Okay, this is part two of risk management. As you recall, we went through five things to consider in your risk management plan. And this time, we're going to do six through ten. So let's get started. First of all, you need some sort of continuous improvement plan. So these things are not meant to necessarily just be written in stone and that's it. You want to go back and review these plans on a regular basis to have some sort of continuous plan. So when you're going to implement these plans, or even if you're reviewing them with that risk management committee, you're probably going to want to make some changes, as I said earlier. So it's helpful that you make these changes and always have some sort of continuous improvement plan. Such that when you report back in the next month, you've, let's say, ticked off some of those items that were risky and it made it less risky. So I think that's helpful to communicate that to either your procurement people or senior management. Number seven, you want to review these things with the suppliers. And this is something that took a little bit of follow up work when I was at Colgate. We have supplier meetings all the time. And what I would tell you is that many times, we don't really bring this up, it kind of gets put on the back burner. But every time you have a meeting with suppliers, either face-to-face or today they use a lot of video type things or even a phone review, bring up where are we in trying to mitigate these risks? So an example coming back to the Triclosan, for a long period of time, we asked the suppliers, can't you build a second plant? And they said no, but at least we had a follow-up to say we want to keep looking at this. And such that when we did make changes to go to the second source, they knew that we were looking at that because we had to because of the risk. But I think what's important here is you have some sort of ongoing reviews with the suppliers. Every time it comes to you, either face-to-face or through a video or whatever, bring up these risk things to say, how we doing? And I think the key here for these ongoing reviews is what I call trust and transparency, t squared I call it. And if you have good trust with your supplier and they're being transparent with you, you're going to reduce risk together. So an example of that would be many times they have tiered suppliers too, so you're doing business with them. They have two or three other suppliers doing business with, they have to work with us to say, are there any risks out there that we can't directly see? Because it will talk about how we'd go about try to find that out later in supply mapping. But I think the idea is you have to be a two-way conversation for both people, both the supplier and yourselves. Intelligent capability, there are a lot of tools on the Internet and software programs that people can buy that can really help you monitor these things. So I'm now just going to mention a few here, but if you search the Internet for risk management tools, you're going to find a host of web tools, and software, and companies, and consultants that can help you. But basically, the approach to intelligent capabilities, you want to make sure the supplier's complying on various things, such as ethics, and contingency plans, and sustainability, quality. So it doesn't come back to bite you. You want to be able to have some sort of measurement in place. You might have seen this in some procurement departments where they actually measure the supplier on a scale one to ten, so you can try to get a feel for that. And then lastly, you gotta look at the overall supply chain risk. The point here and what I'm trying to say is that there's various levels within the intelligent capability. And you want to look at some of these third-party people or even your own risk management people to help you in this endeavor. Number nine is supplier mapping. We're going to cover this again in course five, one on the supply market analysis. It's a way to determine what's going on in the market, but also can be used, quite frankly, for risk management. So this is a supply chain, you want to be able to look at your supply chain. You can see going from the middle blocks out, that is your suppliers and their suppliers and many other sources. It gets very complex in many businesses, we'll show you one as we go through that and supplier mapping in garments, it's very complicated. But the point would be, and then conversely as you're going out to selling the product, which we're not going to cover here, goes out to various people, your grocery stores and the distributors, etc., etc. But we're primarily focusing here on looking backward in the supply chain, try to identify risks. It's a very good tool to do that. And you can review these, again, with your suppliers during those periodic supplier reviews. So lastly, we're going to talk about, the first nine are really proactive, now we're going to talk about one that's reactive. And I said it earlier, number ten is a reactive strategy. So what it says is you want to plan when it happens, what then, all right? So a lot of things you don't know. So let's give you an example. So this is what we call sensing and responding. And this was a case, it's a classic case that people use an example in business schools. But what's important here is the speed that you respond to can help you overcome the unexpected supplied risk. And if you don't do it, you're going to have massive supply chain problems, and more importantly, you can be forced to exit the market. So this is an actual example of Nokia and Ericsson, they were in the phone business a few years ago, quite a few years ago. And there was a supplier at Philips semiconductor plant that basically stopped critical supplies going into both of these companies. So Nokia immediately said, we got a problem here. They got a team and war rooms together, and they changed the product design to source components from alternate suppliers. And ones they couldn't source, they worked with Philips to try to source it from their other plants in China, Netherlands. And they did this all about five days, very quickly. Erickson, on the other hand, took a lot of time, right, took about four weeks to even reach the senior management. And by that time, all the alternative chips by Nokia were already taken up. And it had a devastating impact on Erickson, to this day, they're not in the phone business here. But they had a tremendous $400 million loss in sales, part of loss was covered by insurance, but who cares. And they really had about 1.7 billion loss through their cell phone business in 2000. So this is an example, that is, you have to be reactive. When things occur, time is of the essence. So here's our bottom six through ten, and let's have a look at a couple key takeaways here. I think the first important point is that you want to have a well thought out risk management plan. And I gave you some easy examples, but they're really applicable and can be used. And you want to use these ten ideas that we gave you here, and you can benchmark how you're doing against these plans. I talked earlier about focusing just on the supplier sometimes isn't enough. Sometimes you gotta have your own continuous improvement plan in place. Sometimes you gotta be very good with trust and transparency, have a communication plan. You gotta be monitoring what's going on outside your business through some of these intelligent capabilities. And managing complex really is a very strategic item. Remember we talked, this was in the statistic sourcing process, and you gotta really stand. And you want to be proactive as much as you can. The first nine of these were proactive, not reactive. But when it happens and you're unexpected when these things happen, you gotta act quickly, time is of the essence. And lastly, managing supplier risk is your job. Sometimes people say, it's done in financed through the risk management insurance people. No, it's your job, don't assume somebody else is doing it. Because when the problem occurs, they almost 99% of the time don't go back to those other people. They go to you and procurement and say, how we going to overcome this problem? So let's wrap it up. So I tried to make the point here in the beginning, is you want to grab risk management by the horns before it grabs you. And my question to you is, is this you? Thanks, and we'll see you in week six.
