However, as an article in today’s Wall Street Journal points out, the last year has forced us to question how much faith we can place in forecasts:

Forecasts for just about everything from gas prices to advertising stumbled badly last year as the recession delivered shocks to the economy. The spate of cloudy crystal balls highlighted an uncomfortable reality about telling the future: It is hardest when it is most important.

Put simply, a forecast is a prediction of how future events will pan out, crystallized in the form of a single figure (or a range of figures). In order to make this prediction, models are built – from basic ones that simply project last year’s figures (give or take) to sophisticated models that incorporate a myriad of variables.

However, there are two fundamental issues with this, as we realized over the last 12 months:

1. No model can account for ‘market’ shocks (i.e. unpredictable events)
2. No model can account for emotion

With regards to the first point, consider September 11, 2001 and the market meltdown of late 2008.  Neither could have been predicted, and certainly not to the magnitude that we experienced.

On the second point, emotion is (to the chagrin of our economist friends) a reality of almost every business environment – whether at the business or the consumer level.  Individuals are not always driven by rational logic, but by individual perceptions and agendas.

That said, one shouldn’t surmise that forecasting (specifically within the corporate/business planning context) is an irrelevance.  It isn’t.  The essential learning is that because 100% accurate forecasting is such a difficult proposition, one must be even more diligent and thoughtful in the act.  (Indeed, much like the quest for nirvana, as much as it may be an improbable expectation, it is still a goal worth striving for.)

There are, therefore, 4 key takeaways:

1. Numbers are dynamic: published reports that provide forecasts are useful but are almost always researched months ahead of their publish dates and rarely updated in a timely manner.  They must therefore (especially in periods of uncertainty) be validated through other means.  One practice that we have utilized heavily is primary research to validate the numbers.  Certainly, there is still room for error, but the goal is to minimize the expected deviation.
2. Be thoughtful about the process: building a forecast requires an understanding and analysis of many variables – from expected macro-economic changes to the shifting dynamics in a company’s own environment – hence breeding a deeper understanding of where a given market may be headed and why.  Thus, the act of forecasting provides as much value as the end figure in and of itself.
3. Re-evaluate the figures regularly: similar to point 1 above, once the figures are developed, they cannot be left alone for the remainder of the fiscal year.  The reality is that markets can and do change, and hence the forecast (or outlook) will as well.  A periodic review of expectations is critical on at least a quarterly basis.
4. Consider multiple scenarios and assess probabilities: in many instances, the end goal cannot be a solitary number, but rather a set of scenarios, each with some assessment of the probability of occurrence.  As the WSJ article states, the Federal Aviation Administration, in looking to predict air travel over the next decade, is looking at just such options.

Perhaps the most important takeaway, though, is provided at the end of the article:

J. Scott Armstrong, a professor of marketing at the University of Pennsylvania’s Wharton School who studies forecasting, says that in uncertain times such as today’s, when oil prices and airline travel are so volatile, the smartest prediction might be the simplest. “It’s a forecasting principle that the more uncertainty you have, the more conservative you should be,” Prof. Armstrong says.

While the debates are nowhere near being silenced, there is some emerging research that luxury brand extensions can benefit from more improved brand associations than, say, a value brand.  In fact, a recent article in Time profiled a study in the Journal of Consumer Psychology:

…recession-wracked shoppers are eager to embrace luxury brand names over a wide range of product categories, including those with little logical connection to the brand’s core item. The authors attribute this phenomenon to the “promise of pleasure” — a brand like, say, Cartier evokes strong, positive emotional responses in consumers, and those good feelings can be easily transferred to stuff like furniture, cheese and even, yes, ketchup.

Essentially, the authors’ research suggests that if you have two versions of the same product, one positioned as ‘luxury’ and the other as ‘value’, brand extensions of the luxury name (into completely unrelated categories – say from spaghetti to dishwashers) tended to be perceived much more favorably than those of the value brand.

It’s an intriguing concept and in many ways it aligns with some basic facts that we accept as true – that it’s far easier to trade down than trade up (albeit here we are referring to it in a product sense).  But exactly how far can this go?

