Ariba Coverage of Risk Management within the Supplier Lifecycle

Ariba Coverage of Risk Management Within the

Supplier Lifecycle

December 2015 Customer

2© 2015 Ariba - an SAP company. All rights reserved. Customer

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Agenda

Why is Supplier Risk Management Important… and

Difficult

Solution Overview: Extending Supplier Lifecycle

Management with Risk Insights

An Example: Supplier Risk Management from a

Regulatory Compliance Perspective

Future Roadmap


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


Your Business is Exposed to Supplier Uncertainties From

Multiple Quarters

Plant Disruptions

Child Labor

Natural Disasters

Conflict Minerals

Corruption

Political Changes

Environmental Hazards

Regulatory Breaches


Are You Protected Against the Supplier Risks of Today…

and Tomorrow ?


Supplier Risk Examples by Category

7

Risk

Category

Examples

FinancialSupplier Insolvency /

Bankruptcy,

Counterfeiting IP theft,

Theft, Fraud, Commodity

/ Price Violation,

Litigation

Supplier Insolvency / Bankruptcy:

August 2010: Cadence Innovation, which makes door trim, instrument panels and

air bag covers for General Motors Corp filed for bankruptcy protection in August.

General Motors asked the court to allow it access to facilities of the supplier,

Cadence Innovation, so it could obtain necessary tooling and parts for its plants.

This supplier bankruptcy could potentially interrupt the launch of its new Chevrolet

Camaro car.

OperationalSupplier Non-

Performance, Shortages,

IT Security Breaches,

Infrastructure Outages,

Work Stoppages

IT Security Breaches:

April 2011. 77 million PlayStation Network accounts hacked; Sony is said to have

lost millions while the site was down for a month. Of more than 77 million accounts

affected, 12 million had unencrypted credit card numbers. According to Sony it still

has not found the source of the hack. Whoever they are gained access to full

names, passwords, e-mails, home addresses, purchase history, credit card

numbers, and PSN/Qriocity logins and passwords

GeopoliticalNatural Disaster,

Geographic

Concentration,

Geopolitical Instability,

Volatile Logistic Costs

Natural Disaster:

When the Japanese tsunami devastated that nation in 2011, the impact of the

disaster was eventually felt around the world. The Japanese manufacturing

industry was hard-hit, with many facilities shut down for months. In turn, auto

manufacturers in Detroit and elsewhere who rely on parts made in Japan had no

choice but to suspend production when their supply chain was disrupted.

8© 2015 Ariba - an SAP company. All rights reserved. Customer8

Risk

Category

Examples

ReputationalPoor Factory Condition,

Labor Law Violations,

Quality or Safety Lapses,

Ethics Violations

Labor law violations:

In 2006, the Mail on Sunday alleged that sweatshop conditions existed in

factories in China, where the contract manufacturers, Foxconn and Inventec,

operate the factories that produce the iPod. The article stated that one iPod

factory, for instance, had over 200,000 workers that lived and worked in the

factory, with workers regularly doing more than 60 hours of labor per week. Also,

workers made around $100 per month and were required to live on the premises

and pay for rent and food from the company.

RegulatoryBribes, FCPA Violations,

Illegally Logged / Mined

content, Environmental

Violations, SOX Violations,

Denied Parties Violations

Environmental Violation:

April 24, 2010 Gulf of Mexico: The Deepwater Horizon, a semi-submersible

drilling rig, sank on April 22, after an April 20th explosion on the vessel. As much

as 60,000 barrels of oil per day were leaking into the water, threatening wildlife

along the Louisiana Coast. BP (British Petroleum), which leased the Deepwater

Horizon, is responsible for the cleanup, but the U.S. Navy supplied the company

with resources to help contain the slick.

