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Copyright The Transitions Group 2007. All rights reserved.
Handicapping and Mitigating Operational Risk: An Enterprise Mandate
John A. DeasyManaging DirectorThe Transitions Group LLC5618 Mill Race CourtAtlanta, GA 30338770-522-0125www.riskchaineffects.com
The Transitions Group LLC
2
The pursuit of new markets and lower cost has increased enterprise spans of control.
Current measurements of do not reflect operational risks.
Unplanned for risk, regardless of its root cause, damages shareholder value and enterprise reputation.
New approaches are needed to protect both customers( revenue generation) and shareholders interests( earnings).
Why Now?
The Transitions Group, LLC
Founded in 2001
Focus Areas:
Global Logistics and Distribution Effectiveness
Global Risk Assessment and Training
Supply Chain Financials Analysis
Rapid SC Assessments
Evolving Focus:
Products at Risk
Profit
Customers
Shareholders
Reputation
Mitigation
Scalable, Repeatable, Valuable, Actionable
Copyright The Transitions Group 2007. All rights reserved.
Gartner
1999:Visibility
Variability
Velocity
• 2008: Visibility
Variability
Velocity
Vulnerability
Value
Ten years ago, enterprises sought ways to improve performance through 3 lenses; today we need 5.
Next wave…..virtual
Copyright The Transitions Group 2007. All rights reserved.
What is needed? Identification of risk at the product level to mitigate the erosion of enterprise performance
Risk vs. Customers Expectations
Risk Vs. Reputation Competitive Advantage
Operating Values:
Revenue growth, cost efficiency
Shareholder Values: Solvency, Efficiency,
Profitability
Risk vs. Capital
Creditors
Regulators
Insurer
Risk vs. Return
Shareholders
Analysts
Risk versus Return Risk versus Capital Risk versusGlobal Environments
Customers
Suppliers(And outsourceManufacturing)
Company
Creditors and Shareholders
Customer Facing
Supplier Facing
Internal Facing
Market RiskBrand / Reputation RiskProduct Liability RiskEnvironmental Risk
Operational RiskTechnical RiskFinancial RiskLegal RiskEnvironmental RiskHR / Health and Safety Risk
Relationship RiskSupplier Performance RiskHuman Resource Risk Supply chain disruption risk Supplier Environment RiskDisaster RiskSupplier Financial RiskRegulatory Risk
Enterprise product risk handicapping exposing risks and developing hedges to protect strong enterprise earnings performance.
Supplier of materials
Supplier of services
Tier 1
Tier 3
Tier 2
Legend
Customer Customer Customer Customer
Distribution center Distribution center
Manufacturer
Non Domestic
Expanding product risk characteristics and variability: Apply 80/20 principles- Analysis of the critical few!
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1 1 1 Pitt Prod 1 $$ $$ 1M H H
2 1 1 Lon Prod 7 $$
2 1 1 2 SF Prod 9 $$ .5M
2 1 2 Mont Prod 12 $$
2 1 3 Berlin Prod 41
Global Supply & Demand System
Part Number Volumes, Units , Vendor & Unit and Delivery Cost Metrics
Sales Plan Customers Source Deliver
Likelihood
Sourcing-Make-Deliver
IMP
AC
T
1
2
32 66
Ris
k Id
enti
fier
s
Likelihood
Profit & Loss
IMP
AC
T
1
32
32
66Ris
k Id
enti
fier
s
Likelihood
Shareholder & Customer
IMP
AC
T
1
23
32
66
Ris
k Id
enti
fier
s
3
Hedge Plan
Handicap Class
Where is risk Internal Policy External Contingency In House Production
Part Num 2Current
HighAsian Source
IncreaseInventory
New USA SourceConvert
Line 3Plant 6
Part Num 3 Emerging USA Ports
Increase Stocking Locations
2 New USA Sources None Required
LikelihoodLow High
High
Imp
act
P2P4 P3
P32 P16 P22
Discover &Handicap
Mitigate, Monitor, & Repeat
Determine risk and find mitigation to protect enterprise performance; customer and shareholder expectations
Value at RiskRecognized
ActionableMitigation
Plans
Scalable,Repeatable, Responsive,
Efficient
A culture of continuous risk adjustment as
a strategic objective.
Enterprise focus; maintaining and
protecting customer and shareholder values.
Enterprise risk teams proactively ranking
and rating exposure to systemic events;
proposing mitigation actions.
Enterprise communication/ awareness. No
silos.
What result is achieved?
Global Experience
Balanced Approach
• Team Focused
• Strong Core Competencies
• Executive Leadership
• Broad Experience
• Process/ Methodology
• Results oriented
OrganizationalChange
Repeatable
ActionableScalable
Beneficial
We Are We Deliver We Have You Get
Learn & Teach
Risk Handicap Assessment Sales & Profitability
Centric
Customer Sensitive
Strategic ally Adjusted
Operationally Focused
Actionable
Risk Hedge RewardsProfitability
Shareholders
Customers
Asset Utilization
Competitive Position
Forward Thinking
We can help you identify and mitigate these pressures…