Tag Archives: Risk Management

Developing a five-part SAP ERM strategy

Organizations have faced an increasing number of challenges with internal processes and external supply chains in recent years, leading to a growing realization among companies that enterprise risk management (ERM) is a necessary business process in its own right. An organization should develop a sound SAP ERM structure using five key elements in the SAP solution suite, including SAP GRC and SAP Business Suite applications.

Examples of supply chain risk over the last five years can be found everywhere. The 2011 tsunami in Japan wreaked havoc on automotive companies worldwide, many of whom depended on vendors in that country. Disney left Bangladesh as a contract manufacturing base after a factory fire, and later a devastating building collapse, which Disney blamed on the government of Bangladesh for lack of regulatory oversight.

Image courtesy of University of California

At the same time, companies are giving more attention to ensuring correct transfer of internal funds internationally (known as SWIFT accounts) to meet increasing financial auditing requirements. Corporate and institutional governance boards are also taking greater steps to reduce the potential for large scale fraud and low probability, high impact risks also known as “fat tail” or “black swan” risks.

The Five Elements

SAP customers often get derailed on how to structure business process audits – such as financial audits – using the vast SAP Business Suite and GRC tools available to them. To make that happen, companies should consider five key elements to successfully build out a strong and cohesive ERM program.

To learn more about the Five Elements of an SAP ERM strategy, read my article in its entirety on searchSAP.com.

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Filed under Audit and Oversight, Compliance, Financial Management, Operations, Program Management, Risk Management, Strategy, Supply Chain Management, Technology

Minding the C-Suite Gap: Preliminary Results from CXO Study, Webinar Invitation

Preliminary findings of the CXO Engagement study conducted by Newport Consulting Group and the University of Oregon were released last week during the ISSP National Conference in Chicago. I highlight some of the key points from my exclusive article for Sustainable Industries Magazine.  Join us June 13 at 1PM ET for a full briefing on the study findings, registration is now open.

As we begin to crunch the numbers for our findings of the CXO Engagement Study sponsored by Newport Consulting Group and University of Oregon’s Sustainability Leadership Program, we can now begin to take a step back and gauge where we thought sustainability was falling down inside organizations and what can be done to make sustainability strategies more strategic with the help of the right people inside of the C-suite.

Over 140 organizations responded to our survey which cut across a broad swath of roles, activities, intentions and experiences. Before I get too deep into the analytics, I’d like to offer a personal word of thanks to those of you who took the time and responded. We may yet invite you to serve as interview subjects as we probe a bit deeper into some of the findings and rationale. To our knowledge this is the first time any group or institution has tried to correlate CXO behavior with perceived sustainability performance. We understand and acknowledge we are treading into new waters, and we appreciate you being along for the swim.

First, the high level numbers. There was a predominance of C-suite participants with C-level and vice president titles (38%); directors and managers represented the middle reporting management levels (41%), and the remainder were staff, project team members and consultants (21%). Participant primary job functions were dispersed across a number of areas including management (27%), sustainability/CSR (21%), operations (11%), with areas such as finance, human resources and marketing all represented under 10% levels.

Based on our preliminary findings, we can make some high-level determinations as to what is happening. This will lead over the next several weeks into a clearer picture as to why these things are happening (or not happening) inside organizations.

You can review these trends in my exclusive article for Sustainable Industries Magazine.  Join us June 13 at 1PM ET for a full briefing on the study findings, registration is now open.

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Filed under Audit and Oversight, Change Management and Leadership, Communication Planning, Compliance, Marketing and Social Business, Millennial Worker Shift, Operations, Program Management, Risk Management, Strategy, Sustainability

Software mobility, cloud commerce, Dodd-Frank areas to watch in 2013

My predictions for the new year, now available on the searchManufacturingERP site. Join me on December 19 for Voice of America’s Coffee Break with Game Changers for a live 2013 predictions broadcast – the death of the cash register and more!

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Filed under Change Management and Leadership, Cloud Computing, Cloud Readiness, Compliance, Financial Management, Innovation, Millennial Worker Shift, Mobile Society, Operations, Risk Management, Strategy, Supply Chain Management, Sustainability, Technology

Enterprise Risk Management: New Ways to Tackle Old Problems

My recent contribution for the SAP Community Network is now available including an overview of the recent SAP Inside Track program in Newtown Square, PA and my presentation on Enterprise Risk Management (ERM).

