Category Archives: Risk Management

COUPA: Centralized Optimization Underlies Procurement Adoption …

… or at least that’s what it SHOULD stand for. Why? Well, besides the fact that optimization is only one of two advanced sourcing & procurement technologies that have proven to deliver year-over-year cost avoidance (“savings”) of 10% or more (which becomes critical in an inflationary economy because while there are no more savings, negating the need for a 10% increase still allows your organization to maintain costs and outperform your competitors), it’s the only technology that can meet today’s sourcing needs!

COVID finally proved what the doctor and a select few other leading analysts and visionaries have been telling you for over a decade — that your supply chain was overextended and fraught with unnecessary risk and cost (and carbon), and that you needed to start near-sourcing/home-sourcing as soon as possible in order to mitigate risk. Plus, it’s also extremely difficult to comply with human rights acts (which mandate no forced or slave labour in the supply chain), such as the UK Modern Slavery Act, California Supply Chains Act, and the German Supply Chain Act if your supply chain is spread globally and has too many (unnecessary) tiers. (And, to top it off, now you have to track and manage your scope 1, 2, and 3 carbon in a supply chain you can barely manage.)

And, guess what, you can’t solve these problems just with:

  • supplier onboarding tools — you can’t just say “no China suppliers” when you’ve never used suppliers outside of China, the suppliers you have vetted can’t be counted on to deliver 100% of the inventory you need, or they are all clustered in the same province/state in one country
  • third party risk management — and just eliminate any supplier which has a risk score above a threshold, because sometimes that will eliminate all, or all but one, supplier
  • third party carbon calculators — because they are usually based on third party carbon emission data provided by research institutions that simply produce averages for a region / category of products (and might over estimate or under estimate the carbon produced by the entire supply base)
  • or even all three … because you will have to migrate out of China slowly, accept some risk, and work on reducing carbon over time

You can only solve these problems if you can balance all forms of risk vs cost vs carbon. And there’s only one tool that can do this. Strategic Sourcing Decision Optimization (SSDO), and when it comes to this, Coupa has the most powerful platform. Built on TESS 6 — Trade Extensions Strategic Sourcing — that Coupa acquired in 2017, the Coupa Sourcing Optimization (CSO) platform is one of the few platforms in the world that can do this. Plus, it can be pre-configured out-of-the-box for your sourcing professionals with all of the required capabilities and data already integrated*. And it may be alone from this perspective (as the other leading optimization solutions are either integrated with smaller platforms or platforms with less partners). (*The purchase of additional services from Coupa or Partners may be required.)

So why is it one of the few platforms that can do this? We’ll get to that, but first we have to cover what the platform does, and more specifically, what’s new since our last major coverage in 2016 on SI (and in 2018 and 2019 on Spend Matters, where the doctor was part of the entire SM Analyst team that created the 3-part in-depth Coupa review, but, as previously noted, the site migration dropped co-authors for many articles).

As per previous articles over the past fifteen years, you already know that:

So now all we have to focus on are the recent improvements around:

  • “smart scenarios” that can be templated and cross-linked from integrated scenario-aware help-guides
  • “Plain English” constraint creation (that allows average buyers & executives to create advanced scenarios)
  • fact-sheet auto-generation from spreadsheets, API calls, and other third-party data sources;
    including data identification, formula derivation and auto-validation pre-import
  • bid insights
  • risk-aware functionality

“Smart Events”

Optimization events can be created from event templates that can themselves be created from completed events. A template can be populated with as little, or as much as the user wants … all the way from simply defining an RFX Survey, factsheet, and a baseline scenario to a complete copy of the event with “last bid” pricing and definitions of every single scenario created by the buyer. Also, templates can be edited at any time and can define specific baseline pricing, last price paid by procurement, last price in a pre-defined fact-sheet that can sit above the event, and so on. Fixed supplier lists, all qualified suppliers that supply a product, all qualified suppliers in an area, no suppliers (and the user pulls from recommended) and so on. In addition to predefining a suite of scenarios that can be run once all the data is populated, the buyer can also define a suite of default reports to be run, and even emailed out, upon scenario completion. This is in addition to workflow automation that can step the buyer through the RFX, auto-respond to suppliers when responses are incomplete or not acceptable, spreadsheets or documents uploaded with hacked/cracked security, and so on. The Coupa philosophy is that optimization-backed events should be as easy as any other event in the system, and the system can be configured so they literally are.

Also, as indicated above, the help guides are smart. When you select a help article on how to do something, it takes you to the right place on the right screen while keeping you in the event. Some products have help guides that are pretty dumb and just take you to the main screen, not to the right field on the right sub-screen, if they even link into the product at all!

