Underground Markets: A Macro Risk Factor or a Better Supply Chain Model?

January 17, 2012 § Leave a comment

Recently, I read through the latest World Economic Forum “Global Risks 2011”  report which is an initiative of the Risk Response Network.  It’s an impressive assessment of global risks produced in cooperation with Marsh & McLennan, Swiss Re, Wharton Center for Risk Management, University of Pennsylvania and Zurich Financial.  What is compelling about the report is it is not simply a survey result or a list ranking, rather it details and illustrates the interrelationships between risk areas; identifying the causes in an effort to identify points of intervention.  The report highlights response strategies and even proposes long term approaches.

As with any risk report, it has a tendency to feel alarmist, but its value and content cannot be dismissed and its emphasis on response is encouraging.  The two most significant risks the report identifies are relative to economic disparity and global governance.  The main point being that while we are achieving greater degrees of globalization and inherent connectedness, the benefits are narrowly spread with a small minority benefitting disproportionately.  Global governance is a key challenge as each country has differing ideas on how to promote sustainable, inclusive growth.

The Rise of the Informal Economy

The report goes on to highlight a number of risks including the “illegal economy”.  The illegal economy risk includes a cluster of risks: political stability of states, illicit trade, organized crime and corruption.  Specifically, the issue lies with the failure of global governance to manage the growing level of illegal trade activities.  In a recent book by Robert Neuwirth entitled, “Stealth of Nations: The Global Rise of the Informal Economy”, the author estimates that off-the-books business amounts to trillions of dollars of commerce and employs half of all the world’s workers.  If the underground markets were a single political entity, it’s roughly $10 trillion economy would trail only the US in total size.   Further, it’s thought to represent in the range of 7-10% of the global economy and it’s growing.  To be clear, underground markets are not only dealing in illegal substances, crime, prostitution or drugs.  It’s mostly dealing in legal products.  Some of the examples Mr. Neuwirth provide include:

  • Thousands of Africans head to China each year to buy cell phones, auto parts, and other products that they will import to their home countries through a clandestine global back channel.
  • Hundreds of Paraguayan merchants smuggle computers, electronics, and clothing across the border to Brazil.  
  • Scores of laid-off San Franciscans, working without any licenses, use Twitter to sell home-cooked foods.  
  • Dozens of major multinationals sell products through unregistered kiosks and street vendors around the world.

A Global Risk?

Are the underground markets really a global macro-economic risk?  Mr. Neuwirth makes solid arguments that these markets provide jobs and goods that are essential to these populations and that it is the corrupt authorities in most developing countries that are being worked around.  In some ways, it can be argued that these unlicensed vendors and importers are the purest of capitalists; innovatively providing goods by avoiding intervention.  In a recent interview in WIRED magazine, Mr. Neuwirth points out that Procter & Gamble, Unilever, Colgate-Palmolive and other consumer products companies are selling through small unregistered, unlicensed stores in parts of the developing world.   He goes on to point out that P&G’s sales in these unlicensed market’s make up the greatest percentage of the company’s sales worldwide.  I found this tidbit shocking.  Really, a company that brings in over $80 Billion in revenue a year is actually pulling in most of its revenue through unlicensed channels?  Now, that doesn’t mean P&G is directly selling through those channels, but they sell through distributors that may use others that do sell through to unlicensed vendors who don’t pay taxes.

The WEF concludes that illicit trade has a major effect on fragile country states given that the high value of commerce and resulting high loss of tax revenues impinge on national salaries and government budgets.  An example that’s included in the report is that of Kyrgyzstan.  “Members of the Forum’s Global Agenda Councils argue that the undermining of state leadership and economic growth by corrupt officials and organized crime contributed significantly to social tensions which erupted in violent conflict in June 2010, causing widespread destruction, hundreds of civilian deaths and the displacement of 400,000 ethnic Uzbeks.” 

