Webcast transcript: How to create an early warning system for operational resilience
1 hour approx | 18 March 2021
Hello, everyone. Welcome to the "How to create an early warning system for operational resilience" webcast. This is the second in our series of "How to unlock business visibility for real time insights." I am Deborah Byers, EY Americas Sector Leader. I will be your moderator for today’s program. We have assembled a tremendous panel with diverse and significant experience for our discussion today. We also have a terrific group of registered participants. In fact, more than 2,200 of you from around the globe. We look forward to all of your questions and comments.
First of all, before we get started, a little bit of housekeeping. You can download the slides for today’s webcast by clicking on the link provided under the green resource icon at the bottom of your viewing consul. You can also submit questions through the Q&A window. We look forward to your questions and comments. Please keep them coming throughout our discussion today and we will respond as we can throughout the webcast. And remember, we have content polls that will appear throughout the webcast in a pop-up window. If you have a blocker on, you will need to disable that especially you will need to respond to these questions in order to get CPE.
If education credits are important, please keep an eye on your screen for the polls during the course of the webcast. With that, let's meet EY panelists. Let's advance the slides. I'm thrilled that we have three of our best folks here today to talk about this topic. Joining me is Regenia Sanders. She is EY Americas and US Central Region Supply Chain and Operations Leader. Regenia, it is great to have you here today. Next, we have Brian Moore. Brian is EY Americas Technology Transformation and Trusted Intelligence Leader. He joined us on our last webcast. Brian, you are back for a second time at bat here.
Thank you for hosting us, Deborah.
Last but not the least, we have Steve Yon, and he is EY Executive Director in our innovation and technology group. I think we have a polling question before we jump into the agenda. Which of these 2021 disruptions has affected your enterprise the most? A. COVID-19 restrictions/lockdowns B. Extreme winter weather C. International trade D. Cryptocurrency, which has been hot in the news E. Social and/or geo-political tensions or F. it is not applicable. Let us look at our agenda today. Most of our agenda is going to be really discussion oriented. Today’s topic is all going to be around how do you develop a continuous monitoring system capability to analyze potential incidents and what those impacts are going to be.
None of this is new, but things are really accelerated, so we feel like this is a good time to look at what is out there now, what is coming and how should you be prepared. And, really how do you leverage your business service continuity plans that many of you have in place. There are 3:28 critical minor training services that happened. Perhaps it is now time to look at upgrading those systems and really looking at your systems and applications for real-time insights. This is the key. Things are happening so quickly. You need to have that in real time in order to respond because of the velocity of change.
The impacts could be tremendous. We’ll give some examples of recent things that have happened. And how do you organize and automate your data? We talked a lot about data in our previous webcast and the new technologies that are out there, and how to harness that and reduce the disruption to your services for today and for tomorrow. And one of the questions that I think Brian and the team will talk a lot about is how to get started?
There is so much out there. If you look at the next slide, you know, disruption, and I hate to say this, using this word because we have talked about what’s the new normal, but disruption is the new normal and the velocity is incredible. Here we are mid-March and we have already had a number of events that none of us planned for. I live in Houston. We are usually pretty well prepared for hurricanes as much as you can be, but we were totally unprepared for the great freeze in February where we had single digit weathers not just for one day that certainly happened in the past, but for almost an entire week.
The impact was really devastating ꟷ over a $195B in damages, 82 deaths in Texas. Consumer sentiment continues to evolve and shift. We have all now heard the story, we have seen it play out. The pandemic has accelerated the moves to e-commerce by five years, and that is throughout our entire economy, not just retail. Cryptocurrency, you cannot open the paper without seeing just the price of bitcoin, the volatility, and really all coin transactions. A year ago, who would've heard of Non-Fungible Tokens (NFTs)? And the eye-popping prices of some of those.
So, this kind of volatility, including momentum trading that we have seen with social media coordination, all really harnessing the power of technology to spread information in a velocity we have never seen before. Social justice. We just had another tragic event recently in the US, and again, we have not even finished the first quarter. Technology has continued to accelerate from 5G it’s here now to the blockchain revolution. This sets the stage of why we think this is new normal, why the velocity has changed, and why this is a great time to really assess your early warning system.