“Plain English” Constraint Creation

Even though the vast majority of constraints, mathematically, fall into three/four primary categories — capacity/allocation, risk mitigation, and qualitative — that isn’t obvious to the average buyer without an optimization, analytical, or mathematical background. So Coupa has spent a lot of time working with buyers asking them what they want, listening to their answers and the terminology they use, and created over 100 “plain english” constraint templates that break down into 10 primary categories (allocation, costs, discount, incumbent, numeric limitations, post-processing, redefinition, reject, scenario reference, and collection sheets) as well as a subset of most commonly used constraints gathered into a a “common constraints” collection. For example, the Allocation Category allows for definition “by selection sheet”, “volume”, “alternative cost”, “bid priority”, “fixed divisions”, “favoured/penalized bids”, “incumbent allocations maintained”, etc. Then, when a buyer selects a constraint type, such as “divide allocations”, it will be asked to define the method (%, fixed amount), the division by (supplier, group, geography), and any other conditions (low risk suppliers if by geography). The definition forms are also smart and respond to each, sequential, choice appropriately.

Fantastic Fact Sheets

Fact Sheets can be auto-generated from uploaded spreadsheets (as their platform will automatically detect the data elements (columns), types (text, math, fixed response set, calculation), mappings to internal system / RFX elements), and records — as well as detecting when rows / values are invalid and allow the user to determine what to do when invalid rows/values are detected. Also, if the match is not high certainty, the fact-sheet processor will indicate the user needs to manually define and the user can, of course, override all of the default mappings — and even choose to load only part of the data. These spreadsheets can live in an event or live above the event and be used by multiple events (so that company defined currency conversions, freight quotes for the month, standard warehouse costs, etc. can be used across events).

But even better, Fact Sheets can be configured to automatically pull data in from other modules in the Coupa suite and from APIs the customer has access to, which will pull in up to date information every time they are instantiated.

Bid Insights

Coupa is a big company with a lot of customers and a lot of data. A LOT of data! Not only in terms of prices its customers are paying in their procurement of products and services, but in terms of what suppliers are bidding. This provides huge insight into current marketing pricing in commonly sourced categories, including, and especially, Freight! Starting with freight, Coupa is rolling out a new bid pricing insights for freight where a user can select the source, the destination, the type (frozen/wet/dry/etc), and size (e.g. for ocean freight, the source and destination country, which defaults to container, and the container size/type combo and get the quote range over the past month/quarter/year).

Risk Aware Functionality

The Coupa approach to risk is that you should be risk-aware (to the extent the platform can make you risk aware) with every step you take, so risk data is available across the platform — and all of that risk data can be integrated into an optimization project and scenarios to reject, limit, or balance any risk of interest in the award recommendations.

And when you combine the new capabilities for

  • “smart” events
  • API-enabled fact sheets
  • risk-aware functionality

that’s how Coupa is the first platform that literally can, with some configuration and API integration, allow you to balance third party risk, carbon, and cost simultaneously in your sourcing events — which is where you HAVE to mange risk, carbon, and cost if you want to have any impact at all on your indirect risk, carbon, and cost.

It’s not just 80% of cost that is locked in during design, it’s 80% of risk and carbon as well! And in indirect, you can’t do much about that. You can only do something about the next 20% of cost, risk and carbon that is locked in when you cut the contract. (And then, if you’re sourcing direct, before you finalize a design, you can run some optimization scenarios across design alternatives to gauge relative cost, carbon, and risk, and then select the best design for future sourcing.) So by allowing you to bring in all of the relevant data, you can finally get a grip on the risk and carbon associated with a potential award and balance appropriately.

In other words, this is the year for Optimization to take center stage in Coupa, and power the entire Source-to-Contract process. No other solution can balance these competing objectives. Thus, after 25 years, the time for sourcing optimization, which is still the best kept secret (and most powerful technology in S2P), has finally come! (And, it just might be the reason that more users in an organization adopt Coupa.)

Mercanis: Men with a Mission to bring Modern Volkswagen Efficiency with BMW Style to Source-to-Contract! Part 2

As discussed in Part I, Mercanis is a new Source-to-Contract mini-suite provider based in Berlin, Germany that is bringing a powerful, affordable, and easy to use solution to the mid-market that not only has core capabilities in sourcing, supplier management, analytics, and contract management, but also has core capabilities around risk assessment AND intake, which is not something we have traditionally seen in mid-market Source-to-Contract, and even enterprise Source-to-Contract and Source-to-Pay suites.

Logging into Mercanis takes the end user, who could be a buyer, an AP clerk, or an average employee who needs to go out to market for a product or service to do their job, to their customized dashboard (according to their role) where they can see an overview of their events/requests, contracts, suppliers (including individual supplier overviews) they manage or have access to, organizational spend they oversee, and other relevant information depending on the selected widgets.

Yesterday we overviewed Sourcing, Supplier Management, and Risk. Today we are going to overview Contracts, Spend Analysis, and Platform Administration.

