micg - strategy and risk management for mtu services

1

STRATEGY AND RISK MANAGEMENT MICG Enterprise Risk Management Seminar 2012 for MTU Services

Kenny Ong

Takaful IKHLAS Sdn Bhd

2

THE NEW WORLD

3

The World Today…

13th April 2009

•Two Domino’s employees

•YouTube

•Apology from Domino’s after

48 hours

•1 million hits

•Twitter: questions on silence

•LinkedIn: suggestions by users

in forum

BusinessWeek, May 4, 2009

4

• Shareholder : MNRB Holdings Berhad (100%)

• Established Date : 18 September 2002

• Operational since : 2 July 2003

• Takaful Model : Al-Wakalah

• Business Portfolio : General and Family Takaful

• Number Products : More than 90

• Number of Participants : More than 1,800,000

• Number of Agents : More than 6,000

• Number of Staff : 490

• Regional Offices : 11

• Paid Up Capital : RM295 million

TAKAFUL IKHLAS CORPORATE PROFILE

5 5

IKHLAS Customized Healthcare Solutions

Smart Partnerships

Wellness Program

Cost Management

Flexible

Medical Advisory

Board

6

"The digital watch didn't come from

established watch companies, the calculator

didn't come from slide rule or adding

machine companies, video games didn't come

from board-game manufacturers Parker Bros

or Mattel, the ballpoint pen didn't come from

fountain pen manufacturers, and Google

didn't come from the Yellow Pages" Bob Seidensticker, Futurehype

7

What’s wrong with Strategic

Planning Today?

Long-term Plans

Objectives

Strategies

Enablers

Resources

Also known as L.O.S.E.R.

8

What’s wrong with Strategic

Planning Today? 1. Biggest Threats often come from OUTSIDE your normal

industry

2. Planning from the base of an ‘Existing’ organization vs. zero-based

3. Traditional Analysis (e.g. SWOT) based only on known or existing assumptions or knowledge

4. Spending too much time in market research and analysis

5. Defining the company from a Product/Service perspective vs. Category vs. JTBD (e.g. Coca-cola)

6. Wrong Benchmark – already successful vs. what made them successful

7. Implementing BSC and PMS to improve Business Model and Strategy

8. New strategy, same people

10

Finance Today…

$19.90

11

Contents

1. The Biggest Risk of All

2. Growth Risks

3. Reputational Risks

4. R&D Risks

5. People Risks

6. How To…

12

THE MOST IMPORTANT RISK

OF ALL

13 13

Strategic Risk

External events and trends that can destroy a company's growth course and shareholder value:

1.Industry

2.Technology

3.Brand

4.Competitor

5.Customer

6.Project

7.Stagnation

A. Slywotzky & J. Drzik, Harvard Business Review, April 2005

14

So, what is the biggest

risk of all?

IRRELEVANCE

15

Irrelevance Risk =

Business Model Risk

• Business Model Risk

– Business Model

– Industry

16

The Business Model

The biggest and most holistic

consideration

20

The McPlaybook*

Make it easy to eat

• 50% drive-thru

• Meals held in one

hand

Make it easy to prepare

• High Turnover

• Tasks simple to learn

& repeat

Make it quick

• “Fast Food”

• Tests new products

for Cooking Times

Make what customers want

• Prowls market for new

products

• Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007

21

What is the Business Model?

UVP

Market

Discipline

Cash-Flow

Model

•Google

•Tata Nano

22

Business Model: UVP

Unique Value Proposition (USP)

=

Targeted Customer

=

Core Buying Purpose/ Customer Value

Proposition/ Job To Be Done (JBTD)

http://www.quiklinks.net/quiklinks/rolex.png

http://www.aladream25.com/wp-content/uploads/2009/02/coca-cola-logo.jpg

http://dogtagbrands.files.wordpress.com/2009/03/pepsi_logo.jpg

http://www.homotron.net/images/homotron/louis-vuitton-watercolor-papillon-frame.jpg

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Business Model: UVP

“The Product is Not the Product”

• What is the customer really buying?

• What is the “Core Buying Purpose”?

