SRM and Global Services/BPO — New Offering (and Approach) Emerges to Predict Risk (Part 2)

- September 29, 2011 4:09 AM
Categories: Spend Management |

In the first post in this series, I provided a quick introduction into a new risk toolset from Neo IT that we look forward to analyzing and exploring in more detail in the coming months. The solution purports to predict and model risk for global services suppliers in local markets. In today’s post, continuing on the subject, I thought it would be helpful to highlight some of the specific elements and factors that Global Supply Risk Monitor considers on the country, city and supplier levels, as it models risk for companies leveraging global services delivery in their non-physical supply chain (which I sometimes refer to “virtual goods” to describe it). I’ll apologize in advance for cutting and pasting a bunch of things in this post from the NEO IT site, but the amount they share is fascinating — in regards to some of the specific elements they consider.

Let’s start with country risk. In this area, Global Supply Risk Monitor helps “identify risk segments and risk parameters that impact on operations risk” by leveraging “a model using 25 risk segments and 250+ risk parameters in eight categories (macro-economic, financial, business, infrastructure, geopolitics, legal, scalability and quality of life)”. A selection of these factors includes: inflation, currency, fiscal deficit, GDP growth, FOREX reserves, tele-density and stock market performance. Moving down to the city level, the model considers such areas as city budget deficit, rental rates, space availability, local taxes, lodging costs, industry size, Attrition, pool of graduate, existing and planned SEZs, educational institutes, attrition rates and wage inflation as contributing risk elements.

At the supplier level, the Global Supply Risk Monitor model considers a claimed 250+ fields “across eight categories: financials, clients, people, alliances, services capability, corporate governance, infrastructure, thought leadership”. Among the elements falling into these eight areas include: “operating model capability, onsite-offshore composition, human resources, quality certifications, infrastructure, profitability and key financial ratios and client composition. Ultimately, such an offering may include socially shared (i.e., cross-company) elements of services supply chain performance like a SAP Supplier InfoNet does in the manufacturing area as indicators as well. But for now, such an approach, provided Neo IT really has figured out what factors are correlated with increased risk — and at what level — rather than just throwing a smorgasbord of factors into a black-box model, certainly represents a useful start to pursuing an area of supply risk that has played second fiddle inside many companies up until now.

Jason Busch

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