So, before we dig into this topic with EY panelists, let’s go to our second polling question. What areas of operational resilience are you primarily focused on today? Please pick one. A. financial (e.g. supplier risk, regulatory, banking) B. People. Certainly, that has been a huge focus. Well-being is top of mind for so many companies.
We have been saying every company is now a health care company. C. Daily operations ꟷ day to day, supply chain D. Systems ꟷ your IT, cybersecurity or E. not applicable. Let's talk about what is operational resilience and why is it more important today than ever. Let us kick it off with Steve. Steve, tell us what this means, and how can you be ready? Why is this important? It’s always been important. Why is it more important today?
Greetings, everybody, from a nice rainy Connecticut. I'm hoping for network resiliency as we get through the rest of the webcast. There's a few definitions out there around OPRES, depending on which industry you are looking at, but by and large it is the innate ability of firm to withstand or possibly avoid material effects from disruptive events. Deborah, you had nicely aggregated a number of those type of events and their impacts. What's clear to me is that the nature of these events are more than just the typical technology related ones so many of us have concerned ourselves with for years.
Most of us now have been part of the evolutionary path, from manual to automated to integrated to service-based models. With that evolution comes the expectation to manage and maintain your service level expectations as the brand impacts could be significant through loss of confidence in the market, not to mention your own career impacts could be just as devastating as well. And as probably many of the folks here have been part of those 3:00 a.m. calls to sift and sort what may have just happened, we can all relate to the experiences one would like to avoid.
By the time that call is convened, when people are trying to get in sync on the what, the when, the who, the why, the clock has been ticking and the potential impact and risk continues to grow. So, luckily, the current thinking around resiliency is evolving, too and the expectations from standards bodies and industry committees are updating their language from things like proving a firm's ability to execute a recovery plan to things more like improving a firm’s ability to withstand or absorb a disruptive event which opens up a lot of opportunity for innovation on how to achieve that outcome, which I think we are going to talk a lot about later in the session. Back to you.
We did get the polling questions. What was the number one item or disruptor item? It was overwhelmingly we are still dealing with COVID. I think that’s really important to think about. 82% of our audience are really focused on COVID. The second question around technology, so I am glad that this team is here because 36% are interested in predictive analytics and the technologies around that. On IoT, everybody wants to have more visibility, more data and around supply chains. I know, Regina, we will be very interested hearing from you.
Before that, Brian, talk to us about your perspectives on resilience especially with these answers. We are still in COVID. That's very clear. But wanting to get more visibility and predictive insights is something the audience is interested in, so when you talk to CIOs, you mentioned foreign imperatives. How do those imperatives fit in with the topic of operational resilience that we are talking about today?
We talk about this four imperatives ꟷ visibility, flexibility, reliability and secure ability. It's essential in providing operational resiliency to an organization and its customers. In order to do that, you must have visibility of what is going on in your systems, in your customer networks, and in your ability to serve both your employees and your constituents. Understanding that, having visibility to the early warning signs of needed equipment maintenance, to avoid manufacturing downtimes, to reinforce your supply chain.
Understanding how your suppliers are performing and how they are feeding you your raw materials. Understanding how your network and customer traffic is performing, in order to avoid disrupting your buyers. Using this real-time information and having visibility to it allows you to be more flexible in moving customer traffic, maintaining this manufacturing piece of equipment before it goes down, and having visibility and flexibility allows you to increase reliability to both your customers, your employees and to your stakeholders.
Thanks, Brian. Regina, especially with the last polling question answers, supply chain is going to be important. In the US, we continue to have a discussion about made in America, but especially with COVID and the disruptions we saw over the last year on supply chain, the Biden administration has issued an executive order for supply chains to shore up their weaknesses. This is top of mind in government and improve their resilience. That is very specific in his executive order. How are you talking to clients about improving their supply chain and operational resilience?
