NEUTRAL SPECIES OF 2DQoT OLIGOMERS A. Electronic Structure

Contents

Introduction... 51 Step 1: Assemble a Cross-Functional Team of Risk Experts ... 52 Step 2: Convene the Cross-Functional Team for Brainstorming to

Identify and Map a Portfolio of Enterprise Risks ... 52 Step 3: Filter, Assess, and Prioritize Risks ...53 Step 4: Begin to Work on “Actionable Risks” and

“Integrate Learnings” into Business Processes ...55 Key Takeaways for the Supply Chain Professional ...56 Acknowledgments ...56

Introduction

While enterprise risk management (ERM) continues to gain acceptance in the financial services industry as a means to address credit, market, and operational risks, and improve performance of business operations, other industrial sectors have lagged behind in adopting a true enterprisewide view of risks. Firms are now realizing that global sourcing and just-in-time lean manufacturing, while yielding significant cost savings, may also have increased their risk exposure to global risks. Now, with minimal inventory levels and efficient utilization of production capacity, the traditional buffers against disruptions are no longer available. To respond to this new competitive environment, businesses are beginning to enhance their current capabilities in managing global risks and mitigating impacts of disruptions. This chapter offers some thoughts and comments on how companies can get started in rapidly identifying and assessing manufacturing and supply chain risks to enhance their operational awareness and responsiveness to risk events.

 Published with the permission of General Motors and Deborah Elkins of Allstate Insurance. Originally published by Chainlink Research. With permission.

52 Supply Chain Risk Management

Step 1: Assemble a Cross-Functional Team of Risk Experts

An extended team of experts from across an organization should be selected to help with rapid and thorough identification of risks. Team members can be chosen from among risk managers, statistical analysts, operations research analysts, manufacturing engineers, purchasing staff buyers, commodity experts, supply chain and logistics managers, operations IT systems experts, etc. Each team member is expected to represent their business unit and assist with identifying and gathering quantitative and qualitative risk data. Tradi-tionally in most large organizations, risk management as an expertise has a corporate home in insurance and risk financing or audit services. However, the real risk owners for manufacturing and supply chain risks are in operations. Thus, we advocate that the team must include subject matter experts from business opera-tions who have handled many of these supply chain and manufacturing disrupopera-tions in the past. These operations specialists can contribute significantly in identi-fying risks and explaining event severity from an operations perspective.

Among the team, there must be a core team of “risk evangelists” who have to take up the challenge of promoting risk awareness across the entire enterprise, share risk management and mitigation successes, document and convey lessons learned, and leverage knowledge and experience to embed risk management in operations business processes. Early on in the process, the team should also obtain top management support and a management champion to help overcome organizational roadblocks, and drive improve-ments in operational awareness and responsiveness to risk events.

Step 2: Convene the Cross-Functional Team for Brainstorming to Identify and Map a Portfolio of Enterprise Risks

Figure 3.1 depicts a portfolio map of enterprise risks that are a possible outcome of such a brainstorming exercise. The portfolio spans financial, strategic, hazard, and operational risks. These four categories are chosen because they are typically how risk management responsibilities have been divided and assigned to different business units in many large corporations.

A simple, high-level risk categorization used in the map allows executives and mid-level managers readily engage in the process of editing the map as well as identifying or taking ownership of some of the risks from the portfolio.

This portfolio is an excellent starting place for manufacturing engineers and supply chain analysts to begin identifying risks that would affect their work, or they could impact through their operations responsibilities. Note that the portfolio should include all possible enterprise risks the team can identify.

Capturing this full portfolio is important, for it demonstrates to top lead-ership that the team has been as thorough as possible in identifying risks.

The portfolio will be a key tool for risk awareness discussions because it

encourages groups to talk openly about risks they can control, manage, or mitigate, and those risks that are outside their spheres of influence.

Step 3: Filter, Assess, and Prioritize Risks

Once the risk portfolio is defined and agreed upon, the next step is to have the team filter down the broad portfolio to those risks that are relevant to manufacturing and supply chain operations. Figure 3.2 shows the subset of risks in bold on the portfolio that a group might identify as manufacturing and supply chain risks. This exercise can generate valuable discussion on ownership of some of the risks, recognition that some risks do not have clear owners, and help the team build a common understanding of the breadth of the company’s portfolio of risks.

Once the subset portfolio of manufacturing and supply chain risks is identified, the next task is to construct a subjective risk map or “heat map”

for the manufacturing and supply chain risks, and classify risks based on probability of occurrence and loss severity (see Figure 3.3). Without collecting much statistical data, the team can subjectively place risks in the quadrants, and openly discuss which risks could most impact manufacturing and supply chain operations. Note that the loss severity assessment should also intuitively include how difficult and costly each risk is to mitigate.

Further division of the probability of occurrence into four categories (such as very unlikely, improbable, probable, and very probable), and the loss severity into four categories (such as insignificant, minor, serious, and catastrophic) can help clarify and distinguish among the different manufac-turing and supply chain risks in terms of their overall impact. This refined

Strategic Risks

Risks Op.

Hazard Risks

Financial Risks

Enterprise Risks

Figure 3.1 Industry portfolio of risks.

54 Supply Chain Risk Management Probability or Frequency of Occurrence

Low Loss of Key Personnel

Loss of Key Equipment or Facility IT System Failures

(Hardware, Software, LAN WAN) or Mode Disruptions

Bldg. Or Equip. Fire Logistics Provider

Pollution Labor Issues Flooding

Hurricane Joint Venture/Alliance Relations Tomados

Volcano

Eruption Property Damage

New or Foreign Competitors

Catastrophic Loss of key Supplier

Expert Opinion Only, Not Based on Any Statistical Analysis

Tier 1, 2, 3.

Supplier Problems: Financial Trouble, Quality, Spills Failure to Deliver Materials, etc.

Logistics Route

Figure 3.3 Example subjective risk map.

Strategic

Figure 3.2 Manufacturing and supply chain risks.

classification will help the team recognize the relative difference across all risks in terms of occurrence and severity, and also will help them arrive at a prioritized list in view of organizational metrics (both business unit metrics and overall enterprise metrics).

This subjective risk map can guide allocation of scarce resources (people, time, money) to subsequent risk modeling and analysis efforts. Once the prioritized risk map has been developed, the team can naturally create a Top-10 priority list of risks (see Figure 3.4). The exercise of constructing a Top-10 list is important. As they start to form the Top-10 priority list, the team may have to revisit and adjust their probability and severity assess-ments on the risk map.

Step 4: Begin to Work on “Actionable Risks” and