Supplier Risk Examples by Category


Supplier Risk Management Delivers a Distinct Advantage

to Your Organization

Organizations that leverage

supplier risk analysis and

mitigation tools

Organizations that benchmark

supplier performance against

others

Suppliers that reported

catastrophic failures

5% 2%5% 43%12% 61%

Best-in-class

enterprises Laggards

Best-in-class enterprises identify supplier risk management as an essential component to achieving

effective supplier management

Source : The Year of the Supplier, Aberdeen Group, 2012


Yet Effective Supplier Risk Management Remains

Challenging

Incorrect, incomplete and out-of-date supplier information

Lack of a unified view in to the supplier portfolio due to disparate sources

of information within the organization

Poor adoption of supplier management practices within the end-users as

well as suppliers

Limited resources to monitor and execute risk programs

Lack of accurate insights on external events that influence supplier risk

exposures


Agenda


Difficult



An Example: Supplier Risk Management from a


Future Roadmap


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 Measure Analyze Qualify

Synchronize

supplier information

with existing

systems, manage

supplier approval

workflows and

certifications

Measure supplier

performance and

risk exposures to

undertake

corrective actions

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


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


Scalable Supplier Qualification and Onboarding

Updated by

the supplier

Updated by

the 3rd Party

Updated by

You/User

Supplier self-registration on buyer site and

ability to upload supporting credentials to the

buyer portal

Bi-directional integration of supplier data with

existing systems thus ensuring supplier

information is current at all times

Ability to profile suppliers using conditional

questions and user defined workflows based

on supplier responses

User ability to define supplier parent/child

relationships and add multiple supplier

contacts

Supplier notifications on document

submissions/ upcoming expiries for

insurance, financials, diversity, risk etc

User flexibility to update additional supplier

information , assign supplier owners and

define supplier groups/ categories


Robust Supplier Performance Assessment

Allows creation of supplier surveys and

triggers recurring stakeholder feedback

for employees who interact with

suppliers

Ability to define Key Performance

Indicators (KPI’s) and map survey

questions to specific metrics

Central KPI library for reusability,

supplier scorecarding capabilities and

management of SPM activities by

categories or supplier groups

Automated action item alerts due to out-

of-threshold performance scores

Ad-hoc and custom supplier reporting

and performance specific dashboards

enabling 360 degree visibility across the

supplier base


Ongoing Monitoring Of Supplier Risk Leading Indicators

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

Personalized risk event tracking and

ability to ‘follow’ suppliers of interest

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


Effective Supplier Management is a Two-Way Street A Unified Seller Experience to Reduce Supplier Fatigue and Drive Adoption

Supplier Portal• Single supplier login across all Ariba solutions and across all Ariba Buyer relationships • Intuitive seller registration and single terms of use for all Ariba solutions• Suppliers manage their Ariba profile across all potential and existing buyer relationships centrally• Link multiple supplier user ID’s to a single Ariba Commerce Cloud ID with multiple roles assigned


Comprehensive Supplier Lifecycle Coverage

Capabilities SIPM InfoNet

Supplier Registration via Ariba Network

Supplier Self-Service Data Maintenance

SPQ, Certificates, Surveys & Scorecards

Supplier Project Management

Supplier 360 degree dashboard view across activities

Integration to ERP / vendor master

Supplier matching, cleansing and enrichment with external

information

Comprehensive Supplier risk information at point of use

Geo-map view of supplier risk

Configurable alerting system across all risk categories

Parent-child and multi-tier supplier visibility

Supplier Segmentation, Risk exposure and Impact analysis *

Quick Time-to-Value by leveraging existing best-in-breed solutions

Future


The Ariba Advantage

Ability to deliver advanced risk insights based on structured and unstructured data analytics,

machine learning algorithms, data enrichment and natural language processing tools

Single sign-on for suppliers across all buyer relationships and Ariba solutions enhances

supplier ease of use and thus drastically improves supplier adoption

Best Practice Center delivered services on supplier questionnaire roll-out, defining KPI

libraries, user surveys, scorecarding, risk assessments etc

User Adoption Services

Real-Time Insights

Unified Seller Console

Visibility Beyond Your Level 1 Suppliers

Flexibility to view and assess risk of not just your level 1 suppliers but also the sub-tiers (

supplier’s supplier) to gain an in-depth view in to your supplier value chain

3600 Supplier Information Visibility

Ability to capture information across the supplier lifecycle viz onboarding, measurement and

risk monitoring using a single platform that synchronizes supplier information from other Ariba