CONTRACTS

Contract Management in Mercanis is straightforward contract document management with a sprinkle of contract creation capability. It stores all of the contracts and associated metadata, including the supplier, active term, value, type, and status (which is draft, pending, active, inactive, and archived by default). It’s easy to search, filter, retrieve, and view a contract at any time. Viewing takes the buyer to the summary screen, from which the user can drill into more detailed screens on payment, linked documents and contracts, stakeholders, relevant clauses, and other (custom) information screens as appropriate to the contract type. The system also supports the definition of tags and contracts can be tagged to categories or conditions of interest, such as sensitive of personal data, auto-renewing, special initiatives, and so on.

Uploading a contract in the Mercanis platform is easy. You drag and drop the document and it auto-extracts most of the key meta data elements that are described in the platform using OCR and advanced NLP. It’s not perfect (no system is, no matter how much fancy AI the systems claim), but it’s easy for the user to override any extract data that is not quite what they want, or not found, and index into the relevant part of the contract.

Finally, contract queries can be search and filter on metadata or Natural Language chat, which will learn from repeated use and adapt to the user’s natural language queries over time.

SPEND ANALYSIS

Basic Spend Analysis is integrated into the core and allows the user to select filterable widgets and dashboards that show spend by category, cost center, supplier, and other major identifier in the system (contract, sourcing event, etc.). It is instantiated with AP data on system implementation, which the system auto-maps to your pre-defined category taxonomy using (auto-generated) mapping rules consisting of suppliers and keywords/phrases/abbreviations/tags in the line item descriptions (identified by AI and curated by humans) and provides sourcing professionals insights from the date of go-live.

As with every other modern platform, it’s easy to drill into the categories (and sub-categories), suppliers, cost centers/business units, and contracts and see the associated transactions. Filters will also allow limiting to date ranges or other record values of interest. And it’s very easy to pop-up a supplier profile from a spend analytics widget or screen or a contract as the analytics, while basic compared to best-of-breed spend analysis tools, are fully integrated.

ADMIN

When it comes to platform administration, it is highly configurable by the organizational administrators. This administration includes the ability to configure approval paths, role groups, individual users, and workspaces (which roles can be limited to) as well as the company information your suppliers see about you. (It’s such a simple concept, but even many SRM platforms don’t make it easy for a supplier to access the customer information about you that they need as a supplier.) There can be different approval paths for every workflow including, but not limited to, supplier onboarding, sourcing (intake) request approval, sourcing awards, and contract approvals, including conditional/branching approvals based on arbitrary fields (such as amounts over or under 50K, product/service category, etc.). These flows can be built using a visual approval workflow builder that can support all standard Boolean logic and if/then/case conditionals.

Let’s dive into workspace configuration, as this is one of the most unique capabilities. The platform supports the definition of as many workspaces as you want, where each workspace can have its own dashboard, its own subset of modules, restricted/no admin access, approval workflows, and templates. Most importantly, a role can be associated with a workspace and when a user is associated with role, that is the workspace, and the only workspace, they will see when they log in. If necessary, the platform can support hyper-personalization natively.

In addition to the platform administration capabilities outlined above, the organization can define business units, manage its category tree (for sourcing and the built in spend analysis), define it’s default meta data requirements by contract type, visually manage all platform workflows (across all modules), manage its currency exchange rates, define its (supplier/RFQ) ratings, and define and manage the data collection templates for every module in the system including supplier data collection forms, pricing sheets, RFP questionnaires, and contract/document templates.

When it comes to workflows, just like the platform can support as many workspaces as you like, it can support as many workflows as you like for each process supported by the module. For example, you can not only have a different sourcing workflow for each category, but you can have multiple workflows based on expected spend. You can have different supplier onboarding workflows depending on category, geography, or a combination thereof (for example), different contract / document creation and management workflows (in addition to approval), and so on. And each can be linked to the associated module in the associated workspace. Highly configurable.

Workflow definition is enabled by the rule builder which is very flexible, and just like approval workflows, is completely visual, supports all Boolean logic, and allows rules to be easily defined in a rule chain that defines the category/ies, role group(s), workspace(s), discriminator (such as budget amount), and action (which can itself kick off another workflow).

The pricing sheets are very flexible and essentially act as mini-spreadsheets embedded in the sourcing tool. Allows for detailed cost break downs and calculations in both sourcing events, and analytic comparisons. The templates can have any number of elements and support all standard HTML components.

IMPLEMENTATION

The system can be implemented and configured for go-live in as little as two weeks, as long as the relevant supplier dataset and spend history can be provided day one and is complete enough that their processes can sufficiently classify the AP data on the first pass to the point that they can complete the processing with manual intervention within the timeframe. Note that the buying organization can choose to load all suppliers, all suppliers used within the last x months or years, or just currently active suppliers that will be used in sourcing events.