First of all some key findings as a summary from my presentation:

1. ERM activities are of huge importance to large enterprises and mid-size supplier companies.  Whether it is based on capital, treasury, environmental, natural disaster, or logistics risks …. companies overwhelmingly (by 93% according to one study from 2011) understand the importance of ERM activities as part of the board room to the shop floor.

2. There is a disparity between trained skills and practitioners with the talent required to successfully enable ERM processes in many companies.  Only 33% of all companies report that there are the skills and talents necessary to meet near-term and mid-term ERM requirements in large enterprises.  (Note to practitioners: rest now since it will become increasingly busy as demand rises for your skills!)

3. Executives do not fully understand the importance of ERM processes and – worse – do not understand the key risk drivers in their organization as much as they should.  Only 15% of executives admit that they fully understand what their needs are in this area, while 32% admit they essentially have no clue (“limited to no understanding”) of what key risk impacts affect their business.

Suffice it to say there is a HUGE opportunity for risk practitioners, armed with the right methods, tools and approaches, to make a significant impact in how organizations manage and monitor enterprise risk.  Big time.

Read the full SCN blog post here (login and registration may be required).

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Filed under Audit and Oversight, Business Analytics, Compliance, Enterprise Performance Management, Operations, Program Management, Risk Management, Strategy, Technology

Analyzing Financial Scenarios for Enhanced Relationship Management

The recent Toyota automotive recalls have brought to the forefront the discussion of relationship management, the body of work which organizations use to manage the perception of their organization and their performance in the marketplace.  Key to this point in the case of Toyota’s recent recalls is the point of view of industry observers that the automaker has no more or less recall issues with its products than other global automakers.  The unfortunate high-profile accidents and the perceived reluctance of Toyota management to acknowledge and take action in the public light, however, has created what is considered to be one of the worst public relationship nightmares of 100 years of global auto sales. 

An Investor Relationship Model

Similarly, the investor relationship model used my many publicly traded organizations relies on results and projections taken from financial reporting packages and roll-ups that correspond to actual performance versus planned performance. The accurate monitoring of Key Performance Indicator (KPI) and strategic goal achievement in the organization is at the heart of this monitoring process.  In addition, many individual performance management elements linked to executive reward and recognition systems use these results to determine both direct and indirect compensation models.

The handover to operational planning and financial execution has also been a source of greater examination of both financial executives and fund portfolio managers who seek returns for their investors in publically traded enterprises.  How the enterprise performs against predicted targets, viewed from both internal and external perspectives can have a profound impact on the availability and cost of capital to execute operations and the perceived relationship of the organization in the marketplace.

The Increased Use of Governance Ratings

To determine the relative health of organizations, particularly publicly traded companies, several financial services firms and organizations offer products designed to provide financial and governance ratings for organizations. These ratings affect the cost of capital for organizations, the ease of obtaining working capital lines of credit, and other financial instruments required to fund business growth and company operations. 

In general, ratings organizations consider a variety of metrics, with a key focus on the following categories of metrics, which may differ between ratings organizations:

  • Executive and director compensation, including options plans, how these plans may be converted, and approval processes used to design and implement compensation models
  • Board structure and practices, including the composition of the board and executive management team, separation of the chair and CEO positions, profile of board members, and other factors
  • Shareholder rights and transparency, including the availability of information and timely communications to shareholders, their ability to act in the decision-making process, and oversight provisions

The challenge for financial executives and other professionals in this field is to anticipate the key groupings of metrics and the ratings companies integrate to calculate the grade, and to align with the chosen ratings system. This can become complex when considering a globally operating company that may rely on several financial institutions for various instruments and products to drive their strategic objectives. In addition, ratings firms have been shown in light of the recent financial crisis to not be fool-proof in their ability to predict downstream corporate performance. As such, financial executives must keep in mind the balance between appeasing the financial institutions with which they engage and the focused strategic objectives of the organization.

William Newman is the author of the forthcoming title, “Understanding SAP BusinessObjects Enterprise Performance Management” on sale now from #SAP Press.  He consults, writes and speaks on sustainability, governance, strategy, and compliance topics.  Twitter william_newman.

For more information and to read the entire article please visit Financials Expert online. Visit our presentations today on #sustainability and #compliance at #GRC2010 #FIN2010 or at our website.

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Filed under Enterprise Performance Management, Operations, Risk Management