24

Business Model: UVP

1. Insufficient WEALTH

2. Insufficient ACCESS

3. Insufficient SKILL

4. Insufficient TIME

25

Business Model: Cash-Flow Model

Revenue

Cost

Margin Cash

Flow

Assets

26

Business Model: Cash-Flow Model

Cash-Flow Model Examples:

1. Gillette Shaver

2. IBM and Lenovo

3. GM and GM Finance

4. Google and Ad Revenue

5. McD and Drive-thru revenue

6. SaaS PAYU e.g. Siebel/Salesforce

7. Facebook and Investors

8. Courts and Instalments

9. Kindle Fire and e-Books

10.Celcom and MVNOs

11.Kenya and M-Pesa

12.Banks and Non-Fees vs. Fees

Revenue

Cost

MarginCash

Flow

Assets

Revenue

Cost

MarginCash

Flow

Assets

27

What is the Business Model?

UVP

Market

Discipline

Cash-Flow

Model

28

Market Discipline

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and

flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership

Operational Excellence

Customer Intimacy

• Cost

• Convenience

• TCO

• Features,

Benefits

• Limited

Range

• Solutions

• Customization

• Breadth &

Depth

29

Market Discipline

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and

flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership


Customer Intimacy •Air Asia

•LV

•Ramly

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(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership

(best product)

Customer Intimacy

(best total solution)

Alignment & Consistency:

Market Disciplines

31


(low cost producer)


Product Leadership

(best product)

Customer Intimacy



Market Disciplines

32


(low cost producer)


Product Leadership

(best product)

Customer Intimacy



Market Disciplines

33

Operational

Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent

information for all

• Transactional

• 'Once and Done'

Customer Intimacy

• Management by

Fact

• Easy to do

business with

• Have it your way

(customization)

• Market segments

of one

• Proactive, flexible

• Relationship and

consultative

selling

• Cross selling

Product Leadership

• New, state of the

art products or

services

• Risk takers

• Meet volatile

customer needs

• Fast concept-to-

counter

• Never satisfied -

obsolete own and

competitors'

products

• Learning

organization


Disciplines, Priorities, and KPIs

34

Operational

Excellence

Customer

Intimacy

Product

Leadership

Organization, jobs, skills

Management systems

Information and systems

Culture, values, norms

Each Discipline Requires

Different Priorities & Resources

35


•Central authority, low level of empowerment

•High skills at the core of the organization

•Disciplined Teamwork

•Process, product- driven

•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems

•The system is the process

•Command and control

•Quality management


Management systems





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Management systems



Product Leadership •Ad hoc, organic and cellular •High skills abound in loose-knit structures •Concept, future-driven •Experimentation and 'out of the box' mindset •Person-to-person communications systems •Technologies enabling cooperation •Rewarding individuals' innovative capacity •Risk and exposure management •Product Life Cycle profitability



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Management systems



Customer Intimacy

•Empowerment close to point of customer contact

•High skills in the field and front-line

•Customer-driven

•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and

external information

•Strong analytical tools

•Customer equity measures like life time value

•Satisfaction and share management

•Focus on ‘Share of Wallet’



38


(low cost producer)

Product Leadership

(best product)

Customer Intimacy


Alignment & Consistency

39


(low cost producer)

Product Leadership

(best product)

Customer Intimacy


Alignment & Consistency

HP well-balanced

portfolio, mass

customization

Acer super lean

cost structure,

aggressive pricing

Apple powerful

products, premium

pricing, limited range

Still Doing

well in

2009-2011

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Where are your Key Risks?

UVP

Market

Discipline

Cash-Flow

Model

RISK?

RISK?

RISK?

41

Operational

Excellence

Customer

Intimacy

Product

Leadership


Management systems



Where are your Key Risks?

RISK? RISK? RISK?

42

• Operational Excellence • Move know-how from top performing

units to others

• Benchmark against best in class

• Ensure operations training for all employees

• Use disciplines like TQM for continuous learning to reduce costs and improve quality

Market Disciplines and Risk

Mitigation Focus

43


Mitigation Focus

• Customer Intimacy • Capture knowledge about customers

• Understand customer needs

• Empower front line employees

• Ensure that everyone knows the

customer

• Make company knowledge available to

customers

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• Product Leadership • Reduce time to market

• Commercialize new products fast

• Ensure that ideas flow

• Reuse what other parts of the company

have already learned

• Ensure there are multiple sources of

funding


Mitigation Focus

45

Industry Risk

46

Financial Product Innovation from

Non-Traditional Financial Players

• M&A: bar code readers, inventory tracking, location-

based deals

• App: loyalty card, coupon, NFC, mobile payment at

restaurants and cafés

• eWallet (soon)

• eWallet – in collaboration with Citibank, MasterCard,

Sprint Nexus 4G

• Raised $32,000,000 - $10 at a time, via TEXT for the

Haiti earthquake 2010

• the largest holder of personal savings in the world: $2.1

trillion of assets in yū-cho savings accounts, $1.2 trillion of

assets in kampo life insurance services, ¥140 trillion of

government bonds.