Mercanis is a great new entry to the mid-market Source-to-Contract space, especially considering all of the acquisitions and roll-ups of the last 5 years or so that took a lot of companies out of the mid-market and into the enterprise suite game. If you’re looking for a new S2C solution, and especially if you are based in Europe, Mercanis will make a great addition to your shortlist. It’s come a long way in a short time and the doctor has no reason to believe that they won’t continue to make significant progress, and add significant value, over the next few years while maintaining a price-point the mid-market can afford.

Mercanis: Men with a Mission to bring Modern Volkswagen Efficiency with BMW Style to Source-to-Contract! Part 1

Mercanis a new Source-to-Contract mini-suite provider based in Berlin, Germany that is bringing a powerful, affordable, and easy to use solution to the mid-market that not only has core capabilities in sourcing, supplier management, analytics, and contract management, but also has core capabilities around risk assessment AND intake, which is not something we have traditionally seen in mid-market Source-to-Contract, and even enterprise Source-to-Contract and Source-to-Pay suites.

Logging into Mercanis takes the end user, who could be a buyer, an AP clerk, or an average employee who needs to go out to market for a product or service to do their job, to their customized dashboard (according to their role) where they can see an overview of their events/requests, contracts, suppliers (including individual supplier overviews) they manage or have access to, organizational spend they oversee, and other relevant information depending on the selected widgets.

Today we’re going to discuss Sourcing, Supplier Management, and Risk.

SOURCING

Creating a sourcing event in Mercanis for new or previously sourced articles can be accomplished in just a few minutes as the platform was designed for high efficiency. With integrated intake, the system will either guide an organizational user to a self-serve sourcing event for articles (products/components/fixed services) in acceptable categories under a certain amount or funnel to the appropriate sourcing team, as appropriate.

When an organizational user wants something, they define their event name, a unique departmental project reference, category, budget, RFX due date, relevant organizational tags, affected business unit[s], preferred NDA (from those associated with the category), and then the system will either notify the requester that this needs to be a (strategic) sourcing event and direct it to the sourcing team or take the buyer to their (selected) workspace where they can set it up on their own.

In either situation, the next step is to select suppliers. Suppliers are auto-suggested by the system and it’s one click to select them (and the user can search for other known suppliers or even invite a new supplier for onboarding if they want to). After that, they select an appropriate pricing sheet (from those associated) which is automatically pulled in, and then they select appropriate RFP surveys that they want filled out (which are also auto-suggested based on the article). They can then launch the event immediately, or specify a later date, and at any time they can (come back and) add stakeholders.

For a single article, since everything is auto-suggested, they can literally select the core suppliers, price sheet, and surveys with a few clicks and launch a small event in a minute. Most events on an article or category can be reasonably defined in five to fifteen minutes (vs. the 15 hours for some first, and even second, generation suites).

In the Sourcing projects can be multi-round if necessary. Once the results come back, the buyer can kick off another event based off of that project and link it to the existing one to create a multi-round event.

Also, once response come in, as many stakeholders as desired can score it, the scores can be weighted, and once an award is decided upon, it can be sent to the contract module. Survey responses for each survey can be compared side-by-side for easy comparison against peers. And when the individual responses are scored, the buyer can see the assessment criteria scores graphically in spider graphs, including a calculated score based on total relative pricing. When it comes to price sheets, which can include embedded formulas, the buyer can select the prices of interest for side-by-side comparison as well. And to make the comparisons pop, the buyer can even shift to dark mode. While not always the best for data entry, it does make certain visual comparisons pop.

The entry point to sourcing is the dashboard which will summarize the requests, events by category, upcoming, and current sourcing events that need to be reviewed, managed, or awarded.

An organizational buyer can also two-click a new sourcing event by going to the article summary screen, locating the article of interest, clicking on it, defining an event name, selecting one of the associated sourcing workflows (defaulted if just one), selecting one of the associated pricing sheets (defaulted if just one), and confirming the event creation.

SUPPLIER MANAGEMENT

The Supplier Management module revolves around the Supplier Repository which organizes all supplier related information in the system with each supplier maintained by the system. It’s easy to search suppliers by name, category, location, associated transaction cost centers, and other information. Upon implementation, Mercanis can import all of your suppliers from your ERP, just a subset you mark as active, or only those suppliers used in the past x years.

On implementation, they will pull in as much information as they have, fill in gaps with any information they have in their system, and augment with a 360-degree profile they auto-generate using their AI tools that scrapes supplier websites and pulls in data from third party sites, Compliance Catalyst, Dun & Bradstreet and/or other third party supplier data providers you have a subscription to. This profile will include a short description, any known (reference) customers, categories the supplier (can) supply in your taxonomy, any known contacts, owners, known business units, primary / head office location, website and Linkedin URLs, and even known similar suppliers in your database. It will also contain direct links to any third party profiles you have access to, and can even pull all of that information into the platform for you.