The Threat to Quality and Public Safety

So, if you were guess what type of goods top the list of sales that take place in these underground markets, what would you guess? Cocaine? Opium? Software Piracy? Cigarettes smuggling? Small arms?  Topping the list with a rough estimate of $200 billion in value is counterfeit pharmaceutical drugs.  Just behind at $190 billion is prostitution.   Which leads me to the next serious risk issue if global efforts don’t improve to govern these markets: quality.  I’m not qualified to address the quality of prostitution, but let’s consider the quality of counterfeit pharmaceuticals and the general issue of public safety.  If these markets go unregulated and unmonitored, we are likely to see terrible abuse by profiteers whose only concern is to bring high value products to market quickly.  No regulation also means an inability to create safe work environments and to protect rights of laborers all along the supply chain.

On the other hand, the vast majority of workers and consumers in developing countries thrive because of these markets.  A strong effort to disrupt or disband these markets would cause a high degree of distress in communities that rely on these markets for access to essential goods.  But in return, without tax revenue that can only be gathered from legitimate, licensed businesses can governments function and provide oversight services that would benefit quality and public safety concerns.  It’s an endless loop as we say in the software world; a true catch-22.   Even relatively well functioning supply chain operations at pharmaceutical companies in developed countries are consistently challenged to maintain a high degree of quality (note recent impact of product recalls at Novartis).  Considering how much effort and money is spent on quality assurance, inspections, and FDA audits on legitimate pharmaceuticals, it’s beyond scary to consider the quality of counterfeit pharmaceuticals that are circulating in illicit markets.

Within the US, in the state of California, we’ve seen recent evidence of solutions such as bringing the trade of marijuana within the framework of the law.  Potential results include ensuring quality and safety for the public, raising tax revenue and reducing the profits of organized crime.  Still, the issue of economic disparity is a much tougher nut to crack.  Widening gaps in income within all economies provide incentive for lower income individuals to work outside of established trade structures.  This incentive leads to greater illicit trade which in turn hinders a government’s ability to effectively tax businesses and provide services such as regulatory oversight. 

Can We Govern Illicit Markets?  And If So, Should We?

These are obviously very difficult challenges, but ones that the WEF is analyzing in an effort to form solutions.  The relationships between economic disparity, illicit commercial trade, public safety and government corruption becomes glaringly clear.  How can the global community govern these illicit markets?  They exist everywhere to some degree, even in the US where informal markets are estimated to account for 10-20% of GDP.  One solution that WEF recommends is to strengthen financial systems.  The implication is that weakened systems are the result of the heightened volatility and risk deriving from the recent capital markets crisis.  With diminished confidence comes incentive to work outside the system.  Some suggestions include:

  • Better surveillance of the financial sector, including all systemically relevant players
  • Tighter capital and liquidity ratios for all banking institutions (including non-banks), with higher ratios for systemically relevant institutions
  • Risk retention for securitization (so-called “skin in the game”)
  • Improved transparency and counterparty risk management in “over-the-counter” derivative markets

Perhaps the most interesting part of this global risk challenge is how interrelated these issues are.  The influence that government corruption has on illicit markets is direct, but not the only factor.  Further, the ability of governments to regulate, control and tax this commerce is not straight-forward and overly severe policies can prove detrimental to workers and consumers.  And how much do other factors such as financial stability contribute to activity moving outside conventional channels?  There is no certain view on these underground markets as we must consider why they exist, for whom they exist and how valuable they are for the good of all.

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Creating Your Own Reality

November 7, 2011 § 2 Comments

On my white board sits a list of topics that are near and dear to my heart; topics that I think about often and want to espouse, pontificate and illuminate.  Most often, I think I have original ideas on these subjects and while I don’t feel I have the time to get it all out at once, I keep this list with the intention of banging them out slowly – one by one.  And almost without fail, in my regular reading or research, I’ll come upon an article or book on one of these topics and then suddenly, like a bolt of revelation, someone’s beaten me to the punch; made the key insights that I thought were my domain.