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Industry Risks

The A.T. Kearney Strategy Chessboard, June 2011

Guess Who?

50

Strategic Risk

Other Industry Risks – Margin Squeeze

– Rising R&D / capital expenditure costs

– Overcapacity

– Commoditization

– Deregulation

– Increased power among suppliers

– Extreme business-cycle volatility


51

GROWTH RISK

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Growth Risk

• Growth Risk

– Growth Model selection

– Competitor

– Customer

– Benchmarking

53

Growth Model Selection

1.Base Retention

2.Share Gain

3.Positioning 4.Adjacent Market

5.New Business

GROWTH

“Double-Digit Growth”, Michael Treacy

54

Growth Model Selection

1. Base Retention

2. Share Gain

3. Positioning 4. Adjacent Market

5. New Business

GROWTH


•Increase switching cost

•Customize products

•Preempt Defections

•Brand

•Neutralize Competitor

advantages

•Superior Value

•Buy market share

•Spot growth opportunities

•Organized search

•Promising Market?

•Make or Buy?

55

Growth Model Selection:

Risks

1.Base Retention

2.Share Gain

3.Positioning 4.Adjacent Market

5.New Business

GROWTH


RISK?

RISK?

RISK? RISK?

RISK?

56

Growth Model Selection: Risk Mitigation

• Growth Rate

Growth

Rate

Strategy Why?

Fast 1. Market

Positioning

2. Share Gain

3. Base

Retention

•Maintain market share in strategic

segments

•Prepare for market decline

•Competitors focus too much on

getting new customers

Flat 1. Base

Retention

2. Share Gain

(Acquisitions)

•Lose customers slower than

competitors

•Create scale economics, squeeze

costs

57

• Churn Rate

Churn

Rate

Strategy Why?

Low 1. Share Gain

(Acquisitions)

2. Adjacent

Markets

•Buying customer base is

cheaper than own efforts

•New products, old customers

strategy

High 1. Base

Retention

2. Share Gain

3. Adjacent

Market

•Lose customers slower than

competitors

•Customers are always open to

the best value and offer

•Desperate to gain revenue

How Markets determine

Growth Strategies (2)

Growth Model Selection: Risk Mitigation Growth Model Selection: Risk Mitigation

58

Fast Growth,

Low Churn

1.Market Positioning

2.Share Gain

3.Base Retention

4.Adjacent Markets

•Example: XYZ Sector

Growth Model Selection: Risk Mitigation

59

Other Growth-related Risks

Competitor – Emerging global rivals

– Gradual market-share gainer

– One-of-a-kind competitor

Customer – Customer priority shift

– Increasing customer power

– Over reliance on a few customers


60

Dangers of Best Practice

and Benchmarking…

Company

Performance

high

low

‘Best Practice’

theories

low high

zero

Perfor

mance

Trend

line

“Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005

61


and Benchmarking…

Company

Performance

high

low

‘Best Practice’

theories

low high

zero

Perfor

mance

Trend

line

“Selection Bias and the Perils of Benchmarking”, Jerker Denrell, Harvard Business Review 2005

62


and Benchmarking…

Selection Bias:

1. Success Traits = Failure Traits

2. Successful Cases + Failure Cases

3. Worst effects in ‘Old’ industries

4. Overvalue ‘best practice’ theories

5. Current accomplishments unfairly magnified by

past achievements

6. Reverse Causal

63


and Benchmarking…

Also known as ‘Beware of Consultants’:

1. Selection Bias

2. Big vs. Small company

3. Selective success stories

4. Correlation vs. Causal

5. Survey problems

6. Practical vs. Glamour-to-have

64

Other Growth-related Risk

Stagnation – Flat or declining volume

– Volume up, price down

– Weak pipeline


65

R&D RISK

66

R&D Risk

• R&D Risk

– R&D

– Innovation

– Research/Information

67

Basic R&D Risks…

1.Top Down – Process problem

2.Because I can - Competency problem

3.Poor business value – Ignorance

problem

4. No Budget - Alignment problem

5.Not-Invented-Here – Ego problem

68

The “Old” Days

Invent

R&D

Build

• Manufacturing

• Product Dev.

