Presentation on theme: "ERM In Logistics and supply chain"— Presentation transcript:
1 ERM In Logistics and supply chain Carl LeemanChief Risk OfficerKatoen Natie
2 can only be efficient if it is Risk Managementcan only be efficient if it isEnterprise wide
3 ERM what’s in the nameA methodology to ,as good as possible, realize the goals set by a company, and to continue doing so.A culture of which the company, and thus all its employees have to be committed to .A strategy is easy to copy, a culture is very difficult to copy .
4 Business Unit structure Katoen Natie HQCorporate ServicesITEngineeringFinanceRiskSpecialty ChemicalsGeneral Cargo & CommoditiesPetrochemicalsProjects & EngineeringConsumer Goods & IndustryLiquidsProcess TechnologyPort Operations
7 THE RISKS OF DOING BUSINESS 1. COUNTRY RISKS2. CLIENT RISKS3. PRODUCT RISKS4. CONTRACT NEGOTIATION RISKS5. SUPPLIER RISKS6. RISKS OF PERFORMANCE DIFFICULTIES7. BRANDNAME / REPUTATION RISKS8. RISKS OF DAMAGES9. ENVIRONMENTAL RISKSFERNAND
8 EU laws on RM-In most EU countries we see a lot of rules and regulationson RM for Banks and other financial institutions (Insurers).-We see very few- to none, for non-financial institutions.
9 ERM, how to proceed : Identification Evaluation Handling It will be impossible to handle all risks detected.One will have to make (difficult) choices and/or set priorities.It is always better to make the wrong choice than no choice !
10 RISK MAPPING Financial impacts (quantitative) & non financial impacts Financial metric : EBITDA, Result, assets, …Non financial metrics : victims, reputation, legal disputes, …Period of assessment : choose a significant period according to riskslikelihoodImpactRisk MATRIXQualitative ScaleQuantitative scaleLikelihood scaleSeverity =Level of Impact + Level of likelihoodLevel of impact x Level of likelihood
11 The (new) Bermuda Triangle Time PressureComplexityRisk Averse Society
12 Why expanding outside of Europe ? By 2030, 93 per cent of the world’s middle class will live in what is currently termed emerging markets.For big expansion we have no choice than to look for new business outside Europe
13 Headline Risks (International expansion) Currency and pricingSupplier/Customer insolvency (1)PandemicsCyber risk / IT failure (3)Forecasting / demand riskPolitical InstabilityClimate changeSingle sourcingStrikes / Disputes (2)Natural catastrophesBrand Reputation damageIntellectual propertyAll can impact the supply chain in different ways
14 Do not forget to, amongst others : Identify key points in your supply chain that control flows of information, physical goods or money so that risk & audit attention can be focused on these areasTry to identify what can be controlled, what can be influenced and what can only be monitored.Allow scenario planning and stress testing by taking out elements and disrupting flows.
15 Supply Chain Risks, the challenges understanding your supply chainAssessing the riskMapping the interdependenciesDeveloping solutionsThe increase in outsourcing to suppliers in more remote / exotic locations, combined with an increasing time and rate pressure is probably the main change in supply chain over the last 10 year
18 Analysis of supplier locations Earthquakealysis of supplier locationsFlood
19 Analysis of supplier locations EarthquakeFloodStorm
20 Problem is often elswhere Out of Incidents that disrupted the supply chain60 % happened at a tier 1 supplier30 % at tier 2 supplier10 % at tier 3 or further(Survey from the Business continuity Institute (USA)
21 Some importants elements in your Risk Management Contracts / General conditionsComplianceCrisis communicatie
22 Algemene voorwaardenTracht gebruik te maken van sectorvoorwaarden eerder dan eigen voorwaardenZorg dat uw algemene voorwaarden rechtsgeldig zijn , dwz :1 Klant moet ze gekregen hebben voor aanvang van de samenwerking2 Klant moet de volledige tekst gekregen hebben3 Klant moet in de mogelijkheid geweest zijn ze af te wijzen.Zorg dat U met alle klanten & leveranciers duidelijke afspraken hebt.(liefst op papier en getekend) (pas op met AV & ondertekening)
23 Essence of contract’s Client gives an order We execute the order The client has to pay for what we did.
24 Important elements in our contracts Scoop of the contractTerm of the contractRate & Payment TermsLimitations & Exclusions of liability(KPI’s)
25 ContractenZorg dat je zelf een contractvoorstel hebt dat rekening houd met de specificiteit van je activiteiten, en de regio waar je opereert.Tracht steeds te vertrekken van jouw tekst.Durf contracten / business te weigeren als er totaal geen evenwicht is tussen (potentiele) opbrengst en de te nemen risico’s.Commerciëlen die (vooral) op commissie werken durven hier makkelijke tegenzondigen.
26 But sometimes things go wrong Instructions from client are vague.Parties may have different understandings about the same item.No traces of verbal agreementsSometime, in order to please the client, we put ourselves in trouble.