modules as well as your existing systems


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


Market Event Alerts Covered 150 Risk Event Types Available

o Strikes

o Industrial Accidents

o Plant Shutdowns

o Plant Disruptions

o Environmental Disasters

o Transportation Security

o Transportation Accidents

o Cyber terrorism

o Quality Issues

o Project Delays

o Bankruptcy

o Divestment

o Senior Management Changes

o Ownership Changes

o Corporate Crime

o Financial Reporting Fraud

o Insider Trading

o Unethical Practice

o Intellectual Property Infringement

o Litigation

o Sanctions / Watchlists

o Natural Disasters

o Geopolitical Issues

o Country Risk scores

o *Health Hazards

o *Critical Infrastructure Failures

Location Risks

Opportunities

Operational Risks Reputational Risks

Regulatory Risks

o Contract Awarded

o Patent Issued or Upheld

o Environmental Issues

o Money Laundering

o Child Labor / Forced Labor

o Food Poisoning

o Neglect of Workplace Safety

o Anticompetitive Behavior

o Sanctions Violations

o Corporate Credit Rating Downgrade

o Diversity

o *ABAC, AML

*To be added in future releases.* Financial Health


Example: Timeline of a Supplier Risk Event (1/2) Signals of potential supplier disruption event build-up helps customers undertake preventive

action

Sequence of risk alerts identified

1

2

3

4


Potential risk event

identified by

Supplier Infonet and

users are alerted

Example: Actions based on Timeline of a Supplier Risk Event Signals of potential supplier disruption event build-up helps customers undertake preventive

action

Standard Register

hires advisors for

options that could

include sale,

restructuring

Jan, 23, 2015

Standard register

files for Chapter 11

Bankruptcy

Mar 12, 2015

Supplier risk alert

feed uploaded to

Ariba SIPM. User

workflow initiated.

Supplier risk mitigation

actions identified.

Kick-off supplier

conversation

Kick-off migration of

business operations

to new supplier

Hedge fund set o buy

Standard Register says

it will keep

headquarters in Dayton

Mar 13, 2015

Standard

Registers board,

lenders face

potential lawsuit

Potential disruption

severity and impact

assessed. Alternate

supplier identified

Mar 19, 2015


Ariba and SAP – Leading the PackAn integrated best-of-breed application suite addressing the entire spend management process

Gartner: Magic Quadrant for Strategic Sourcing

Application Suites, February 4, 2015

Gartner: Magic Quadrant for Procure-to-Pay Suites

for Indirect Procurement– Mar 2015

Strategic Sourcing Procure to Pay


Agenda


Difficult



An Example: Supplier Risk Management From a


Future Roadmap


OCC’s Risk Management Guidance Framework for

Banking Institutions

Office of the Comptroller of the Currency (OCC), Bulletin 2013-29

Managing the Vendor Life Cycle

“…an effective risk management process includes…”

Proper due diligence in selecting a vendor

Written contracts that outline the responsibilities of all parties

Ongoing monitoring of the vendor’s activities and performance

Contingency plans for ending the relationship effectively

Clear roles managing the relationship and risk management process

Documentation of oversight, accountability, monitoring

The OCC Risk Management Guidance mandates banks to undertake appropriate risk management

measures while managing all third-party relationships across the lifecycle of their engagement with

the bank.


Managing Third-Party Risk Exposure How Does Ariba Help Manage Third-Party Risk Exposure in the Supplier Lifecycle

Qualify Onboard Measure Monitor

• Supplier risk due

diligence through

user created

supplier

qualification and

evaluation

questionnaires

• Trigger

qualification or

updated

evaluations based

on external risk

events

• Up-to-date supplier

information through

integration with

existing systems

• Customizable

approval and

supplier assignment

workflows

• Supplier document

management

• Enrich supplier

information with

third-party sources

• Recurring supplier

scorecarding

through user

created

performance and

risk assessment

surveys

• Built-in workflows

and user alerts to

undertake

corrective action

plans

• Real-time

monitoring for risk

events

• Mapping and

monitoring of

supplier n-tier

hierarchy

• Identify and

prioritize risk events

relevant to your

users and trigger

alerts

Supplier 3600 Reporting

Designed to address every step of the supplier lifecycle management


Click the screen to play the video from YouTube

Organization

First Niagara

Headquarters

Buffalo, New York

Industry

Banking

Products

Financial Services

Total Assets

$37 Billion

Employees

5000+

An Example: First Niagara BankDriving a Scalable Supplier Management Model With Ariba


Agenda


Difficult



An Example: Supplier Risk Management From a


Future Roadmap


Vision for Supplier ManagementA unified solution combining information, intelligence, performance, and risk

Performance Management• Surveys• KPI Management• Scorecards• Analytical Reporting• Supplier Performance

Process Mgt.• Supplier Program Mgmt.