Market

Marketing Sell

Sales

69

The “New” Days

Invent

Build

Market

Sell

R&D

Manufacturing

Marketing

Sales

70

Marketing 101

Product

Promotion

Pricing

Place

4Ps

71

Marketing & R&D

Product

Promotion

Pricing

Place

4Ps

Features

Brand

Target

Logistics/

Technology

72

Marketing & R&D

Features Brand

Target

Logistics/

Technology

Price

Promotion

Place

Product

IKEA

Apple

Nestle

Asus

73

R&D Today → RD&D

• Garnier

• Digi

Design Point 1: Designed to SELL

Design Point 2: Before-After R&D

74

R&D Today → RD&D

• Research, Development & DESIGN

1.Features

2.Benefits

3.Differentiation

75

R&D Today → RD&D

• Research, Development & DESIGN

1.Function

2.Aesthetics

3.Logistics Design Point 1: Designed to SELL

Design Point 2: Before-After R&D

76

Retail Adaptation:

McDonald’s Menu

Product Variation:

– 80% Global, 20% Local

– home-style meals (Boston Market)

– burritos (Chipotle)

– coffee (McCafé) – DVD rentals (Redbox)

– Premium menu items (snack wraps, sweet tea

Frappes)

Retail Adaptation: McDonald’s Design

$2.4 billion to: •redo at least 400 domestic outposts,

•refurbish 1,600 restaurants abroad,

and

•build another 1,000

78

Business Situation vs. R&D

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

NPD Cycle Time

Improve Edge

Extensions

Counter Competitor

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Focused on

‘Breakthrough’

JV, In-source, Out-

source

Eliminate bottom 20%

Improve Top 15%

revenue-generating

products

↓ R&D, ↑Sales

79

Potential Tools for Innovation in

the Financial Services sector

• Social Networks - new financial services, increase

interaction with customer, collect new ideas from outside

• Dedicated “Innovation Department” or “R&D

Department”

• Think broadly about what their target customers are

trying to get done

• New technologies – Mobile, Social, Cloud, GeoMarketing

etc.

• Under-served Markets, New Segments on Value-Chain,

Micro Niche segments

• Academia partnership

• Corporate venture capital fund

80

Location-based example

81

Future of Financial Services Sector

• Just take an image of the front and back of the check.

• No annoying deposit slip required

• Immediate confirmation of deposit transaction.

• It’s Free

82

• Just slide the Money Bar to transfer funds

between accounts.

Future of Financial Services Sector

83

Research/Information Risk

“In business after business, 60% to

80% of lost customers reported

on a survey just prior to defecting

that they were satisfied or very

satisfied.”

HBR March/April 1996

84

‘Input’ Filters and Associated Risks

Mkt Rsc R&D

Research

Development

Filter

Filter

Filter

Marketing

Filter

85

Information Drifts (1/2)

1. Availability Drift: Looking for convenience • You give more weight to information that’s more

readily available to you.

2. Experience Drift: Influenced by personal prejudice • You tend to see things in terms of your personal or

professional interest.

3. Conflict Drift: Struggling with beliefs • Your natural tendency is to reject information that

conflicts with your beliefs.

4. Recall Drift: Trusting your memory • You more easily recall information about things

familiar to you.

86

Information Drifts (2/2)

5. Selectivity Drift: Picking your priorities

• You screen out information and observations about

things that do not interest you.

6. Anchoring Drift: Weighing answers too heavily

• If you lack experience in a specific area, you hang on to

or anchor to the first information you hear.

7. Recency Drift

• You place greater emphasis on what has just

happened to you.

8. Favorability Drift

• You are more likely to look harder for information that

supports your beliefs rather than input that is obvious in

front of you.

87

REPUTATIONAL RISK

88

Reputational Risk

• Reputational Risk

– Branding

– Public Relations

– Crisis Management

89

Strategic Risk

Brand – Erosion

– Collapse


90

What is the purpose of

Marketing & Branding?

Ultimate Objective of Marketing:

“Get more people, to buy more

things, more frequently, at higher

prices.”

Sergio Zyman

“Retention and Loyalty are useless if

No Conversion is happening.”

91

What is the purpose of

Marketing & Branding?

“Retention and Loyalty are useless if

No Conversion is happening.”

“Communication is useless if No

Conversion is happening.”

92

What is the Objective?