Fairly far, it seems.  There are some categories that we tend to accept as ‘givens’, that is, we perceive these as completely logical extensions of a luxury brand.  Clothing comes to mind.  Fragrances is another area.  Others are less so.  But even these acceptable types of plays are governed by some strict rules.  Organizations cannot stray too far for their core luxury mantra: the extensions, to be truly successful and aligned with long term brand development, must exhibit the same quality standards as the core product.  To quote Time again:

If Cartier is going to license its name on cheese, it had better be damn good cheese, and it had better sell this cheese at exclusive, upscale stores. When Bulgari licensed its name to a hotel, it chose a luxury hotel. Hermès has weathered the recession in part by expanding into premium, yet relatively more affordable, accessories and fragrances.

Worth noting here are two points/implications.

First, that an implicit characteristic of such luxury extensions is that they must continue to be perceived as exclusive.  The minute that “The Masses” adopt such products as their own, the allure is lost.  Consider this the Cardinal Sin.

The other implication is more of a question: who is actually buying these products?  By extending into other unrelated “commodity”-like categories (foods fall into this bucket), are you diluting your customer base.  Are we now tapping into a customer set that has more aspiration to buy the core product than the budget?  The answer certainly varies by product type, but it is worth asking (refer to the Cardinal Sin above).

So while the answer isn’t clear cut, the debate has just got a lot more interesting with this study.  But, seriously, can BMW really benefit from having its own brand of ketchup (as Time half-jokingly suggests)?

You be the judge.

Indeed, bubbles can hardly ever be explained by good, bread and butter quantitative techniques.  During the recent era of cheap and easy money, the process of asset valuation for most investors appeared to have lost any semblance of quantitative rigor – the value of any asset effectively depended on how much money you could readily borrow to buy it.  The party raged on as mortgage brokers were paid hefty commissions to make quick and easy loans with no questions asked, while commercial bankers fought to lend billions to sub-investment rated borrowers.  As a result, asset values truly sky rocketed.

However, all good parties must come to an end, as the bubble has popped and the proverbial blanket has effectively been pulled from beneath a number of highly leveraged companies, the messy fallout extending from Australia to Arizona and everything in between.  Investors are again taking a good hard look at the fundamentals, dusting off Excel spreadsheets and basic principles to analyze investments.  As the traditional definition of investment rationality has returned to the markets, both Damodaran and Altman have seen their stock sky rocket.  Once again, their time has come.

And returning alongside this traditional definition are those irritating little concepts of complexity and uncertainty.  With no grand unifying theory of the new world order or forever altered investment landscape, etc. to work behind, we are now being forced to deal with the fact that asset valuation isn’t a clean or easy process – as quantitative and disciplined as the process can be, there are multiple, reasonable paths to valuation.  For example, in own equity valuation work, our analysts regularly apply 4 or 5 different methodologies, such as benchmarking against sales multiples, P/E multiples, EBIT multiples, EBITDA multiples, and discounted cash flow analyses.  Almost never will all methodologies produce the same answer and rarely, in fact, will two perfectly competent analysts come out with the valuations.  This complexity is part and parcel of free markets – after all, if all investors had identical views of securities prices at all time, market volatility would immediately fall to zero.

(In addition, the recent difficulties that many borrowers and distressed firms have faced in raising capital highlight just how difficult this brave new world of rational asset valuation has become.  Case in point: the potential Delphi-Platinum Equity deal.  Last week, lawyers for Delphi’s lenders swarmed the US Federal Courthouse in Manhattan arguing that Platinum Equity, a Private Equity firm, is getting a sweetheart deal by ponying up less than $500 million in cash to buy the giant Auto-parts maker Delphi out of bankruptcy.   Lawyers for the creditors, who stand to be reimbursed as little as 20 cents on the dollar, argue that they are getting the short end of the stick and more buyers willing to pay more cash should be brought in and permitted to bid.  (Delphi, once a huge wholly owned subsidiary of GM, had been one of the largest Auto-parts makers in the US.)

While the total value of Platinum’s bid is some $3.6 billion, including a variety of debt instruments and future guarantees, the exact amount of cash being offered for the assets of a firm that was once a giant in the automotive industry is surprisingly low – or is it?  The truth is that cash buyers are few and far between these days.  Many private equity firms that may have been interested in out-bidding Platinum for Delphi are already well over-exposed to the automotive sector given the investment frenzy of years past.  Further, few of these funds could hope to raise the huge amounts of leverage finance from eager financial sponsors who in years past were all too willing to oblige.  Could it also be that, while Platinum’s offer may seem paltry, it is perhaps an offer made on the basis of Damodaran type logic: expected future cash flow, EBITDA, and conservative estimates about what the top line will look like when GM, Delphi’s number one buyer, comes out of bankruptcy?  (Whether this truly is or isn’t the basis, we will find out in the coming weeks and months.))

