Managing risk is not simple. But it is becoming easier. Attending vendor events – in this case SAP Ariba Live – almost always uncovers vendors with capabilities that are not obvious.
The following three – EcoVadis, Celonis and Semantic Visions – contribute in their different ways to the improvement of procurement effectiveness, reducing corporate exposure and managing risk.
A principle theme of the Amsterdam SAP Ariba Live is the importance of sustainability. This comes in several flavours – at least in SAP Ariba terms. These include issues like avoiding child labour or breaking sanctions. But risk management and avoidance as well as identifying process inefficiencies are similar factors. Each of the companies, EcoVadis, Celonis and Semantic-Vision contribute an element, in their contrasting ways.
Ecovadis provides ratings and scorecards for corporate social responsibility (CSR). Its research covers 21 CSR Indicators over 150 commodities and 180 countries.
To deliver its information EcoVadis employs some 400 people from 40+ nationalities. These include 150 analysts with CSR-specific experience. An analyst must complete 4-6 months of internal training before starting customer-facing work. Part of this is learning the EcoVadis methodology which has 21 criteria spread across four themes:
- fair labor practices
- ethics/fair business practices
- supply chain.
Most buyers, suppliers and third-parties find themselves frustrated by questionnaires, self-assessments and data collection – all in the interest of making sure buying enterprises know about what they purchase. Some suppliers can receive multiple surveys from customers every year. They would prefer one assessment, relevant to their business (and in their language), with clear results and feedback that they can share everywhere. This is the challenge which EcoVadis seeks to address.
In addition, buyers face risk and compliance issues. Failing to assess or observe risk or compliance requirements can lead to massive losses of reputation and government sanctions. None of these are desirable.
Celonis mines business processes, especially ones built on SAP. Process mining leverages the digital footprint left behind on IT systems. These can provide a visualisation or simulation of how processes actually work. This enables enterprises to ask questions like:
- is there a gap between (say) when a product ships and when the invoice goes out?
- are vendors meeting their contracted commitments?
- do unnecessary (inefficient) steps exist, from an order through manufacturing to completion?
- might automation speed up delivery, and then payment?
Process mining will provide answers, and possibly much more. The basic elements are:
- reconstructing and visualising processes
- detecting vulnerabilities
- identifying causes
- recommending actions.
It is an almost universal truth that most organisations do not have a good understanding of how their processes work in practice. Building models often presupposes that what people think is correct. Often it is not.
The value of the Celonis approach is that it feeds on what occurs in the applications. This provides data which can then be assembled for examination. This allows informed actions to occur.
Semantic Visions is a Prague-based risk assessment firm. Its clients include state institutions, corporations and non-profit organizations. To deliver, it has developed an Open Source Intelligence (OSINT) system. This provides the ability to deliver risk assessment of a form that has largely been impossible before.
The essence of Semantic Visions is the ongoing collection of c. 90% of the world’s news content. It uses some 600K sources. It processes this content using automated semantic analysis (hence the name) using SAP Hana. This extracts the key information from the textual noise.
Semantic Visions’ solutions integrate with the Ariba Network (which processes more than Amazon, eBay and Alibaba combined). Within the SAP Ariba system, Semantic Visions can provide timely risk assessments and warnings to enterprises. This might be political, economic or social. Any one of these might be relevant for reducing product or operations risk.
Enterprise Times: what does it mean
To comprehend why these types of solution matter, consider the example of an electrical fuse that might be a part of a larger, complete product. Prima facie an electrical fuse is pretty simple. But it may ‘include’ a hidden danger or risk. For instance, one of the components of a fuse is tin. Some tin comes from sources which mis-employ child labour. How can a business know that buying bulk fuses might expose it to reputational harm?
Or, imagine that an earthquake occurs in a remote part of the globe. The tremor might damage a dam. That dam might break. If it does so it will flood a valley where there is the manufacturing of a key component. The final product manufacturer may be thousands of miles away. To know early is to be able to act.
Whether process mining or semantic news mining or assessing CSR, all three make procurement ‘safer’, less exposed to the unexpected (or unknown). And there is a flip side: with such capabilities, enterprises can no longer expect to plead innocent ignorance. Wilful ignorance is no excuse or justification.