1.Comm = Relationship (something

like Dating)

2.Comm ≠ Media glitz

3.Comm ≠ ATL/BTL/BwTL/ArTL/FTL

4.Comm ≠ CSR

5.Comm = Get more people, to buy

more, more frequently, at higher

prices

93

Brand Erosion

“Get more people, to buy more

things, more frequently, at higher

prices.”

“Less people, buying less things,

less frequently, at lower prices.”

94

What does the Customer

want?

* Treacy & Wiersema, The Discipline of Market Leaders, 1995

Product/Service Attributes Relationship Image

95


want?


Product/Service Attributes

Price

Quality

Time

Selection

√

√

Smart Shopper

Relationship Image

Operational Excellence: Quality and selection in key categories with unbeatable prices

96


want?



√

Brand

Time

Function

√

√

Best Product

Relationship Image

Product Leadership: Unique products and services that push the standards

97


want?



√

√

√

√

Service Trusted Brand

Relationship Image

Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships

Relations

98

Public Relations and

Reputational Risk

99

Why is PR important to

Business Value?

1. Funds

2. Brand

3. Intelligence

4. Business

100


Business Value?

1. Funds

2. Brand

3. Intelligence

4. Business

Communication

to bring in the

Funds

101


Business Value?

1. Funds

2. Brand

3. Intelligence

4. Business

Communication

to bring in the

Sales

102

Importance: Brand

PR is a key component of corporate

Branding due to its direct influence on:

1. Multiple parties (Investors)

• These parties are either our Branding

targets or has influence on our branding

targets

2. Brand Story

103

Challenges of Public

Relations

1. Stake- vs. Share-holder*

2. Public Opinions

3. Indirect Stakeholders – NGOs, Community Activists, Online Networks

4. Increasing focus on ecological, social, ethical issues

5. Diverged expectations for same issue

6. Web 2.0

7. What to do with Excessive Cash?

8. Superficial changes vs. Fundamental Changes

9. Investors depend on ‘hearsay’ vs. ‘facts’

10.Share Price ≠ Market

11.R&D/M.S./HR vs. Investor Expectations

12.Opposing ‘Expert’ views

13.Operational Risk -> Reputational Risks

104

PR Challenges

“Good news for stockholders can be

bad news for other stakeholders.” Gregory Miller, Assoc. Prof., Harvard Business School.

105

Audiences – Good News?

Bad News?

• money saved by tough bargaining

with a union

• announcing a dividend: to employees

• announcing a dividend: to

environmentalists

• setting up Diversified business

106

Audiences

Institutional

Fund Managers

Corporations

Sovereign Funds

VCs

NGOs

Non-Profit Org

Financial (Loans)

JV Partners

M&A

Social VCs

Holding Co.

HQ (MNC)

Gov VCs

Supply Chain

Government

PFI

Competitors

Franchisees

107

Audiences

Individuals

Investors

Employees

Shareholders

Customers

Distributors

Management

108

How do External Parties get

their ‘INFO’? (1/2)

Institutional

Gov./Politics Customer

s

Suppliers

Economic

s AGM

Market

Research

Internet*

Annual

Report Media

Analysts

Fund

Managers

Due

Diligence

NGOs

Newsletter Spokespersons

109



Institutional

Gov./Politics Customer

s

Suppliers

Economic

s AGM

Market

Research

Internet

Annual

Report Media

Analysts

Fund

Managers

Due

Diligence

NGOs

Newsletter Spokespersons

110



Individuals

Gov./

Politics

Customer

s Public

Events

Economic

s AGM Ads

Internet*

Annual

Report

Media

Analysts

Fund

Managers

Relatives

Friends

Pasar

Malam

Employees

Employee

Bloggers

Mgmt

Action

s

Newsletter

111



Individuals

Gov./

Politics

Customer

s Public

Events

Economic

s AGM Ads

Internet

Annual

Report

Media

Analysts

Fund

Managers

Relatives

Friends

Pasar

Malam

Employees

Employee

Bloggers

Mgmt

Action

s

Newsletter

112

What topics interest External

Parties?

Acquisition

target

Layoffs

Cost

Cutting

New

Mgmt

Treatment

of Profits Consistency Ecology

Economics

Politics

Strategy

Alignment

CSR-

related

Crisis

Topics?

113

What topics interest External

Parties?

Acquisition

target

Layoffs

Cost

Cutting

New

Mgmt

Treatment

of Profits Consistency Ecology

Economics

Politics

Strategy

Alignment

CSR-

related

Crisis

Topics?