Thank you, Deborah. You are absolutely right. The second polling question was a perfect tee up for the statement you made, especially as we look at what the risks are across the supply chain. There are three things in particular that I have been spending time talking to clients about. Number one, we have already began to touch on, which is end-to-end visibility, investment in digital, and the third one is really looking at operating model. So if we unpack those things, when I talk end-to-end visibility, we are talking supplier all the way to the customer and everything in between. We are looking at ways to get increased visibility and supply chain intelligence with the tier-end suppliers.
In the past, a lot of times we spent – I was talking to a client a couple of weeks ago. He told me that they would spend a lot of time really getting a good idea of what tier one and two suppliers ꟷ what their capacities were, but they really had not looked at the suppliers and the suppliers of their suppliers, right? Now with the advancement of technology, we have the capability to be able to look across a broader spectrum of the supply chain ecosystem than we ever have before. I'm talking to a lot of clients around a control tower, that's one of the investments in digital that EY clients are making.
Looking at a lot of the point software solutions that are out there that have control tower baked in. We are also looking at digital twins for simulation and looking at traceability throughout the supply chain. And of course, there is the really sexy technologies like IOT, machine learning, block chain, using telemetry and sensors and of course, automation. But we see a lot of clients really looking at how do I upgrade my ERP system and figure out how to better utilize it, but then also looking at some of those best-in-breed point solutions for things like supply chain planning that already have machine learning and some of those sophisticated algorithms baked into it.
On the operating model side of the house, we are not only looking at network strategies, but we are also looking at how to make that network more tax efficient. You mentioned the Biden administration. There are a lot of incentives that are coming out, especially when it comes to where manufacturing is located. We are talking to EY clients about looking at how to make their supply chains tax efficient, locating manufacturing facilities in places where they might be able to access more incentives from the local government. This is in the US as well as across the world.
As well as looking at process efficiency and looking in the whole operating model. What functions need to be led from the core or center and centralized, and what functions might need to be more localized just based on what the imperatives are? All of this is really to be able to pivot whenever we do have disruptions, like you talked about at the beginning of this call.
There are two things, Regenia that you said, I think would be really interesting to our audience here, and maybe you can say a little bit more. The first is you mentioned control tower quite a bit. When I think of control tower, I think of the flight director that is able to kind of say which plan is going to land and where, and also look out. Tell us a little bit more about - bring that to life a little bit for our audience. What do you mean by control tower specifically in terms of what we are doing for EY clients?
When we talk about the notion of control tower, it is really a technology enabler. It starts with data and data intelligence and it allows us to be able to look across any of the existing systems that we have within our IT landscape, as well as any one particular system that actually has visibility to data across the entire supply chain ꟷ so supplier data, customer data, inventory data. In this control tower is a fancy dashboard, that we can, in essence, understand what the levers are across the supply chain. If end up having a dip in inventory or if I happen to see increased demand, what does the flow through look like?
And what are the changes that I might need to change in terms of where I am- storing inventory, or where I might need to add additional capacity? It gives us that visibility end-to-end across all of supply chain operations so that you can figure out what needs to be pulled. It's a combination of technology and data coming together to give you visibility across your entire business.
And that visibility then will – I mean, what I have seen when we have talked about control tower, and you mentioned digital twin, the digital plant, whether it is you know it could be something that you can something that you can look at and relate back to your control tower, but then you can run sort of scenarios. And I know we are going to get Steve to talk a little bit about scenario planning, but you need that visibility, right in that control tower, in order to be able to actually realize a benefit from all these technology – the technological assets, the data that’s coming in.
That is exactly right, Deborah.
The second thing that you mentioned, I think is quite interesting and you did reference the Biden administration and the executive orders that are coming out. It’s really – you know, the specifics are not there yet, but it has really brought this issue to the forefront about how to – you know, do on shoring in the right way and you mentioned incentives. A lot of times people do not think about the tax implications, especially some of our members in the audience who are multinational. While these things are not always top of mind, it certainly been an area where you can optimize and create some capital, right?
Yes, that is absolutely right. We have been looking at things like global trade and duties, and where operations are, what different trade lanes exist in order to be able to capitalize on some of the savings that are untapped when you are looking at some of the customs and the duties and the trade and the cost of just trading from country to country. So those are some things that can also be coupled with everything that we are talking about with supply chain visibility to get additional cost-reduction in the process of simplifying, as well as making your supply chain network more fungible.