This is in addition to the basic corporate information (and contacts) maintained by the system (which includes legal identifiers, basic accounting information, and location data), supplier states (which can be buyer organization defined), tiers (as the organization can track tier 2 suppliers or suppliers typically used by your suppliers, third party ratings (from the ERP or a data partner) and data that can be pulled in (which can be visually displayed in spider graphs), specific information collected during onboarding, and appropriate risk data (including cached data from any third party data feeds you have a license too). Note that suppliers can also be evaluated using organizational surveys that can be associated with them, and multiple evaluators can be associated with these surveys.

The SRM system also centralizes and maintains a record of all system activity, including sourcing events, contracts, risk profiles, and associated supplier analytics. It also tracks all associated tasks from across the system in one location, all associated (onboarding/sourcing/contract) requests, and any notes the buying organization wants to add.

New supplier creation is easy. It can be as easy as defining a name and email to kick-off the onboarding process, which will send a request to the buyer to provide the requested information. (Note that if you provide an appropriate legal identifier or URL and the supplier is in the Mercanis database, base information will automatically be populated to simplify the onboarding process for the supplier.)

Search can be customized to work on any given supplier identifier.

RISK

The risk module, primarily used in supplier pre-qualification, tracks country and industry risk across the globe and can instantly associate the relevant country and industry risks with an existing, or new, supplier based on its address and NAICS code. The platform uses over 40 different data sources to analyze country and industry risk in accordance with the German Supply Chain Act and computes a score for every country-industry risk correlation.

In addition, it can integrate with third party data from providers like IntegrityNext and Ecovadis and, for any supplier, pull in all the relevant data if the customer has the data feed licenses and automatically compute advanced risk measures using their data (from public sources) and third party data.

Come back tomorrow for Contracts, Spend Analysis, and Administration.

Brooklyn Solutions: An Answer to Your Third Party Compliance Management Challenges!

In our last article, we introduced you to the oft-overlooked area of Third Party Compliance Management which is not adequately addressed in the majority of Third Party Risk Management solutions, despite beliefs to the contrary. And those of you who pay attention probably realized that in addition to telling you about the challenge, we were also going to tell you about one potential solution (and give you a starting point in your research).

One starting point is Brooklyn Solutions, founded in 2018 to automate and scale vendor management for compliance standpoint across the enterprise. In order to ensure compliance, they offer not one, but four core modules to address all the relevant areas — third party risk management, third party relationship management, and third party contract management in addition to third party compliance management (as they all feed into the compliance pie) — as well as two auxiliary modules for ESG (which is an area all its own) and Digital Assessment Frameworks (for automated digital assessments in the supply chain tail). They already have global customers with over 1,000 users across multiple industry sectors which they support with offices in the US, UK, and South America.

Note that their holistic approach to compliance management (by tracking the vendors the organizations interacts with, the contracts that govern key relationships, and risks they are subject to in order to collect the necessary information to ensure compliance) is not just because of the criticality of compliance (as lack thereof can result in massive fines and even criminal charges to executives in some countries), but because a lack of compliance with organizational policies and contracts can lead to an average overspend of 9% to 15% in contract value in an average organization as per Gartner, Deloitte, PWC, McKinsey & Company, Bain & Company, CIPS, and the WorldCC. In this economic climate, that’s not something any company can afford!

Considering how many CLM solutions are on the market, you’re probably wondering how so much value leaks, especially since the classic cause of lavish leakage was due to lack of good e-Procurement systems that could m-way match the invoice to the PO, the pricing to the contract pricing, the line items to the goods (and services marked) received, and so on to make sure what was paid was what was agreed to. That’s because most CLM systems that claim to “govern” a contract are actually just glorified electronic filing cabinets that track the metadata and alert you when it’s expiring. And even if they allow you to break out obligations, most don’t track the extent to which they are mapped, monitor the risks that can lead to disruptions that can lead to a significant loss, assess the downstream parties that can put you in non-compliance, ensure performance is at agreed upon levels, and so on. Furthermore, even though the more advanced systems will support negotiation, all that does is allow you to identify value (not capture it), or perform (process) analytics, and that’s just helping you get efficient in the partial process the system supports, not efficient in capturing the value. That’s why Brooklyn Solutions focuses on ongoing contract and risk management from a compliance viewpoint AFTER the contract is signed rather than focussing on all of the pre-contract-signing and onboarding activities that the majority of traditional S2P, CLM, and TPRM vendors are focussed on.

It does this by allowing the organization to define as many workflows and actions as it needs to define in order to ensure all processes necessary for compliance are met. The workflows can be tailored to precisely what the organization needs. We’re not going to go too deep into workflow construction, as you’re probably familiar with how it will work if you have a supplier / third party onboarding platform that also allows you to configure the process, but point out one key difference between workflow construction in Brooklyn Solutions vs. many other platforms. The one key difference we are going to point out is that the logic is not only conditional and fine grained but can trigger other processes based upon the responses which can themselves trigger other processes and allow for as much branching as needed to get the information an organization needs to manage the risk, maintain the relationship, fulfill the contract, and ensure compliance — and these (sub) workflows can even branch back into the right point of the main process when the time is right.