114

What Events impact External

Parties?

Politics

Financial

Announcements

Shareholding

changes

Structure

Accidents Economic

Crisis

Competitor

Moves

M&A

New

Plans

Share-

drop

Events?

115

What Events impact External

Parties?

Politics

Financial

Announcements

Shareholding

changes

Structure

Accidents Economic

Crisis

Competitor

Moves

M&A

New

Plans

Share-

drop

Events?

116

Good News vs.

Controllability

Can Control Cannot Control

Internal

Attribution

External

Attribution

?

117

Bad News vs.

Controllability

Can Control Cannot Control

Internal

Attribution

External

Attribution

118

Stakeholders vs. Reputation

Communications

Consumer

s, Partners

Media Sharehold

ers,

Investors,

Analysts

Regulators Civil

Society,

NGOs

Key Issues

Key

Questions

asked

Actions

119

Media-specific Reputation

Communications

Media

Key Issues •Big business as negative

•Lack in-depth reporting for balanced view

Key Questions

asked

•Limited, usually telecons with IR/CC

Actions •Websites

•Press Release

•Management Press

•Sells-side Analyst calls and reports

•Industry Reports

120

Crisis Management

121

What is a Crisis

1. cannot be predicted,

2. they always bring about change—

often for the worse, and

3. affects reputation, management,

brand or market share.

122

Goal of Crisis Management

“to contain and/or prevent the

impact on the various audiences

that corporations must recognize”

these audiences are customers, employees,

communities, government, and of course, the

shareholder/ investment community.

123

Board’s Role in Crisis Management

1. Understanding types of Crisis Risk

2. Effective Crisis Plans

3. Good Communications Strategy

124

Type of Crisis - Corporate

Entire organization is put at risk:

• Failure of Corporate Governance

• Changing the shape of structure or

organization

• Failure of strategy

• Government regulations

125

Type of Crisis – Site

Part of organization is put at risk:

• Major fire

• Explosion

• Dangerous leaks and spills

• Physical damage

• Physical harm to staff

• Theft of dangerous materials

• Natural disasters

126

Type of Crisis – Product

• Process failure contamination

• Direct and indirect Raw material problems

• Mischief or extortion

• Counterfeiting

• Poor distribution

127

Type of Crisis – Employee

• Criminal acts

• Sabotage

• Drugs

• Money-laundering

• Lawsuits

• Defection

• Loss of key staff

128

Type of Crisis – Competitor-initiated

• Media attack

• Prevent a deal

• Dismantle barriers to entry

129

Crisis Planning

• Vulnerabilities Audit

• Business Recovery Planning

• Disaster Recovery Plan

• Crisis Communication Plan

130

Crisis Management Plan

Business Function Crisis:

Before

(readiness for

crisis)

During

(sound crisis

management)

After

(profiting and

learning)

Policy and

Planning

Process Owner:

[dept. accountable]

Communications

Logistics & Info

Systems

131

Crisis Communication Plan

• Crisis Communication Team (to determine small

or BIG for communications purposes)

• Crisis Media Plan

– Media Management

– Media Centre

– Crisis Spokesperson & Interview

– Press Release

132

PEOPLE RISK

133

People Risk

• People Risk

– Succession Planning and Business

Continuity

– Fraud

134

Practical succession planning

135

Right vs. Wrong SP Method

Succession Planning as

per Job Positions

Succession Planning as

per Leveling

136

Risk and Succession Planning

Succession Planning

=

Business Continuity Plan

137

What’s your SP goal?

Succession Planning

Personal

Estate Planning

Business

Legacy

Business

Continuity

138

Principles and Objectives

Principles Company’s Needs

1.Succession Planning of Key Leaders –

Founding Directors (perpetual business theory)

2.Retention of Key Staff – especially younger

ones

3.Transform into a Performance-based

organization

139

Principles and Objectives

Principles HR Philosophy

1.Equal / Fair

2.Happy / Productive

3.Hire Low, Train High

4.Performance vs Potential

5.Retention / Engagement

140

The Wrong Approach

141

The Better Approach

Business

Strategy OJT, Mentoring,

Big-5, LP, PDP,

SDP, Projects,

P/P Grid, SP Table,

PDP, Premium,

Q12, C&B, ACDP, SCL,

Transfers, Events

P/P Grid, Q12,

PA, SDP, SP

Development

Motivation

Selection

Evaluation

142

Targeting: Identify and Attract

Group I

(Talent Pool)

