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

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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

Failure to manage global enterprise risks destroy enterprise value

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

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2

32 66

Ris

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enti

fier

s

Likelihood

Profit & Loss

IMP

AC

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fier

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Likelihood

Shareholder & Customer

IMP

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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…

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Thank You

The Transitions Group LLC