All that said, the question that this raises, is not so much whether we are in a world of perfectly rational asset valuations, but rather if our present level of risk aversion and caution is here to stay.  How will we react when the next Big Thing rolls around?  Business cycles, as severe as they may be, do inevitably reverse and, yes, it is entirely possible (and probable) that the leverage loan pipeline (filled even with covenant-light deals) may soon begin  to flow again providing the fuel to power yet another asset buying binge.  Will it be as frenzied as the past?  Or will we remain as disciplined as we are now?  Only time will tell.

Though perhaps not quite as extreme, a somewhat similar scenario is taking shape with regards to the investment outlook for Emerging Markets.  While there has certainly been a broad based recovery across Emerging Markets both in fixed income and equity, there is still no agreement among analysts as to whether the volatility and accompanying precipitous price drops of the last year are behind us.  As a result, most Emerging Market institutional investors are also asking the same question: “Is it safe”?

So is it?

The answer, it seems, depends on whether you are a Corporate or a fund manager.

As a Corporate looking at Emerging Markets from a Foreign Direct Investment (FDI) point of view, managers appear to have returned to a ‘full-steam-ahead’ strategy with regards to EM investment – they clearly believe that EM, as opposed to the G5, is the place to be.  Look no further than the flurry of media reports released during President Obama’s current trip to Moscow: it seems like one Fortune 500 corporate after another is announcing their big time bets on Russia as their hot new market for the next decade (despite the collapse in oil prices and perceptions around corruption).

PepsiCo, for example, announced on Monday that it will invest $1 billion in Russia over the next three years and open its largest bottling plant in the world outside Moscow.  Similarly, Boeing announced an agreement to buy Russian titanium parts for its wide-body Dreamliner jet.  Even middle market manufacturing is jumping on the bandwagon – Deere, a Midwest-based farm-equipment maker, announced sharply increased planned investments in its operations in Russia.  The tractor giant and former Dow-component stock, Deere is betting on the agricultural renaissance in Russia as investors create a huge business stretching from the Urals to the Pacific of modernizing former collective farms.

Despite this rosy Corporate outlook, the view on the investment side is not so clear.  On the upside, the Russian equity market, which has consistently ranked as either one of the best or one of the worst performers in the global league tables, has nearly doubled since plunging to a 5-year low earlier this year.  Brazil has similarly recovered with no sign of the return to the boom-bust-boom cycles and hyper inflation of the last decade.

Yet, portfolio managers and hot money investors who need to see results in days rather than years or decades still appear to be reluctant.  The rally in EM debt and equity prices, according to many skeptics, has gone too far, too fast and is primarily fueled by speculative fishing in highly illiquid markets with little, if any, solid macroeconomics to support further price appreciation.

Local currency EM investment, particularly in leveraged debt, is still a moribund market with still virtually zero interest from G5 fund managers.  Commercial bankers and trade finance desks are only now beginning to look at super senior collateralized deals originated out of Europe and the US with absolutely no trace of the bubbly euphoria for EM deals of years past.  As we commented in a recent article on Emerging Market Local Currency Financing in Global Trade Review:

“Most analysts agree that it is still too soon to gauge how willing investors will be to gain new local currency exposure – particularly with risk aversion hovering around historic highs in the commercial banking sector where much of the EM finance industry is based.”

All of which raises the interesting debate about ‘decoupling’ in Emerging Markets.  As we indicated in Global Trade Review:

“Decoupling was a growing belief among emerging market financiers that economic development, risk and volatility of emerging markets would slowly but surely decouple from GDP growth – or lack thereof – in developed markets.   By contrast, the opposing “we are all in the same globalised boat” view on estimating volatility in of emerging economies has quickly taken over.”

In other words, the real question is, while the G5 economies (led by the United States and Britain) may be in a slow-growth or no-growth mode for the foreseeable future, will the world’s economic engine now be shifted to the Emerging Markets – or all we all in the same slow/no growth correlated global boat?  Your guess is as good as ours.

So while there is no consensus on the hot debate around decoupling, perhaps we can answer a somewhat simpler question on EM investments: Is it safe?

The answer is an unequivocal “Yes”…and “No”.