2

3

4

5

PE

RF

OR

MA

NC

E

2 3 4 5

POTENTIAL • Identify

143

Targeting: Identify and Attract

Group I

(Talent Pool)

Group II

( Potential)

Group III

( Performance)

Group IV

(Counseling)

2 3 4 5

2

3

4

5

PE

RF

OR

MA

NC

E

POTENTIAL • Identify

144

Succession Planning Table:

Example Succession Plan

Business-Critical Position 1

Ready Now 1-2 years > 2 years (Year estimated)

Head of Sales 1. Ramli Bakar

2. Joseph Wan

3. Selina Chan

1. Rebecca Ganaraj

2. Abu Hassan

3. Lee Tai How

1. Irene Soo

2. Fatimah Ibrahim

3. Kan Weng Tai



Head of Operations 1. Wong Wai Chun

2. Selina Chan

3. -

1. Abu Hassan

2. Syed Kamil

3. Jessica Lee

1. Khoo Tien Wee

2. -

3. -



Head of R&D 1. Michael Wong

2. -

3. -

1. -

2. -

3. -

1. Khariul Nizam

2. Jessica Lee

3. Wong Lai Sun

145

Advanced Career

Development Plan: Example 9. PERSONALITY PROFILE:

10. LEADERSHIP STYLE:

11. RELOCATABLE:

Within Country Within Region Globally

12. PERFORMANCE/POTENTIAL RECORDS

Year Performance Rating

Potential Rating

Performance/ Potential Grid

Exceptions:

13. SHORT RANGE CAREER GOALS:

State goals for the next 1-2 years

14. LONG RANGE CAREER GOALS:

State Career goals for the 3-5 years

15. CAREER PLAN

Next Position Option 1 Readiness for Next Position Option 1




146

Advanced Career

Development Plan: Example

9. PERSONALITY PROFILE:


11. RELOCATABLE:




Potential Rating


Exceptions:





15. CAREER PLAN





147

Advanced Career




11. RELOCATABLE:




Potential Rating


Exceptions:





15. CAREER PLAN





148

Advanced Career




11. RELOCATABLE:




Potential Rating


Exceptions:





15. CAREER PLAN





149

SCL: Specialist Career Ladder

•Telco,

•Outsourcing,

•Aerospace,

•Biotech,

•Digital media,

•Animation,

•M&A

•Financial forensics

Associate Specialist (2)

Specialist (4)

Consultant (4)

Principal Consultant (1)

150

Last Note about Succession

Planning

“He has 20 years experience:

1 year of bad experience

repeated 20 times”

151

Fraud

152

No Business, No Risks.

• Ironically, success is the cause of risk

• More success, more money, more fraud

• Easiest way to reduce fraud is to reduce

business

• Don’t laugh. This is what most Finance and HR

people do, unintentionally

153

Fraud Risk Mitigation?

Standard Fraud definition:

What is Fraud?

1. Someone is Lying

2. Someone is Benefiting

Both Conditions must be met in order to be

considered Fraud.

154

Where are the Risks?

Industry

Management

Staff

Frontline

Sup

plie

rs/V

endors

R

eta

il Fro

nt

155

Real Fraud, Real Risks

1. Distributor Fraud

2. Staff Fraud

3. Management Fraud

4. Distributor

5. Credit Loss

6. Undercutting

7. Purchasing

8. Credit Card

10.Ghost Staff

11.Ghost Distributor

12.Financial Reporting

13.Theft

14.Sales Staff

15.eCommerce

16.Share manipulation

156

Fraud Root Causes

• Policy problem

• People problem

• Unavoidable problem

157

Possible Psychological Root

Causes for Fraud

1. "Everyone does it."

2. "It was small potatoes."

3. "They had it coming." – the revenge syndrome

4. "I had it coming." – the equity syndrome

158

GENERAL STRATEGIES AND

POLICIES

• B1. Classification of Behaviors

– B1.1 Disrespectful Workplace Behavior

– B1.2 Progressive Discipline

– B1.3 Zero Tolerance

159


POLICIES

• B2. Recruitment and Selection

• B3. Exit

• B4. Employee Assistance Program

• B5. Anonymous Hotline

• B6. Communication and Feedback

• B7. Training and Education

• B8. Formal Complaint and Grievance

160


POLICIES

• B9 Leadership

– 1. Leaders act as role models whether

consciously or unconsciously

– 2. Leaders determine the working

environment

161


POLICIES

• B9 Leadership

– 1. Educate

– 2. Involve

– 3. Teach

– 4. Eliminate

162

SPECIFIC STRATEGIES AND

POLICIES

• C1. Theft and Fraud – Root Causes

– 68.6% - no prior criminal record.