Great. I know global tensions was not a hot topic during our polling question, but certainly as each country's looking at their internal supply chain resilience, and there could be a lot of changes as goods cross borders. Steve, talk to us a little bit about, you have all of this data. Let us say you have this control tower, and, you know, how do you then look at and use scenario planning in order to embed this resilience into your operations?
Sure. This goes back, and I think, you know, Regenia, you mentioned IOT a little bit earlier. The notion of having a facility by which you can, you know have visibility and transparency across critical business services is actually wicked important these days becoming - getting more so. And I guess I would like to spend a second to talk about IOT because I think that is something I think that’s on a lot of people's minds right now, and it presents, you know, a kind of an interesting way to approach these types of problems. But then there are some other sides of the coin that you have got to be aware of.
So, you know, these types of things to enable a control tower function like that, and the solution – we will talk about the solution a little bit later. You know, they both enable and they accelerate resilience capabilities and comprehensiveness. I think it is pretty straightforward to envision where an ocean of these self-identifying devices and assets can be levered into that framework – be it the solution we are going to talk about, or, you know, the control tower concept, each throwing off signals on its state.
However, it does light up – like I said, one of the biggest cautions we have when thinking about implementations, specifically the need to calibrate the model and the enabling design supporting it because it is like a balancing act between ease of delivery, usefulness and level of granularity. We call it a signal-to-noise ratio problem that really needs to be solved. For control tower, the solution that your monitoring the thing through and being able to know what is a real credible signal versus all the other things out there - exceptionally important.
You know, and our thinking about implementing a practical resiliency solution, you know, focuses on this and starts with the underlying principle of working with firms to talk through, really, really, what are your basic needs and components of these critical services that need to be operational? And calibrate those service maps underneath to reflect those high-level assets within. This application, this facility, these people, this supplier – again, all of these things represent data and information that go to a control tower or your solution.
And then declaring the controls and thresholds on each of them, which would reflect its operational status and ongoing signal to detect an indicative trigger event. So, the thinking that goes behind how we set something like that up and taking advantage of the natural evolution of, you know, the world's investment to evolve IOT and OT. They will ultimately provide all that telemetry, but the view of operational resiliency has to set the pragmatic view as a priority to sort signal from noise but to allow that control tower to actually monitor the things that really need to, that are critical to the business.
That is well said, Steven. So, you know, I think it is very clear why you need operational resiliency and why you need it more today than ever. And that it is important to be proactive, I think, separating the signal from the noise, as you say, is important. One of the things that I think is also important is this concept of being able to do some stress testing and scenario modeling and see where your fault lines are in your operation. So, let's jump into a quick polling question. Then let us talk about how to enable that and get a little bit more specific. Which technologies are you primarily counting on for improved operational resilience?
I am happy to talk about stress testing when you are ready.
We will do that. I think I jumped to this question earlier and did the wrong one previously, so, apologies for that, but this is the predictive analytics. I think I gave the answer to that previously. So, all right, let's jump into enabling operational resilience. I do not think it should impact anyone’s educational credits so we will make sure that that gets ironed out, but enabling operational resilience. With that, Regina, let us go back to the supply chain discussion because you cannot talk about resilience in your business without understanding all nodes in your supply chain.
Can you describe the importance of, not just the technology, but the culture, training and technology and assets are only as important as how well people use them? Can you talk a little bit about how that is important and empower people to make decisions to help improve overall resilience? Let's jump into that before we – when we think about how do you enable this resilience in the operation.
Sure, Deborah. You are absolutely right. Organizational change management is at the core of any process improvement adoption of technology, as well as any operating model of change. The key is the empowerment of EY people, putting people at the center of whatever the change is. And that means making sure that there is clear ownership, and there is clear accountability, and there are clearly set roles and responsibilities.
A lot of times we take it for granted that when we implement a new technology, it is going to automatically solve our problems, but there is always the notion of people adoption, always the notion of making sure that we baseline what current performance is so that we can make sure that whenever we enable this new technology or new process or even operating model change - we have got the individuals able to see exactly what is changing for them. I think key in that is building trust and the way that you build trust is empowering the people by making them part of the process.
