Risk Management, Executive Responsibility and IATF: 16949

This presentation includes forward-looking statements about QAD and its business. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in QAD’s SEC filings, including the company's latest Annual Report on Form 10-K dated April 15, 2016 and in particular the section titled “Risk Factors” therein and other periodic reports the company files with the Securities and Exchange Commission thereafter. This presentation contains certain references to financial measures that have been adjusted to exclude certain expenses and other specified items. These financial measures differ from comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in that they exclude unusual or non-recurring charges, losses, credits or gains. This presentation identifies the specific items excluded from the comparable GAAP financial measure in the calculation of each non-GAAP financial measure. Management believes that financial presentations excluding the impact of these items provide useful supplemental information that is important to a proper understanding of the Company’s business results by investors. These presentations should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures presented by other companies. The following is intended to outline QAD’s general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, functional capabilities, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functional capabilities described for QAD’s products remains at the sole discretion of QAD. QAD undertakes no obligation to update forward-looking statements.

Safe Harbor

• Strive for Operational Excellence • IATF 16949 – Opportunity for Change • Enterprise Risk Management as a Start • View Quality from a Value Perspective • Operational Excellence as a Roadmap

Agenda

• ISO 9001:2015 + AIAG + OEM specific • Mandatory compliance to sell in automotive

industry • Effective compliance date September, 2018 • Each organization must undergo an audit to

prove compliance • Only about 3% complete

IATF 16949 Review

• Enterprise wide changes are a good transition point

• Top management actively engaged

Opportunity for Change

• Product Safety & Manufacturing Feasibility

• Risk-based thinking

*LNS Research

• Software-based quality management system for consistency

• Web solution to provide common, friendly environment

• Enterprise based licensing scheme for budget • Single system becomes single source of truth

Single Enterprise System

• Affects most, if not all, departments and levels of the enterprise

• Risk management based on IATF 16949 changes

Risk Management

Identify

Analysis & Eval.

Treatment

Monitor Risk Register

• Formalized risk methodology – ISO 31000? • Implement EQMS with enterprise risk module • Train teams and/or departments • Formulate a risk governance team • Improve and evolve

Incorporating Risk in the Enterprise

• Enterprise risk register • Filterable by org. level

and risk drivers • Consistency related to

risk • Provides a company

wide priority

Single Risk Register

Ext Ext High High Mod Ext High High Mod Mod

High High Mod Low Low High Mod Low Low Min Mod Mod Low Min Min

Pro

babi

lity

Impact

• Tackle high risk opportunities

• Keep value in mind • Mitigating low cost,

high risk items provide best value

Focus on High Risk

Ext Ext High High Mod Ext High High Mod Mod

High High Mod Low Low High Mod Low Low Min Mod Mod Low Min Min

Pro

babi

lity

Impact

• Forget quality--shoot for operational excellence

• Operational excellence implies quality • Present quality in terms of value

Quality as Value

• Choose a maturity model • Determine relative status on the model • Determine ultimate goal

Compared to What?

STAGE 1

Paper

STAGE 2

Spreadsheet

STAGE 3

Desktop Database

STAGE 4

Some Automation

STAGE 5

Automated EQMS

STAGE 6

Operational Excellence

At Risk High Process Costs

Possibly Compliant No Process or Margin

Benefit

Exceeds Quality Standards Quality is a Profit Driver

• Translate Quality to Value • Value assessment report • Represent report in common terms • DuPont Model

Full Value Assessment

Value Assessment Model

Level 3 Value Report

QMS Best Practice

QMS Best Practice

QMA Best Practice

Busin

ess P

roc.

Bu

sines

s Pro

c.

QMS Maturity Model

Level 2 Metric Level 2 Metric Level 2 Metric

Level 1 Outcomes

Level 1 Outcomes

Level 1 Outcomes

Level 1 Outcomes

Cost of Compliance

Cost

Ris

k

Automation Savings

Paper-based QMS

• Manually Intensive

• Prone to Error • Inefficient &

Costly

Automated QMS • Increased

Efficiency • Lower Cost for

Same Level of Risk

• Operation Excellence as priority 1 • Use the IATF transition as the driver for

change • Involve as much of the organization as

possible • Get executive buy in by showing quality value

Operational Excellence Roadmap

• Title

Questions / Comments