Risk Management

• KNOW your supplier

(Identification, key

suppliers, categories)

• KRI Management

• Across risk types –

reputation, operational,

compliance, financial

• Risk Segmentation and

Assessment

• Supplier Information

Enrichment – ratings,

scores

Information

Management

• Pre-Qualification

• Registration & On-

Boarding

• Profile Mgmt.

• Certificate Mgmt.

• Supplier Discovery

• Segmentation

Predictive Insights &

Intelligence

• Analytical Reports

• Heat Maps

• Alerts

• Benchmarks

• Risk Exposure and

Impact

• Inherent Risk potential

VisibilityAlerts Benchmarks

Government / public data, Licensed 3rd party data,

Newsfeeds

Business Systems (ERP, GRC, Finance)


Integrating Risk Insights into the Supplier Lifecycle

• Risk impact scores and

ratings

• Incorporate risk factors in

supplier scorecard

• Collaborate internally to

understand impact

• Risk traceability to enable

actions

• Monitor based on inherent

business risk factors

• Ongoing monitoring for risk

exposure

• Alerts based on changes to

risk profile

• Periodic due diligence

checks for business critical

suppliers

• Combine risk profile with

supplier profile

• Filter based on

compliance/financial risk

attributes

• Role based views of risks

relevant to the user’s role

• Differences between supplier

declared info and risk profile

• Trigger compliance checks

• Trigger additional

certifications from content

partners


Risk: Planned Scope

A scalable risk insights solution that enables

ongoing monitoring and intelligence on leading

risk indicators for your global supply base,

presented to supplier engagement owners and risk

experts for proactive supplier management.

Supplier Risk

Due Diligence

Ongoing

Supplier

Monitoring

Collaborative

Risk

assessment

and evaluation

Risk Mitigation

and Corrective

action

3

2

1

Tactical Engagement

Suppliers

Preferred Suppliers/

Operations Critical Suppliers

Business Critical

Suppliers/ Partners


Outcome: Shared risk exposure across LoB, Procurement,

Compliance and Risk teams

Supplier Manager

Category Manager

Supply Chain

Compliance & Risk

IT

Legal

Shared Services

Plant Ops

• Immediate action by

supplier engagement

owners

• Collaborate across teams

to assess risk

• Meet corporate

compliance and CSR

standards

Compliance Financial Reputational Operational Sustainability


Evolution of SAP Supplier InfoNet in 2015

New risk signals

• News-based natural disaster

and geo political events, IT

service disruptions,

JV/Partnerships

• Capture 3rd party scores

related to location

vulnerability/readiness

Location-based risk signals

• Natural disaster event alerts

by supplier location (source

GDACS)

• Country-specific

competitive/vulnerability

and risk scores

Content Additions -

Reputational Risk and

Regulatory compliance

• New regulatory/compliance

news categories: fraud,

ABAC, non-compliance,

litigation sub-categories

• Geo-political and public

health events

• Financial deterioration, credit

risk rating,

Alert relevance and quality

Alerts grouping, improved quality

and relevance, additional risk

events – regulatory compliance

Globalization:

Local/Regional/Global news

perspectives in additional

language (Spanish)

Review and audit trail: Provide

review comments for audit trail

purposes

Mar 2015

v2.3Dec 2015

v3.0

Feb 2015

v2.0

Integration

• API to publish insights to

your in-house procurement

or risk management

systems

User enhancements

• Map view of risk

• Search by supplier ID

• Follow All suppliers

Content precision

• Improved content

relevance

• Reduced noise

Future

Risk dashboard

Risk category summaries | Risk signals

snapshots, Sentiment and Signal

trends, Role-based risk views and filters

Network Intelligence

Context and benchmarks derived

from Ariba Network for network

relationships

Risk exposure impact and modeling

Analyze risk impact on business, model

what-if scenarios for decision making

Integrate tightly with supplier

management

Extend Content Coverage

• Sanctions and regulatory info

government and international

agencies (eg. OFAC, OSHA)