The Surety of Fools

One such happening this past weekend as I perused the New York Times Magazine, a gentleman by the name of Daniel Kahneman wrote an article entitled “The Surety of Fools”, an adaptation from his upcoming book entitled “Thinking, Fast and Slow”.  He hit on a key observation that is at the core of what I’ve been writing about over these last few months; misperceptions of risk.  I won’t rehash the whole article, but in essence, Mr. Kahneman points out how we often hypothesize based on logic, but when empirical evidence belies our theories, we simply don’t believe the facts.  He calls this phenomenon the “illusion of validity.”  I love this premise as I see it so often with investment managers, news reporters, mortgage brokers, sport team coaches, politicians, voters and prognosticators in general – they all create their own reality. 

Creating Your Own Reality

We ALL do it to some degree.  We watch the news channel that validates our set biases.  We befriend people who support and validate our opinions and views.  On the topic of investment risk, operational risk and risk in general, how does that phenomenon play out?  Do we see the facts and are we able to evaluate data without bias? Mr. Kahneman illustrates the reality of investment bias with examples of studying investment managers and how their performance is measured.  The vast majority of investment managers he studies do not perform better than a purely random pick of stocks.  Yet, the illusion of validity causes the management of the largest investment firms to bonus and commission those managers as if they are keenly skilled; as if the fund managers have brought tremendous value to their client’s interests.  They create their own reality – instead of accepting that the unbiased data shows no value in their management of investment assets.

Life Sciences’ High stakes

There are even greater risk examples.  Life Sciences companies such as pharmaceuticals, biotechnology and medical device firms have huge investments and pressures to produce new products.  Each development stage requires rigorous testing and massive volumes of data.  While the FDA enforces regulations and these companies are regularly audited both internally and externally, the pressure to produce is high.  Time is of the essence when it comes to bringing a new drug to market; both for the sake of patients as well as profits.  How well is the data reviewed and scrutinized before passing each validity stage?  Is there a bias that errs on the side of validation ahead of rejection?  Absolutely.  Kahneman’s Illusion of validity is at play and the consequences are immense. 

The Supply Chain Fog

For Life Sciences companies the risks involve patient health as well as immense risks to the company including product recalls, regulatory findings, lawsuits, and ultimately, reputation damage.  The organizations I’ve worked with over these last few years are extremely diligent in their processes and methods for R&D, trials, manufacturing as well as distribution.  But other operational risks do exist.  In a post last year by Daniel R. Matlis entitled, “Life Science Executives Concerned about Outsourcing and Globalization Unintended Consequences”, Mr. Matlis notes, “In the drive to lower costs, manufacturing and sourcing of ingredients and components in countries such as China and India are playing a more prominent role. Yet, according to the research, outsourcing to manufacturers in developing economies carries significant operational risks.  Industry Executives surveyed for the research said that Raw Materials sourced outside the US represented the greatest risk to the Value Chain, with 94% of those who responded seeing it as a significant or moderate risk.  When comparing the risk profile of US vs. foreign raw material Suppliers, United States Suppliers were classified as low risk nearly 10 times as often as foreign Suppliers.”  Any Life Science company’s ability to define, monitor and track each and all of their third party providers adds a level of complexity and difficulty.  This difficulty stems from what consultants at Nimbus have labeled the “fog of process accountability, control and oversight.” 

To be certain, this fog exists to some degree everywhere and obviously with supply chain partners even more so, but how well an organization tries to create clarity of process definition and clarity of quality both from within and beyond the enterprise is critical when managing operational risk.  Perhaps the biggest concern I have with the phenomena of “creating your own reality” is the fact that the “fog of accountability” provides a condition for pushing forward; an excuse for not accepting what the data is revealing; and a scenario wherein doubt can always be cast on outliers.

Focus on the Facts

I spent part of last week with a biotechnology firm’s scientific directors, their CIO and colleagues from TIBCO, briefing them on my company’s software technologies and how they apply to the wide variety of process areas they represent.  The volume of data and the complexity of that data as it applies within their product trials is tremendous.   Next week I’m with a medical device company who’s in the process of a major transformation and will need to address most every operational area as part of a corporate spinoff.  These are just a couple of quick snapshots, but they epitomize the speed with which organizations change, adapt, and grow.  Speed and volume is only increasing – further escalating the demands for validation of each initiative. 