For Corporates with a time horizon of years rather than trading days, the answer is a definite “Yes”.  Fund managers, by contrast, appear to be responding with a far more equivocal answer: “I’ll get back to you on that one”.

The core elements of the deal are your standard outsourcing fare – HCL will provide IT application and infrastructure operations and management services to DPS, which essentially means it will manage DPS’ computer networks.  However, one aspect of the relationship specifically caught our eye:

HCL said that Dr Pepper Snapple would be its “anchor service desk customer” in an operation in Raleigh, N.C., that would eventually employ 500. With the new deal, HCL is continuing to “bring on new staff at our new facility in North Carolina,” Shami Khorana, president of HCL America, said in a statement.

In other words, not only is HCL outsourcing (and offshoring) DPS’ IT work to its own offshore locations (cost arbitrage was no doubt a key factor in the deal) but it will be ‘onshoring’ jobs as well as part of the deal.  Indeed, as the NY Times put it:

Indian Informational technology and outsourcing companies have been increasing their use of so-called onshoring, or putting jobs in a client’s home market, as political pressures build to increase jobs in countries hard hit by the slowdown.

This trend has been evident in recent years across a wide range of BPO players from TCS to Aegis to Infosys to even IBM.  And while political pressures are no doubt driving some of these onshoring activities, if you look at this from an overall business development and organizational standpoint, there is a sound business basis for these onshoring decisions. This is centered around two basic points – one definitional, the other practical.

First off, outsourcing does not necessarily mean offshoring.  While offshoring has been a critical component of outsourcing strategy, the choice of location is a distinct decision and is driven by a mix of factors, including the nature of the work, requirement for onsite/client-facing interaction, availability of talent, competitive considerations, etc.  Cost is only one element of the total decision and rarely the most critical consideration.  (Cynics can shake their heads at that last point, but consider any successful outsourcing deal, and cost becomes the driving factor only after the other work-related criteria are met.)

Secondly – and in line with the first point – the best delivery model in today’s global, technology-enabled business environment, is typically a mix of onshore and offshore resourcing.  The key driving question is what the work is and where is the best place for it to be located.  (In other words, the right roles in the right places.)  Hence, the decision is effectively around where to strike the balance between on and offshore, not one versus the other.  Typically, for a vendor,  onshore locations make sense for higher end work that involve closer client interaction e.g. where there is a need for an account executive to interact directly with multiple onsite stakeholders to define requirements and ensure smooth delivery of a particular solution.  To try and do this from an offshore location isn’t necessarily feasible or practical.

So our expectation is that we will only begin to see more news in line with the HCL-DPS deal.  Clearly, outsourcing and offshoring are accepted and vital elements of the management toolkit.  Given the benefits, the rush to outsource and offshore over the last decade or so (in the white collar world; remember, we’ve been outsourcing blue collar work for decades) has been significant, and quite possibly, we saw the pendulum swing far in one direction, as everyone rushed to do it.  This is normal with any new trend.  However, as we go forward, we are likely to see a more thoughtful process as organizations begin to consider the complexities inherent in such relationships.  And job creation is likely to be a much more common outcome.

In light of this improving financial climate, attention is slowly turning back from stabilization to identifying the next economic opportunity, and few are seeing as much attention as one of President Obama’s most ambitious (and popular) economic agendas: the promotion of Alternative Energy. Indeed, as we write in a recent article on the subject in the financial publication Global Trade Review:

Green energy had been a buzz phrase throughout the final weeks of the US presidential campaign. Both Senator Obama and his Republican rival Senator McCain eagerly promoted their determination to lead the US economy towards energy independence. This was largely due to a massive government campaign of tax incentives and government investment to fund development of alternative energy generation.

Six months into the new administration, though, project finance desks and commercial bankers across Wall Street are not exactly throwing suitcases of money at Alternative Energy deals (and certainly lack the enthusiasm shown for the highly leveraged multi-billion dollar takeover deals of the past). Indeed, with the traditionally slow summer season upon us, the jury is still out as to when and how quickly enthusiasm for financing big ticket alternative energy deals will return. Certainly, while the new presidential administration is speeding full steam ahead to kick start most any aspect of the economy (including incentivizing investment into alternative energy):

…Public funding alone will not change the basic economics of energy production and the tight credit environment. The central questions facing renewables are: how long will credit be tight and how low will oil and natural gas prices fall?