– Struggling financially or large purchases

• difficult time in their lives

• gets out of hand

– Merger and acquisition or reorganization

activity.

• ‘I don’t have a career here’ attitude.

163


POLICIES

• C1. Theft and Fraud - Prevention

– Background checks

– Duties segregated

– Anonymous hotline

– Share the wealth

– Communicate successes

– Make a big noise when discovered

– Video surveillance equipment

164


POLICIES

• C2. Violation of confidentiality or security

of company information - Prevention

– a. ICT Security Policies

– b. Ownership of Intellectual Property

– c. Inside Information and Trading of shares

165

*ICT Security and Fraud (1/3)

Biggest ICT risks

• E-mails

• Portable drives

• Social Media

• Cloud services

• Mobile devices

• Laptops

166


The following are threats faced from ‘inside’ the

company:

• Current Employees,

• On-site Contractors,

• Former Employees,

• Vendors/Suppliers,

• Strategic Partners, and

• OEMs

167


1. Web browsing and

Internet Access

2. Username and

passwords

3. Instant Messaging

4. E-Mail

5. File access permissions

6. Backups

7. Crisis management,

Disaster recovery and

Business Continuity

8. Physical

9. PCs and laptops

10.Remote access

11.Servers, routers, and

switches

12.Internet / external

network

13.Wireless

14.PDA and cell phone

15.Documentation and

change management

ICT Security, Backup, and Continuity Strategies:

168

Mistakes and Lessons

Learned on Fraud Cases

1. Price to Pay for Fraud/Risk Mitigation =>

Business Flexibility

2. Control vs. Growth

3. Rules vs. Humanity/Motivation

4. Not tackling the root cause i.e. Motive +

Opportunity i.e. Humans

5. Focus on Finance vs. Sales/Marketing => who

has control?

6. Relationship Role vs. Enforcement Role e.g.

Sales vs. Credit Control vs. Retail Audit

169

HOW TO…

170

• How To…

– 4-Wheels Model

– Checklists

– Insurance/Takaful

171

Risk Mitigation Strategies

Culture

Mitigation

Identified

Fraud

Risks

Structure Resources

Leadership

Person

172

Alignment: Framework

• Org Structure

• Job Design – C.Fraud.O.

• Policies & procedures

• Governance, Internal Controls

• Management Systems, SOPs

• Central

• Special Task Force

• Internal Audit, Surprise Audit, Regular Audit

(Surveillance)

• Levels of Authority, Power Balancing*

Structure

173

*Power Balancing

1. Initiate

2. Propose

3. Approve

4. Monitor

174


• Tools

• ICT Systems

• Rules detection

• Whistle Blower

• PED

• Profiling/Assessment Tools

• Budget for Investigation,

Litigation

Resources

175

Strategy: Framework

• PED

• Involuntary Role Modeling

• Personal accountability and

Commitment

• Values

• Watch out: Current people promoted

to Key Positions

• Promotional criteria

Leadership

176


• New Employee Background checks

• Willingness to Punish

• Root Cause Analysis (Mager & Pipe)

• Rotation

• PED

• Fraud Detection & Analysis Competency

• High Risk Jobs

• IT breaches through Frontline

Person

177

Strategic Risk Map

Type of

Risk Risk Rating

Expected timing

in years

Changing

probability

over time 1 2 3 4 5


178

End Notes

179

Which Company?

American Customer Satisfaction Index (ACSI)

• 64 out of100-point scale: lower than IRS (Tax)

• 2nd last among 30 companies surveyed

• Lowest 5% among 223 companies surveyed

• Bottom 5% of all measured private sector

companies

• 500 million customers

2010 American Customer Satisfaction Index

(ACSI) E-Business Report

http://www.foreseeresults.com/research-white-papers/ACSI-e-business-report-2010.shtml



180

Which Company?

American Customer Satisfaction Index (ACSI)

• 64 out of100-point scale: lower than IRS (Tax)

• 2nd last among 30 companies surveyed

• Lowest 5% among 223 companies surveyed

• Bottom 5% of all measured private sector

companies

• 500 million customers

2010 American Customer Satisfaction Index

(ACSI) E-Business Report




181

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