I can only hope that Mr. Kahneman’s “illusion of validity” is tempered when organizations manage operational risk and the key decisions that drive product development.  The stakes are indeed high when it comes to Life Sciences, but every industry is predisposed to this condition.  In short, we can never be to too sure.  Let’s not fall too in love with our own marketing slogans.  Let’s understand the complexity that we’re faced with, make our best, valid judgments and do the best with the facts we have.  While there is never purity in our judgments, we can at least try to be aware of the propensity to fulfill objectives through maintaining a blindness to the facts.

Real Time vs Analysis

September 19, 2011 § 4 Comments

It happens every day, every hour, minute and second.  Stuff.  Stuff happens, and lots of it.  Every so often, something happens that make us go, “oh, that’s big”.  And sometimes so “big” that we scramble to react to either take advantage or take cover; to move money in or out; run for higher ground or head out to sea.  Sometimes we have a bit of notice, but other times we don’t.

Previously, I wrote about risk, fraud and how Barings Bank was brought down by a single rouge trader.  Well, it happened again just a few days ago.  UBS AG, a large Swiss bank appears to have lost somewhere in the neighborhood of $2 Billion.  The news caused its stock to promptly drop; closing 11% lower than the previous day’s close.  Moody’s Investor Service quickly reacted suggesting they would review UBS for a possible downgrade; citing concerns that it’s not adequately managing risk.

It’s much too early to determine how this trader pulled off his scheme.  Early information suggests he may have manipulated back-office operational systems as he previously worked in back-office operations and would have had that knowledge.  Did UBS have a policy to restrict back-office workers from transferring to front-office trader positions?  They didn’t comment.

There is much that needs to come to light.  Was this the work of the single trader, Kweku Adoboli, that is currently being implied or were others involved?  What controls were in place to prevent these type of trades and why did they fail?  How long did it take for monitors to catch the rouge activity and did they prevent additional potential damage? 

To give a sense of size, it only took Nick Leeson’s $1.3B cheat to bring down Barings in 1995.  Jerome Kerviel devised a scheme that cost Societe Generale $7.16 Billion in 2008.  Other scandals have impacted banks over the years and the fraudulent events don’t seem to end.  Regulations can be implemented and made more stringent; auditors can review organization’s processes for compliance to those regulations, but still big stuff happens.  It’s the kind of big stuff that wipes out all other assumptions.  You can be the finest analyst in the universe, performing all the due diligence necessary to make the most prudent investments.  You believe in UBS, the fact that they brought back senior leadership that they are serious about reform.  Oswald Grubel were supposed to be turning around the troubled UBS, but it appears he and his leadership team was just not that concerned about managing operational risk.  Simple bottom line is: one event can be catastrophic erasing all other assumptions.

So, the questions that are most pertinent:  Which operational events need real-time monitoring?  What events need process controls in place to automatically prohibit additional risk exposure?  How can managers respond in real-time to both opportunities and adverse situations?  As Pete Seeger adapted from the Book of Ecclesiastes, “there’s a time to gain, a time to lose, a time to rend, a time to sew”.  Similarly, there is a time for analysis and there is a time for real-time response.  All the analysis in the world cannot determine the future.  As the Heisenberg Uncertainty Principal states; the more precisely one property is measured, the less precisely the other properties can be controlled or determined.   In other words, the mere act of observance imposes yet another factor into the set of conditions.  There are no absolutes about tomorrow and there is no such thing as risk-free.  So, while I point out the immense advantage that doing your homework will bring with a previous blog post in interconnectedness, at the end of the day, a single event can wipe out all of your assumptions. 

