one has full capability score on “Supplier Business Interruption Risk Insurance”
Why might that be?
Confidential 3
Outline ~ 30 minutes Objectives of session
Review traditional versus new perspective
New challenges – illustration from Katrina
Risk assessment process
Loss database
Cross-matching opportunities
Confidential 4
To share current thinking on SCR assessment in context of developing a new risk transfer tool (SCBI)
To consider lessons from the SCRLC Supplier Reliability track
Objectives of session
GP
Time
ICOW
Loss of ProfitsLoss of Profits Cost of TemporarySolutionCost of TemporarySolutionCost of TemporarySolution
Confidential 5
From the traditional to a new world Historical focus on protecting physical assets BI becomes more important – Katrina ratio of BI:PD claims (70:30) The journey from
- traditional Business Interruption (BI) insurance to
Contingent BI to
Supply Chain BI
Global risks and the ‘Over-Optimised Supply Chain’ (WEF 2008)
Confidential 6
The concept of supply chain networks*
* Derived from Cranfield University – Supply Chain Risk study
Physical flow (logistics)
LEVEL 2 Infrastructure
LEVEL 3Organisation networks
Strategic (partnerships)
Value creation (production)
LEVEL 1 Process
LEVEL 4External environment
LEVEL 0People
E.GEmployees
Regulatory,Exchange rates,Country, region issues
Confidential 7
SCBI Risk Assessment ProcessRisk factor assessment Workshop 1 (Controls).
+ input from- benchmarking- BI Surveys- BCM assessments
2
Basic data input Form(Exposures
)
1
Pricing Tool
Data/Info to define supply & customer risk
Risk modifiers that either increase or decrease rate
% rate to be applied to limits
SCBI Insurance premium pricing
6
7
EML and Profit Impact AnalysisWorkshop 2.
Agreed Loss Calculation
EMLs and limits
4
5
3
Capacity
Accumulation db
Confidential 8
Supply chain risk factors
1. Commodity Shortages / Price Fluctuations2. Supplier Reliability3. General Availability, Cost, Quality Of Labour4. Internal Supply5. Accidents / Errors6. Malicious Intervention7. Supply Chain Infrastructure8. Customer Demand9. Obsolescence Of Product / Inventory /
Technology10.Product Quality11.Incidents / Natural Disasters12.Regulatory Concerns13.War, Terrorism, Other Geopolitical14.Other External Influences
Exposures Controls
(Cross-match with SCRLC Supplier Reliability factors)
Confidential 9
Supply chain risk framework
Control Activities
Risk Assessment
PHYSICALPROCESS
INSTITUTIONAL
X-Tier
1st-Tier
Your company
Primary customer
Downstream customer
Commodity Shortages / Price FluctuationsSupplier ReliabilityGeneral Availability, Cost,
Quality Of LabourInternal SupplyAccidents / ErrorsMalicious InterventionSupply Chain Infrastructure
Customer DemandObsolescence Of
Product / Inventory / Technology
Product QualityIncidents / Natural
DisastersRegulatory ConcernsWar, Terrorism, Other
GeopoliticalOther External
Influences
Exposures
Controls?
Cross-match with SCRLC Supplier Reliability factors
Confidential 10
Supplier reliability - Controls
Supplier business continuity planInternal material contingency planIndustry analysisSustainability / RegulatoryCapacity analysisInventory target settingStrategic material planning / RCCP / Materials at
RiskMaterial change management processInitiative management processLane risk assessmentSupply network visibilitySuppler capability assessmentsInternal capability assessmentsSupplier BI risk insuranceSupplier relationship / partnershipCrisis management / responseRisk analysis (data modelling, measurement, etc)
Confidential 11
Visualising revenue dependenciesSITE A - Grain distillery
SITE B
Barrel/Cask Warehousing
Blending
SITE CBarrel/Cask Warehousing
SITE DPackaging & Bottling
SITE EPackaging & Bottling
SITE FPackaging & Bottling
SITE A - Grain distillery
SITE B
Barrel/Cask Warehousing
Blending
SITE CBarrel/Cask Warehousing
SITE DPackaging & Bottling
SITE EPackaging & Bottling
SITE FPackaging & Bottling
Paper out:t
PaperPaper
Pulp int
Storage capacity:paper pulp)
Paperout
Pulp in:t
Raw material:
Finished product:
Unbleached pulp:
?? Limited to raw materials and semi-processedmaterials. Buffer storages at participating mills.
5% of sales:m
pulp
Pulp:Region 2’s cartonned
Paper out:t
Receives brokefrom 3 sites
Co-pulp
3 Ultracast suppliers$
REGION 3
REGION 2
REGION 1
Reels:
Reels:
Broke(limited)
Reels:mt
Co-pulp mt
Release paper forsale : mt
Region 1 & 2 brandedsheets and reels for sale
Pulp:mt
Pulp:
mt
Pulp:mt
Pulp:mt
Pulp:0mt
Pulp:mt
Branded sheets andreels for sale
mt
Uncoated products forsale:
Paper out:t
PaperPaper
Pulp int
Storage capacity:paper pulp)
Paperout
Pulp in:t
Raw material:
Finished product:
Unbleached pulp:
?? Limited to raw materials and semi-processedmaterials. Buffer storages at participating mills.
5% of sales:m
pulp
Pulp:Region 2’s cartonned
Paper out:t
Receives brokefrom 3 sites
Co-pulp
3 Ultracast suppliers$
REGION 3
REGION 2
REGION 1
Reels:
Reels:
Broke(limited)
Reels:mt
Co-pulp mt
Release paper forsale : mt
Region 1 & 2 brandedsheets and reels for sale
Pulp:mt
Pulp:
mt
Pulp:mt
Pulp:mt
Pulp:0mt
Pulp:mt
Branded sheets andreels for sale
mt
Uncoated products forsale:
Key sitesKey sitesKey sites
Confidential 12
Risk grading
Confidential 13
Opportunities Building a rich source of data
Benchmarking
Best practice
Loss evaluations and risk quantification
Confidential 14
Questions?