These workflows can also punch out to third-party systems and automatically pull in risk and compliance data into the platform, data which can trigger new risk and compliance workflows if the data that comes back is too risky or potentially non-compliant. The configuration capability is extremely flexible. Essentially, Brooklyn Solutions is an orchestration platform built for managing third parties, contracts, risks, and compliance in a cohesive whole.

Contract Management Overview

Since the contract management solution is focussed on obligations, SLAs & KPIs, issues and workflows and was designed to help the organization ensure that the negotiated terms are adhered to, and value achieved, it’s functionally a meta-data driven application and the entry point is an analytics dashboard that gives you deep contract analytics on obligations, reviews, documents, SLAs, (open) risks, and (current) actions. It’s easy to dive into any aspect and see detailed status; this includes diving into obligations and getting an overview of how many are pending, overdue, and non-compliant; into (open) risks and see those where there are actions and the status of associated actions; into documents and how they breakdown by active vs inactive contracts, addendums, etc.; and so on.

The obligation tracking is exceptional. You can fully define what the obligation is, who is involved, what workflow is required to complete it, whether or not it’s a critical path obligation for a contractual, risk, or compliance requirement, the relevant financials, and the frameworks being used as well as track activities and associated action items, associated documents, and status. The obligations can also be linked to related parties in the supply chain and tracked down to the source supplier or supplier that need to adhere to them easily using Sankey Diagrams.

Relationship Management Overview

Relationship management in Brooklyn Solutions isn’t the touch-feely relationship building that Procurement sells as a way to become a “customer of choice” and “reduce costs”, nor is it the activity definition and tracking capability of a traditional old-school SRM application (where the “R” stands for Relationship, and not Risk). It’s a data and metric tracking application focussed on SLAs and KPIs, performance scorecards and monitoring, and regular policy and governance reviews to ensure everything stays on the up and up.

It’s also one of the perfect solutions to plug into the Customer-Supplier-Management gap left by P2P/S2P systems between the PO and the Invoice as it allows you to

  • onboard suppliers and ensure core data requirements are collected and fulfilled
  • quickly get complete, 360-degree, supplier profiles
  • define and assign actions and issues and track the status
  • collaborate with the third party at any time
  • kick of governance reviews as needed

Supplier profiles not only consist of basic organization and contact information, but all associated contracts and documents, obligations, risk profiles and data, performance data and scorecards, associated actions (in all states), and interactions including meeting minutes and upcoming meetings. They also allow you to drill into the relationship hierarchy UP and DOWN the chain.

Risk Management Overview

The risk management application is all about tracking organizational risk ratings (as well as what a supplier can do to reduce their risk rating), risk indicators and monitoring risk levels and allowing the organization to quickly find out, for any supplier contract, obligation or compliance requirement what the currently assessed risk is. They are colour coded in a matrix that allows a buyer to quickly dive into the high or moderately high risks that could pose a critical compliance risk, dive in, and address them.

It’s also very easy to get an overview of the entire portfolio of risks tracked in the system, the risks with the worst scores or least/no controls, the suppliers with the most concentration of risk, the individuals who own the most risk (either through suppliers, contracts, relationships, etc.), and so on. You can quickly identify the high risks, which ones can be reduced, what can be done, and how the effort can be initiated, and kick it off.

All risks are scored on a 1 to 25 scale that is meant to gauge the impact vs. probability which is mapped against the organizational typical risk tolerance to quickly identify those risks that are too high with respect to organizational tolerance (red), slightly higher than tolerance (yellow), and well below (green), with orange between yellow and red and dark green between yellow and light green.

Compliance Management Overview

The fourth, and most important of the four primary modules, is compliance management which, unlike prior generation compliance and GRC (Governance, Risk, and Compliance) solutions that were built to help you collect compliance data for reporting, was designed to ensure the organization was digitally fit for audit. And yes, there’s a difference. When a platform collects data simply for the purpose of completing a report, it’s a static piece of data in one place that can be queried individually or spit out as part of a pre-coded data dump for report creation. It technically solves the reporting problem, but it doesn’t solve for audit.

When your organization undergoes an audit, it’s more about the data that goes in an annual report. Where did it come from? When? Who verified it? Why was it deemed acceptable? Did you explore all of the necessary elements in making the determination?

For example, if you’re undergoing a GDPR compliance audit because someone complained that you don’t protect personal data and you hand over a report that says all the personal data you have is encrypted, and that you have annually tested processes in place to verify that all personal data you aren’t legally required to keep by law on an individual can be quickly deleted, it still doesn’t satisfy a compliance audit if you use third-party data services (“processors”) to store and process some of that data.
If you haven’t a) fully verified they are fully compliant with the regulations and can do the same purges in your tests and b) fully verified any third parties they use can do the same, you can’t claim to be fully compliant. For example, a cloud service might use a third party for managing its database and another cloud service to identify personal data that might not be appropriately tagged. If those third parties used by your cloud service aren’t fully compliant, then your cloud service isn’t fully compliant and you aren’t fully compliant. And that’s trouble that you would not identify in a compliance solution built for reporting and not for audit.