Well, I know what you’re thinking…. that sucks.  First you tell me that I should do fantastic amounts of due diligence to identify opportunities, but then you say, “ahhh, it’s all a waste once a single unexpected event strikes.”  Okay, I can see that paradox or contradiction, but really what I’m saying is: you have to do both.  Good operational process management is about analysis of the details; of every single activity; every single owner, reviewer, regulation and risk.  And yet, it’s also about agility.  What do we do when things don’t go as planned?  What do we do when the proverbial poop hits the fan?  Can we analyze each activity for its risk exposure?  Can we find methods and control activities to mitigate against adverse events… especially the catastrophic ones?  And can we buy insurance to position ourselves for gain if adverse events strike?  Absolutely, I say!  Why some organizations don’t, especially financial institutions that are particularly vulnerable, is beyond me.  Sometimes, it’s just incompetent management, but often it’s a simple lack of appreciation for how solid operational process management requires a sizable investment in process thinking, risk management and development of a process improvement culture. 

Fortunately, a lot is being done during this generation to advance process-based thinking and to raise the level of consciousness about business process management and its impact on corporate governance and risk.  But, it’s happening slowly.  Maybe events like last week’s UBS debacle will open a few eyes…. let’s hope so.

Compliance: Headache or Windfall?

August 8, 2011 § Leave a comment

Forming a Process Centric Model

Regulatory bodies and compliance rules are as old as civilization.  Early Egyptians, Greeks, Romans and Indians created standards and rules for business.  These rules were centered on weights and measures as well as currency, but today regulations come from many sources.

When we look at a regulatory construct, we are effectively looking at rules, laws, guidelines and best practices that are dictated by a governing body.  I say dictated, but these rules are generally a set of statements that have been developed, reviewed and ultimately enacted through a governing board within a corporation.  Regulations may also be established as governing boards that are industry related and many regulations are based on governmental laws (federal, state and local agencies).  The volume of these regulatory books and the volume of statements contained in each can be enormous depending on the industry and corporate size.  Public companies have the Securities and Exchange Commission to deal with.  Companies with global operations have to comply with varying laws that are relevant in each operating country; adhere to health and safety standards, hiring and firing requirements, social responsibility requirements, etc.  If you’re a financial services firm, a plethora of regulations guide how you account, record, trade and settle.  If you’re a pharmaceutical company, strict standards dictate how you run your clinical trials, record your findings, label your products, etc.  Now, add in all of the internal standards that govern your best practices related to your unique products, partnerships, and contract types.  As we can easily surmise, the complications that result are immense.

The SOX Phenomena

In 2003, after starting my own software services firm, I sat with the head of compliance for a Fortune 100 construction company to review their requirements for Sarbanes-Oxley.  Within a day of information gathering it became clear that their main objective was to look at how to manage a set of “controls” by recording who was responsible for each and whether it was working or not.  Now, to be clear, a “Control” is simply a process step that has an owner and it’s in place to mitigate a risk to the organization.  So, what this company was doing was to create a “matrix” of relationships between identified risks, controls (mitigation steps), owners, and the process area they relate to.  As I discovered in the weeks following these meetings, almost every company that was scrambling to comply with SOX was doing this exact thing and they were almost all risk/control matrices in spreadsheets.  The problems with that approach was universal and having a collaborative, relational data storage solution was an obvious need. 

Process is the common denominator

While I grew my business by developing software to address this requirement, other interesting similarities emerged from my client base.  Companies were not only interested in passing an audit or dealing with the SOX regulations.  They had a dozen or more other pressing regulations that required the same type of solutions.  In each case, whether it was FDA regulatory 21CFR part 11 or ISO9000 or Basel II, or the variety of internal standards that was being addressed, the same basic needs existed.  Companies needed to understand the regulations, identify the risks, controls, gaps, remediation steps, owners, process areas and manage all of that information somewhere.  Most commonly, that meant in an independent spreadsheet.  And what was the one thread that formed the backbone of all compliance management?  Process.

Another Fire Drill?

What I found was that each process area (ie: HR, Finance, Manufacturing Ops, etc.) was being hounded by internal audit teams, compliance directors, external auditors and quality managers to document their processes; document their controls; document their risks; document their issues; document remediation tasks, and on and on.  It’s amazing that anyone was ever actually doing their day job.  During the nearly ten years that I’ve worked with organizations on regulatory requirements, very little has changed in this regard.  I have yet to encounter a company that manages all of their compliance and regulatory requirements from a single platform.  Some organizations have made strides with managing process details in a more coordinated fashion, but most still deal with each compliance requirement as a separate challenge involving separate projects.