• Slavery, Sustainability

• Company’s financials capture and

financial health ratings

• Industry specific regulatory content

• Country specific export-import

regulations


Supplier Risk RoadmapPlanned for 2016, evolve InfoNet into an Ariba solution

• Inherit supplier records and

matrix from SM for risk

identification

• Derive risk exposure based

on external risk leading

indicators

• Deliver Insights and alerts

from ongoing monitoring

within Ariba (out of Ariba DC)

• Role based views of risk

exposure

August 2016 Dec 2016May 2016

• Add risk exposure to

supplier profile in SM

• Ability to filter risk

exposure by supplier

matrix

• Add due diligence

compliance check process

flow

• Trigger tasks in SIPM

based on risk

Future


• Context and benchmarks derived

from Ariba Network for network

relationships

Risk exposure impact and modeling

• Analyze risk impact on business,

model what-if scenarios for decision

making

Integrate tightly with supplier

management

Featu

res

Compliance risk

• Sanctions and regulatory info

government and international

agencies

• Legal complaints

• Adverse compliance risk

events

Sustainability

• Forced labor risk

• Social risk

3rd party risk indicators

• Additional risk indicators from

3rd parties

Financial Health

• Company’s financials

capture and financial health

ratings

Connect custom 3rd party due

diligence process

Extend Content Coverage

• Enhanced Sustainability

• Global Trade risks

• Labor health, safety and fair labor

practices

• Industry specific regulatory content

• Country specific export-import

regulations

Co

nte

nt

• Integrate risk scores and

impact into supplier

scorecards

• Identify ongoing

performance measurement

based on risk

• Extend to address

sustainability due diligence

• Associate risk due

diligence based on

inherent risk factors at

project level


Planned: Supplier Risk Insights in Ariba PortalInsights detection and risk indicators surfaced in other Ariba modules

Associations /

Correlations

Alert Generator

*Report Generator APIs *

Insights

Dashboard *

3rd party data

aggregator

Event

detection *

Impact

models

Exposure

mapping *

Root cause

analysis

Data

enrichment

3rd party

connector

Trend

Analysis

Outside IQ

Content Partners

Sourcing SRPMSupplier

RiskReports Spend Viz

Business Systems (Ariba, ERP, GRC,

Finance, PSN, GTS)

3rd party

systems

APIs

SM

te

ch

sta

ck

Use

r

facin

g

SAP Labs Preview

Ba

ck

en

d


SIPM

Supplier Risk

ManagementSupplier

Manager

Supplier Master Data

Operational KPIs


ERP

Risk

Manager

Supplier Matching

& Enrichment

Relevancy,

Trends,

Insights

Impact

Analysis

Information &

Content HANA DB

Alerts and

Notifications

Information & Content Engine

Industry Expertise

Supplier

InfoNet

Certification, Audit services

Outside IQ

Risk Content Partners

PLANNED: Technology Stack and Partner ViewSIPM + InfoNet + Smart Supplier Matching + Network Centricity

SAP Labs Preview


SAP Labs Preview

Planned: External Info embedded in SIPM supplier profile

• At-a-glance view of

external information for

a supplier

• Events feed in to SIPM

supplier profile

• Events act as trigger for

additional SPQ or

supplier audit

• Get top events

impacting supplier

• Review alert trends


Thank You


Gopal Sundaram

VP, Products & Innovation

Supplier Management

[email protected]

1.678.336.2763

Maria Gammon

Sr. Product Manager

Supplier Management

[email protected]

1.214.872.1316

Keertan Rai

Director, Solution Marketing

[email protected]

+91.80.4191.4463

Sundar Kamak

VP, Solution Marketing

[email protected]

1.650.390.1030

Solution Contacts

Padmini Ranganathan

VP, Products & Innovation

Knowledge Network solutions

[email protected]

1.650.646.0048

Ruchi Aswal

Product Manager

Supplier Risk

[email protected]

1.617.715.7240

mailto:[email protected]