Since Brooklyn Solutions was built for audit, you can drill into the supplier profile, see their connected parties, and, in particular, the third parties that manage their systems and data and whether they have completed their audits, have the appropriate certifications, and run (and report) the proper tests annually. If not, you can reach out to them directly, send them the surveys, collect the reports, and do your own compliance analysis if you need to. And then, when the auditor comes in and asks you to prove you did the necessary exercises to ensure compliance, you can go into the system, show them all the parties you directly deal with that may have access to your customers personal data, drill into them, show that you know all their suppliers, show that you ensured that each of them were compliant, and so on down to the last service provider in the chain that may, even indirectly, have access to your customer’s personal data. Since it can handle the GDPR example above, which is one of the toughest audits you could get, you know it can handle any other supply chain audit as well.

No matter what question the auditor asks about a report you submit, with a few pieces of information and a few clicks, you can drill in to not only show exactly what answered, but where the data came from, why, what processes you used in collecting it, and how confident you were. You can also show all of the historical actions, reviews, in-platform conversations, documents, etc. It’s a full fact-based history, not a partial viewpoint based on the memory of the best organizational expert.

Also the holistic TreeMap overviews of compliance areas or risk areas (based on financial risk impact or some other indicator) makes it quite clear to an organization just how well they are doing, or not doing (and quickly dive into the areas where the compliance is the least or the risk the highest).

The only real shortcoming is that, while it can be configured to ensure compliance for any global regulation you can think of, as of now, only four compliance requirements are fully supported out of the box: the German Supply Chain Act, the EU EBA/EIOPA guidelines, the UK PRA Outsourcing regulations, and GDPR. This is because they’ve spent the last five years building all of the core capabilities required for holistic third-party compliance management (and started in the Financial Services sector, coding for those regulations first).

However, now that they’ve built and fleshed out all the core capabilities, and natively integrated it all into one consistent view (for every module you purchase), which is backed up by powerful AWS QuickSight dashboards that can be drilled, filtered, and searched on any data dimension, they plan to start adding more out-of-the-box support for global regulations over the next few years. Whether it will be by area (of ESG, CSR, etc.) or industry has yet to be determined, but with all of the necessary capability built into the platform, it won’t be hard for them to add more acts in a relatively short time frame. It’s just regulatory expertise, obligation data element identification, and workflow coding at this point.

Roadmap

With respect to Brooklyn Solutions‘ near-term roadmap, they will soon be releasing a number of “Gen AI” capabilities built on appropriately trained next-generation large language models (LLMs) for natural language processing (NLP) that use human curated data sets relevant to the problem at hand. These new capabilities, which are designed to increase user efficiency, could make some users three times as efficient (or more) in their jobs as they are now. (Right now, power users in the platform have been measured to be 200% more efficient in their responsibilities than before when they were working without the help of Brooklyn Solutions.) The new “Gen AI” capabilities are being deployed to power the following new capabilities:

Meeting Agenda Generation
Identify the supplier or action team, and the platform will scan all associated actions, flows, contracts, risks, and compliance requirements and create an agenda based on open / incomplete items and changes since the last meeting (which can be quickly edited or adjusted based on the desires of the meeting organizer)
Executive Meeting Summary
Attach a transcript of the meeting meetings (which can be auto generated using the transcription capability of most modern video conferencing platforms) and any supporting documents and it will generate an executive summary
Report Generator
Similarly, select a supplier or contract and time-period, and items of interest (events, contracts, risks, compliance requirements, etc.) and the solution will generate a written summary of the items of interest, highlighting those that are (scored) high or low, fully formatted and exportable to docX, xlsX, and pptX
Automated Survey Creation
Identify the risk, capability, and/or compliance requirement you are concerned with, where you are concerned with it, how concerned you are with it, and how intrusive / work intensive you want it to be for your suppliers (by way of a max question count) and the platform will use its built-in knowledge of the risk, capability, and/or compliance requirements and its library of surveys/templates to auto-generate a survey and send it to all suppliers in, or dependent on, the region in question
Contract Clause Explainer
Highlight any clause in the contract and the solution will translate that clause into everyday layperson English (or for those clients in the UK, the King’s English on special request, as that requires a special configuration), and provide one or more examples of where that clause would come into effect and/or how it may be used
Contract Search by Topic
For example, if you want to identify all clauses in a contract that might relate to or satisfy GDPR, the solution will automatically identify the key requirements of GDPR, determine the most likely terminology that would appear in the contract, search for that, contextually analyze the clauses, and return those most likely to relate to GDPR with an everyday language definition of each. The same can be applied to any “contract clause” you can define, such as termination, audit right, price increase, and sub-contractor to name but a few.