The issues with this condition are perhaps obvious;  each time one of the regulatory initiatives is executed, operational leaders are reliving the exact nightmare!  It’s Groundhogs Day!  I’ve had leaders within Pharmaceutical clients tell me that rarely does a year pass before they have to execute another fire drill of process capture, internal review, internal audit, and external audit.  Invariably, it’s a short sighted exercise to check a bunch of boxes and get a rubber stamp, so we can get back to normal operations.

The Single Platform Vision

Now for the good news, things are changing.  During my four year tenure at Nimbus I’ve seen an awakening within highly regulated industries to stop the nonsense.  It all begins with proper process management wherein organizations do the following:

  1. Define end-to-end processes using a simple notation for business end users.
  2. Govern process definitions and all related reference materials in support of process execution.
  3. Manage regulatory and internal standards within structured, governed statement(s).

Process management should not become the result of fire drill exercises to satisfy auditors, rather BPM should be an integral part of knowledge capture, process improvement, compliance management and business agility.  As one executive summarized when heading into a board meeting after meeting with me, “We can’t improve what we can’t understand.”  As I’ll discuss in later postings, there is both a mechanical nature to BPM and a cultural one.  Very few cultures are used to maintaining a high level of accountability and continuous management of process content.  Just putting systems in place is not a cure-all and as we’ll explore, organizational culture plays a huge role.

Active Governance

August 1, 2011 § 2 Comments

What is true oversight?  How much oversight is prudent?

Governance, much like Business Process Management is a term that is thrown around in a variety of contexts, but rarely is understood.  The term often refers to a structure that enforces rules.    The most even handed definition I could find states that governance is: the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled.  I like this definition for the fact that it tries to encompass “processes, customs, policies, laws and institutions”, but the most telling word is perhaps “affecting”.  Governance may provide some sense of structure, but only so far as it attempts to “affect” behavior of the organization.  Also, what is key to understanding what I will call “active governance”, is not just putting a structure in place, but actually putting an enforcement structure in place.  Governance cannot have much effectiveness to “affect” behavior without a complete cycle of structure and enforcement.  Further, governance is not an end-state condition.  For any company to state that they are well governed is simply a relative judgment that is meaningless when proclaimed from someone within that organization.   Organizations can establish thorough and sophisticated methods for sustaining specific levels of governance, but the degree that such governance is adequate for employees, management and investors is variable. 

It’s similar to stating a risk management position.  Organizations, as well as individuals, may assess risk and make decisions to take specific risks based on value judgments.  It’s not the fact that organizations take risks that is an issue.  The challenge for risk management is how much effort goes into understanding and mitigating known risks and how much investment in mitigation is needed.  Further, an organization’s ability to address the unknown unknowns and to plan for unknown events is an important part of what active governance is. 

In 2003, the vast majority of US public companies moved with furious pace to try to “comply” with regulations that were enacted to ensure executives were accountable for the financial disclosures of their respective companies.  With sections 403 and 204 of the Financial Reform Act of 2002, also known as Sarbanes-Oxley (from the sponsoring senators) or SOX, companies throughout the US and most global organizations with significant operations in the US suddenly found they did not have an adequate governance structure and could not reliably show compliance with SOX.  Part of the challenge that companies were facing had to do with the vagueness of the law itself, but regardless of those issues, companies throughout the US did not have adequate governance to reliably and confidently verify the numbers and statements on operational controls in their organizations.  As I began work in this area, each week I was ushered into large organizations, most with global operations that were treating SOX as a major headache that was being imposed upon them that they needed to “get through”.  In most cases, the task of dealing with SOX was managed under the chief financial officer’s role and a “director of compliance” was either tasked or newly established to address SOX compliance.  In every case I worked; cases that spanned industries from construction, financial services, consumer products, energy, and healthcare, organizations universally saw compliance as a problem imposed upon them by government.  It was a box to be checked, a hurdle to be cleared.  It was not seen as something that should be necessary within the organization, in fact, it was most widely reviled and criticized as a huge waste of time, resources and money.  Millions were being spent within each organization to accomplish SOX compliance and to most every executive it was viewed as a major waste and a major imposition.