27 Typical issues with Supply chain contracts We often start to work without written instructions or clear agreementsClient changes his mind …….!Make sure to have clear instructions and to explain them to operational oradministrative people.Follow up if you are paid in time for everything you didin some cases 20% of what was done was not invoicedOn average clients exceed payment terms by 30%
28 ComplianceWat is dit : Voldoen aan alle wettelijke verplichtingen waaraan U met uw bedrijf enhaar type activiteit moet aan voldoen.vb : Explotatie vergunningen, bouw vergunningen, Milieu vergunningenVerplichte verzekeringen (BA auto, AO, OA Brand…….)Administratie personeel (contracten, kwalificaties, keuringen,….)Wettelijke keuringen (machines, hefwerktuigen, installaties,…..)Andere Nationale, Europese of internationale wetten en regelgevingMaar er is meer : - Corporate Social responsibility- Business Ethic’s- Verantwoord ondernemen- Corruption & Bribery regulations (UK Bribery Act, US FCPA)In de praktijk is één en ander niet eenvoudig zijn.Ook hier zal men prioriteiten moeten stellen na (grondige) analyse
29 Corruption & Bribery Rules & Regulations 1 ) US Foreign Corruption Practices Act (FCPA)Exists more than 30years but increased dramatically the last 6 yearsOnly a minor US connection is sufficient for US authorities to enforce FCPA rulesThe FCPA prohibits US companies & individuals from bribing non US officials.Wide variety of industries investigated (oil & gas, Healthcare, pharmaceuticals, transportation, etc. .)8 out of 10 largest FCPA enforcements involved non US companies & citizensReality : - Siemens paid 800 million USD to settle US anti corruption charges(on top of same amount to German authorities)- FCPA : : 641 Million USD penalties2010 : 1,8 Billion USD in fines
30 Corruption & Bribery Rules & Regulations II UK Bribery ActEffective since July 1st 2011Regarded as gold standard in anti-corruption lawsDue to Extra –territotial application & aggressive enforcementIncludes strict criminal liabilities for corporate offence of failing to prevent bribery
31 Corruption & Bribery Rules & Regulations III 3) International Anti Bribery Conventions- UN convention against corruption (2005)- OECD convention on combating Bribery(34 members including Brazil, Argentina, South Africa)- ………..
32 Anti Corruption & Bribery To Do’s Educate employees & managementBasic rules & standards (Compliance Program / code of conduct)Companies fundamental values and principlesPolicy & Procedure (e.g. (financial) reporting, authority & accountability, Hotline (?))In M&A’s asset deal instead of share deals can avoid a lot of (liability) problemsTo leak (info) or not to leak ?Clause in contract with suppliers on bribery : No involvement & Hold harmlessRemember the “non, or controlled, subcontracting clause” in suppliers contract
34 CONTINGENCY PLAN Before During After 1)Repair/ Rebuild warehouse & equipmentPutting in Place & TestingTalk to local authorities cfr. Crisis centerUp to date on a yearly basisAlarmStart up contingency plan2) Support to clients3) Handle third partyclaimsEvacuationFire fightingInform : ClientsAuthoritiesFire fightersNeighborsSocial mediaInform PeopleCheck if things are in place as it should be
35 Crisis communication Facing the media Radio / TV I All declarations, and or external communications should be coordinatedinternally in order to have one message towards clients,authorities, employees,and other third parties.(What about : subsidiaries versus HQ in different time zones?)Do not forget:- to have one spokesman- to provide all your own employees with the same information.
36 Facing the media : Radio / TV 2 1) NEVER TELL A LIE.Do not try to hide info, everything does surface sooner or later.2) HAVE ONLY ONE SPOKESMAN.Journalists just love to hear contradictory statements; be aware. It is also veryimportant to provide your own employees with identical information, so that onlyone identical version is communicated ‘to the outside world’. (Use also yourWEBSITE / INTRANET to provide that same info to anyone wishing to know it).3) IF THERE ARE CASUALTIES, ALWAYS SHOW COMPASSION.4) BE PREPARED FOR THE 3 CLASSIC QUESTIONS:
37 Facing the media : Radio / TV 3 -WHAT HAPPENED?-WHY DID IT HAPPEN?-WHAT ARE YOU GOING TO DO TO PREVENT THIS FROM HAPPENING AGAIN?It is highly likely that you will not know the answers at that particular moment, and that is no problem as long as you show that you were prepared for the situation, say that these issues are still under investigation, will inform them as soon as you have any news, show themthat you are open and that there are no secrets to hide. 5) NEVER EVER MAKE ANY SPECULATIONS IN FRONT OF THE MEDIA.If you are not sure about something, then do not say so! “We think that it must have been this or that” = SUICIDE.
38 Facing the media : Radio / TV 4 6) ALWAYS SHOW THEM THAT YOU ARE IN CONTROL OF THE SITUATION.“We are going to do this, this and that”.This will show them that you are well prepared and that you know exactly what to do. 7) TELL THEM WHEN YOU WILL MEET OR INFORM THEM AGAIN.