The key question, therefore, remains: will the Green Revolution prove to simply slogan or substance? The GTR article concludes:

For many skeptics, alternative energy, even under a green-friendly White House, recalls the dot com internet and telecom hysteria that bankrupted less than a decade ago when then vice-president, Al Gore, called for a national campaign to develop the “information superhighway”. Nonetheless, there is nothing like massive government intervention to get investors to stand up, take notice and act – particularly in the area of tax credits and the creation of tax equity, which has been a key driver to financing a bulk of the existing US alternative energy infrastructure already in place.

If the free market gets a little helping hand (or even a giant push) from Uncle Sam, perhaps the Green Revolution can take off for Wall Street bankers.

Stay tuned…

The British CFA recently asked members for the first time whether they trusted in “market efficiency” – and discovered more than two-thirds of respondents no longer believed market prices reflect all available information. More startling, 77 per cent of the group “strongly” or “very strongly” disagreed that investors behaved “rationally” – in apparent defiance of the “wisdom of crowds” idea that has driven investment theory.

The shift is significant as the assumption of efficient markets is a cornerstone of calculating the value of everything from stocks to pension fund liabilities to executive compensation.

It’s an interesting result, especially given the fact that CFAs are schooled in the tenets of rational and efficient markets from the outset.

It’s also, in my opinion, in line with the reality of the markets.  The evidence has been there for all to see in recent years (and, in truth, much before that as well) – markets have quite frequently behaved irrationally and, many would argue, are not behaving entirely rationally at the moment.   Some even go further, such as Jeremy Grantham, the famed market strategist with GMO, who wrote in a recent quarterly letter to his clients (see a recent NYT article):

“The market is full of major league inefficiencies…There are incredible aberrations…The U.S. housing market in 2007. Japan in the 1980s. Nasdaq. In 2000, growth stocks were three times their fair value. We were quoted in The Economist in 2000 saying that the Nasdaq would drop by 75 percent. In an efficient world, you wouldn’t have that in a lifetime…if professional investors had been willing to acknowledge these aberrations — and trade on the fact that the market was out of whack — they should have been able to beat the market. But thanks to the efficient market hypothesis, no one was willing to call a bubble a bubble — because, after all, stock prices were rational.”

Wow.

While it might be a bit of a stretch to blame our entire economic crisis on a specific theory, it is interesting that we are now seeing an implicit rethink of the concept of rational markets.  As the FT article also points out, there is renewed interest in the field of behavioral finance, which suggests that markets can be moved by ‘irrational’ considerations such as human emotion (fear, for example).  Indeed, as we collectively take our tentative (and circuitous) steps towards recovery, it’s hard to argue with that.

Given the death of the “Company Man” and the general acceptance that the employee can have diverse needs, organizations have begun to rethink their definition of ‘career path’.  In fact, according to an article in Ignites.com (Corporate Ladder Gets Makeover Amid Downturn), organizations could actually be facing a unique opportunity to rethink the traditional corporate ladder:

…the up-or-out ladder model is no longer a tidy fit in corporate America, as the workforce has evolved from a male-dominated cadre to a more diverse group. With that comes a mix of lifestyles and demands, as employees struggle to strike a balance between work and life.

This is especially true in the professional services world.

The article cites fund companies as experiencing this change, but it’s equally as applicable to advisory firms such as consulting organizations, where the traditional demands of the profession – long hours, 4-5 days a week on the road – are no longer as easily accepted as they once were.  Instead of relying on increased pay as the solution, management has to begin to think creatively, offering more flexible arrangements working arrangements and distinct career path options (recognizing, for example, situations where an employee may need to cut back on their working hours to tend to a family member or care for a child).  Clearly, there are trade-offs – as ignites.com states, “it’s about enabling, not entitlement”.

I was asked to comment on this development for the article and my view is pretty clear – firms have been dealing with this issue for quite some time, and the true differentiator between those that are successful and those that aren’t, is trust.  In particular, trust between the employer and the employee, and based around a clear understanding of the implications of the different paths on offer:

“The key challenge for managers and employees alike is faith that employee choices will be respected by their managers, and that companies know that employees understand the implications for their future careers…The trust factor has to come in”

The unequivocal acceptance of this mutual respect is what serves as the basis for talent retention in the long run.

Of course, this discussion isn’t entirely new – we’ve seen variants of this conversation evolving over the last decade at least (the last major period of upheaval being the dotcom days, where companies were forced to offer all sorts of incentives to keep talent – the pendulum had in fact swung very far in the other direction then).  That said, it’s an important discussion and one that is continually continually evolving.