Now, there are quite a few papers and books published detailing the variety of frauds and scandals that led to the enactment of SOX, so I won’t attempt to rehash the events within Enron, Arthur Andersen, WorldCom, Tyco and others.  These events also contributed to a view that slack governance undermines investment confidence.  And if investors cannot be sure that management disclosure of financials and reports can be trusted, then investors will turn away from holding equity or debt stakes in public companies.  This is logical and reasonable.  So, why should corporate executives take such issue with improving their governance models?  A key point I will draw out in a following post discusses how important process governance is and how it serves as a foundation of the organization.  In other words, the formula for success – I call this the “secret sauce”. 

Meanwhile, with little appreciation for the value of governance, the need to rush into place a formal structure for reporting was not trivial.  Not a single organization I encountered had a governance structure that allowed process owners to confidently attest to the performance of their financial controls.  Beyond risk-control structures, organizations also could not reliably attest to the financial reporting within every operating unit.  Given the nature of my work and the confidentiality of my relationships, I am not disclosing the names of the organizations I’ve worked for, but the issues were universal.   With such a condition of governance immaturity, the level of investment required to approach the requirements of SOX reporting was massive.  The investment would need to be made for advice from consultants, software systems that could aid attestation, reporting and internal resources to spend time dealing with such requirements, and ironically, external auditors to provide additional advice and services.  But rather than look at this challenge that was originating from regulations as an opportunity to improve risk management, operational effectiveness and investor confidence, executives became mostly defensive.

Now, that was 2003 and this is now 2011.  A lot of maturity has occurred during this stretch of time and I’m encouraged by the understanding that now exists about corporate governance.  There is still, however, a failure of public companies to fully appreciate the value of governance toward the leveraging of process information.  The ability for executives to fully appreciate the value of harvesting process information and controlling those assets is at the core of establishing a successful BPM strategy.  BPM is about harvesting process assets and fully leveraging them as key organizational assets.

What we talk about when we talk about BPM

July 27, 2011 § 1 Comment

So, what do we talk about when we talk about BPM?  I’m reminded of the short story author, Raymond Carver who wrote one of my favorite stories, “What We Talk About When We Talk About Love“.  Well, the good news is this blog’s topic is a little less amorphous than Mr. Carver’s, but I’m not sure it requires any less debate. 

As I begin this blog, I will provide you with some insight into my perspective because when writing on a business topic such as business process management, it’s perspective you’re going to get.  In the “About” section, you can get a bit of my background.

Regardless of who you speak with and what white papers you’ve read, there is not a consensus definition of BPM, let alone a professionally established scope of this topic.  So, when deciding how to approach BPM, I decided not to take an overly academic approach.  I’m not likely to supplant the analysis you’ll find with a McKinsey, Bain, BCG, Gartner or the variety of BPM societies that have been established. 

Process Maximus is intended for business leaders who are serious about protecting, leveraging and improving the most important assets in their organization – their processes. I will look at BPM by breaking from the collective IT centric understanding and descriptions on this topic.  I will consider how processes help define the unique knowledge that allow organizations the ability to differentiate, compete, change and thrive.  I look at what innovative, global organizations are doing and have done to harvest knowledge, understand the inherent complexities in their organizations, form methods for managing operations and align operations to strategic objectives.

Some of the key topics I will explore include (but are not encompassed by):

 Executive Governance

Process Knowledge

Risk

Compliance

Quality

Business Agility

Continuous Improvement

BPM Technologies

The Necessity of Culture

Please join me regularly and please comment away.  While I have my viewpoint, I love a good debate and hopefully together we’ll improve our understanding of these important topics.

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