driving integrity into the supply chain...why metrics are important metrics you should be thinking...

www.redflaggroup.com

October, 2019

Report and Optimise

DRIVING INTEGRITY INTO THE SUPPLY CHAIN

Part 3 of a 3 Part Series


Introductions

YOUR HOST

Rich HoffeckerProduct Director, Supplier Integrity®

The Red Flag Group®

Better Decisions

We provide highly-enriched intelligence, insights and ratings on companies globally to allow clients to make Better Decisions on selecting, onboarding and monitoring their customers, suppliers, distributors and other partners.

The Red Flag Group®

www.redflaggroup.comwww.redflaggroup.com

Series Recap

1. Setting expectations for success

2. Trust but verify

3. Report and optimise


Agenda

1

2

3

Why metrics are important

Metrics you should be thinking about

Things you can learn from metrics


DisclaimerI am not a lawyer, doctor or priest. I cannot and am not throughout the course of this discussion offering legal, medical or spiritual advice. All the views expressed are my own, based on personal research and experiences working with organisations to build third-party integrity and compliance programmes. Your personal experiences and mileage may vary. I recommend consulting your attorney or general counsel on any specific legal questions that may come up.


A point of view can be a dangerous luxury when substituted for insight and understanding.Marshall McLuhan, Canadian Philosopher / Professor


Metrics tell a story…

What story are you telling?


Why programme reporting is important

Improve visibility

Justify programme budgets

Better partner decisions

Programme optimisation


What metrics should you consider?

Basic operational Risk profile

Cost/Revenue


Measures and Dimensions

Measures are numerical values that mathematical functions work on. For example, a time to onboarding column is a measure because you can find out a total or average the data.

Example:

Total number of third parties (measure), by country (dimension).

Dimensions are qualitative and do not total a sum. For example, third party type, country of operation, spend level, or date are dimensions.


Measures / Dimensions

Third party type

Country / Region Risk Tier Level of

spendOnboarding Status

Phase of Onboarding

Count of third parties under managementCount of new onboardingsCount of thirdparties deniedAverage time to onboardCount of Renewals

EXAMPLE:

Basic Operational Metrics


What can be learned?

Geographic concentration of third parties

Volume of each third party type

Volume of new onboarding and renewals

Comparison of average onboarding time

Risk tier breakdown of third party universe


EXAMPLE:

Risk Profile Metrics


Third party type

Country / Region Risk Tier Level of

spendOnboarding Status

Phase of Onboarding

Assumed risk Score

Assessed risk score

Risk Tier(s)

Top Risk Areas

Risk Events



Assumed vs. assessed risk score

Risk tier ratio across dimensions

Risk areas to consider investigation

Where risks turn into events


Cost factors to consider

1 Relationship management costs – resource cost involved in onboarding, ongoing management, renewals, audits, etc.

Hard costs – direct expense to the organisation such as third party reports, software, data access, support infrastructure, etc.

2

Reputational costs – investigation costs, as well as the impact to sales and stock value and when an event occurs

3


EXAMPLE:

Cost Based Metrics


Third party type

Country / Region Risk Tier Onboarding

StatusRisk Area(s)

Event Type(s)

Cost per onboarding

Monitoring Costs

Cost per renewal

Cost per risk event



Onboarding and management costs (budgeting)

Where to optimise spend

True cost of risk events

Hidden cost of poor supplier decisions


Think like a CEO, think revenue!

Area for greater exploration…

Opportunity response –programme efficiency to enable faster action on new opportunities

Increase market size –demonstrable high integrity programme often opens up new markets (e.g. companies that require integrity programme, governments, etc.)


Conclusions

Create your story Move from opinions to understanding

Build metrics that matter Tell your story using metrics


CONTACT USTo find out more about our products and services, please visit www.redflaggroup.com or contact us at [email protected].

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driving integrity into the supply chain...why metrics are important metrics you should be thinking...

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