At the very least, these conversations indicate that we’re headed in the right direction.

In times of trouble, organizations tend to do two things – 1) Conserve cash and 2) Focus on what you know.  This makes perfect sense for most corporates but when it applies to a community that is considered by many as being the lifeblood of innovation, perhaps we need to rethink our rules?

Recent commentary has suggested that the VC Outlook in the near to medium term is weak and that the appetite for risk in the industry as a whole is declining.  Much of this is understandable given the proliferation of venture firms and funds of funds, the (temporary) death of the IPO and multi-industry wide slowdowns.  Simply put, there is just too much money chasing too few investments with not enough light at the end of the payback tunnel.

Or is that really the case?  Another school of thought is that while the economic issues are very real and we will likely see a number of VCs disappear in the next 18 to 20 months, the reality is that many firms are essentially becoming risk averse (most notably argued by Timothy Draper at the International Business Forum venture capital conference last week). Many VCs are chasing after the same ideas or are becoming very provincial from a geographic investment perspective (too US-centric).

The implication is that the next boom will not be centered in Silicon Valley but elsewhere across the globe, where innovation is being pushed harder and faster.

From the perspective of our global village, this is quite the cause for optimism, and national sentiments aside (though I’m not entirely convinced that the US won’t drive a lot of the innovation again), suggests a couple of key takeaways, as summed up excellently by The Stimulist:  The time for innovation is indeed now – when times seem darkest.

From a pure wealth creation perspective, this is the time to plant the seeds of success, when the ‘arbitrage’ opportunity is at its highest.  In addition, we are seeing something of a political, social and economic alignment, especially when it comes to anything ‘green’, ‘cleantech’, etc., suggesting that the avenues to massive prosperity (material and otherwise) lies in a path that will ultimately better both us as individuals and business people, and the planet.

Plenty of cause for optimism…perhaps we need to rethink our perspective on (and appetite for) risk?

While predictable performance is influenced by a multitude of factors, one of the most critical and visible over the last year has been the area of Supply Chain Risk.  Our global, interdependent economic environment – with its complex web of relationships and dispersed value chains – has made this a critical challenge over the last decade.  The recent economic turbulence has simply raised the stakes.

It’s no surprise, then, that as ‘hot topics’ go, Supply Chain Risk is one of the hottest in management today.  A key reason for this is that this type of risk is not simply a problem for the supply chain or procurement executive – it is an issue for senior management as a whole.

Consider Auto Parts producers the world over, whose very existence is being threatened by the problems of organizations all along their value chain, who are extending payment terms or defaulting on payment altogether; or the raft of manufacturers (from any number of industries) in Asia who are unable to secure the required credit to fund working capital requirements and thus stay in business; or even the OEMs and Electronic Manufacturing services providers, who operate in global, virtual, outsourced models where supplier outages, slowdowns and bankruptcies could threaten their ability to deliver to their end customers.

While these aren’t all issues that the Procurement team alone can resolve on its own, Procurement is, as the British like to say, at the ‘sharp end’ of the game.
It is no surprise, therefore, that supply chain executives are becoming much more aggressive in tackling this issue.  The starting point, very clearly, is quality information, and while most professionals recognize this, progressive organizations are thinking more broadly, asking themselves a host of key questions:

• Do we understand the ‘risk profiles’ of our top 50 suppliers?
• If so, is this an active program that is being periodically updated and refreshed?
• Are we integrating both qualitative and quantitative considerations when assessing risk?
• Are we looking at risk not only at a company specific level but rather across the entire value chain?
• Is the process of risk management integrated with our ongoing supply chain and sourcing activities?

Clearly, getting quality information to answer these questions cannot be a point solution – most markets are simply too dynamic to allow for this.  Instead, quality information must be obtained as part of a structured framework of activities that are embedded into an organization’s operational processes.

Such a framework must be multi-tiered, and look across the entirety of the category or commodity in question – from the value chain level through to the individual supplier level.  In addition, a clear understanding of the types of questions that must be asked to truly understand the type and level risk that an organization faces within its supply chain is critical.

For a deeper discussion of this topic, we’ve put together a brief discussion of the issue of Supply Chain Risk from both of the above perspectives – the framework with which to think about this issues and the key questions to be asked as part of this analysis.  For a copy of this paper, please click here.