Summary

In a nutshell, Brooklyn Solutions is one of the most complete Third Party Compliance Management solutions the doctor has ever seen. If compliance is an issue for your organization, be sure to add them to your shortlist.

An Introduction to TPCM: Third Party Compliance Management

TPRM: Third Party Risk Management is Big. Really Big. In fact, as evidenced by recent investments over the past year (Spectrum’s 200M investment in RapidRatings in 2022, Vista Partners acquisition of Resilinc, and now the 1.2B acquisition of Exiger by Carlyle and Insight), it’s HUGE. Actually HUGE! (Not Trump huge. In fact, the exact opposite. 😉 )

Why? The pandemic finally caused the space to wake up and realize not only how significant long-term disruptions are, but how much risk has been embedded in over-extended global supply chains over the last thirty-plus years (thanks to the global sourcing craze started by McKinsey and their ilk in the 90s as a method of “cost savings”, which really just resulted in “spend transference” to big consultancy pockets and the buildup of risk, and risk related debts, in the supply chain that, just like technical debt, always comes due someday). Big corporations have finally realized they need to manage that risk, or at least maintain constant visibility into it, if they want to get the supply they need to just stay in business. (At the end of the day, “cost savings” don’t matter if you don’t actually stay in business, which is what happens when you don’t receive any products to sell. So you need to assure supply first, and then avoid unnecessary cost second — especially since there is no real “savings”, just cost avoidance with improved processes, designs, networks, management, etc.)

As a result, these companies, who were mostly clueless about the risks (sometimes by choice), needed solutions now to at least get insight into the risks so they could plan mitigations, or at least take action when something happened. Since their traditional enterprise / manufacturing resource management, supply chain, source-to-pay, or back-office systems didn’t give them the insight they needed, they finally started to turn to TPRM (and in some case, broader SCRM – Supply Chain Risk Management) systems in a big way.

And that’s great. Until it isn’t. As a result of all of the supply chain failures and the impending disasters they created across supply chains, not just health and defense, governments have started taking action and introducing a lot more regulatory compliance into the mix. This is at the same time they are waking up to the wild west of technology and introducing a lot more regulation into the mix around personal data and use of AI. And with fraud and money laundering seemingly increasing without end, there’s a lot more regulation around partner due diligence. And then there is the reality that the world is heating up (whether you believe in climate change or not), that this heating up is contributing to an extremely substantial increase in natural disasters, that temperature is correlated with carbon and greenhouse gasses (GHG) in the atmosphere, that we are currently producing a lot of carbon and GHG as a species, and while we may not have been entirely responsible for getting here (as there are other factors that cause temperature to naturally rise and fall on a planetary scale — although the changes we’ve seen in the last few decades have historically taken centuries or millennia looking at the geological record), we need to do everything we can to not make it worse (or risk natural disasters on a scale that have not been seen for millennia, and that have sometimes even led to extinction level events in the past). In response to this, countries are making commitments to the Conference of the Parties of the UNFCCC and instituting legislation limiting the carbon you can create (without fines or fees to offset that, presumably fines or fees that will be invested in greener energy options, but we have to admit many governments haven’t thought that far ahead) and the amount of other pollutants you can pump out.

In other words, not only do companies have to worry about more risks than they are aware of, they also have to deal with more regulations than they can easily keep track of (and, when they’re not on the ball, they don’t find out about them until they get a fine) — as well as dedicate way more time than they should gathering the required information for, and filling out, the appropriate reports and filings.

Moreover, and this shouldn’t surprise you, the vast majority of TPRM (and even SCRM-TPRM) systems don’t help with this at all. While they can be configured to detect issues that may represent potential violations, they generally don’t collect the reporting data that is required and typically don’t provide the detailed trickle-down visibility that is needed to verify that key requirements — such as personal data protection, no forced labour, etc. — are truly adhered to throughout the chain.

That’s why many big multi-national organizations, especially those that collect and process personal data, do a lot of global importing or exporting, or deal with extended supply chains and have to comply with extensive privacy regulations AND data protection laws in the finance sector, have to comply with hundreds of sanctions and denied party lists globally (as well as ensure there are no connected beneficial entities on those lists), and/or need visibility down to the source on human rights needs a solution that understands the regulations they are subject to, encodes the data they need to collect and the violations (special types of risk) they need to monitor for, and helps them produce the reports and regulatory filings they need to make.

And the only system that can do this is a Third Party Compliance Management solution, which has some commonality with a Third Party Risk Management solution, but also a lot of differentiation as well. Most organizations won’t know they need such a solution, as they won’t even know that such a solution exists (as there’s not many solutions and not much buzz about them … yet). Hopefully this post will change all that. Even though the solutions are two sides of the same coin, the sides haven’t met yet, and until they do, which could be years (and years and years) away (because no one has really thought about the hard center yet), for many companies, what they really need is a TPCM solution.