So, whatever the new technology is, whatever the new process is, make sure that they were included in the concept, as well as the rationale for why we are doing this. There have been a number of clients that we have worked with that have empowered their workforce in this concept of citizen developer. This is basically pitting into the hands of the individuals who are actually doing the work. What are the changes that would make your job easier? What would you like to have additional visibility to? What additional data do you need?
And in so many cases, we do not really take the time to ask those questions to the individuals who are doing the work and that is core in making sure that you are gaining the adoption throughout whatever it is that you are implementing and that whatever you do is sustainable. And it is going to get those results that you are expecting when you are comparing it back to where you started with the baseline. So that is incredibly important, as well as recognizing that we need to see the connectivity throughout the entire organization.
There are so many instances where we optimize and process in a silo. We optimize planning, we optimize how we do sales, we optimize how we run our factories, but it is important to be able to connect the dots across all of those internal operations and internal organizations within the internal ecosystem of a company, much less really figuring out how that translates to the external ecosystem of the full supply chain.
So, you know, to summarize it all Deborah, it is about empowering people, making sure that they are sharing knowledge and there's an inclusive environment that builds trust and so people understand out of the gates what is in it for them, how their jobs are going to change, what new skills and the need to adopt so they can fully embrace whatever this new technology that we are bringing to them are. And documentation – can’t leave that out. Documentation is key.
Having integrated work system procedures, guidelines, all those things come into play, especially when we have a disruptor happen and we have got to be able to pivot the organization or have a contingency plan or a business continuity plan to make sure that business continues to go without a hitch.
So, Regenia, in our first polling question that everyone is still focused on lockdown, and implementing a program like this and looking at change management with people working remotely still -- vast majority of people working remotely and changing the way that they work -- presents a very unique and probably a challenge that we have never experienced before, at least in our working lifetime. How has that impacted some of the work that you see with EY clients?
Well, I think it complicates it a little bit because, you know, it is not like we can just walk down the hallway and talk to someone, or you know, whiteboard something pretty quickly. So that means that clarity is even more important, having guidelines and procedures and the guardrails established is even more important. And we also have to put a bit more extra effort in engaging. It is a little bit different engaging someone on a camera than it is, you know, in a conference room.
And so those are things that make us have to be a lot more, um, a lot more focused on what it is – deliberate and intentional about communicating what the change is and what the impact of that change is going to be. We might not be able to do mass rollouts to the same degree. We might have to do smaller rollouts simultaneously if we have got the team and resources to be able to do that.
So, you know, it might not be the mass thing, because you leave a lot of people behind when you try to roll out something hugely at scale, but maybe it is taking small baby steps with focus groups so that you gain the adoption and that those individuals feel empowered to then be able to cascade the information and the new skills and the new technology that we are trying to implement. But we have seen a lot of success with that, and I think that, you know it also makes it a little bit easier to empower people because you cannot really hide in a crowd. It is little bit more one-on-one in some cases when we are doing these.
That is great. And we do not see people slowing down. I do not think slowing down is an option even though we are in lockdown because the economy is, despite everything, quite strong. And everyone, at least the folks that are in the business of forecasting are forecasting a very very strong economic growth for the US. So, you really cannot afford to slow down, and you need to embrace some of these changes and capture this upside that is coming. So, thanks, Regenia. Brian, maybe back to you. It has been a while, since we have heard from you.
When disruption hits, you talked about the four things that are important, four imperatives to the CIO, but you find companies have not dusted off their business continuity plans. We saw that. We saw a lot of that play out this past year. Can you talk through the importance of the scenario planning? We alluded to it, and everybody talks about it, but how is that important to the business continuity planning. And then really, what about the governance when disaster hits making sure that everybody knows what their lane is?
As we learned last year, a robust scenario and business continuity plan is a critical piece of a company's risk mitigation strategy. Now, having the ability to shift where people work, where goods are manufactured, how we serve our customers, how to determine which have really determined in the past year, which companies have succeeded during the pandemic. The companies that were able to have a somewhat organized plan of moving to direct-to-consumer succeeded. Companies that did not have that footprint, or that experience or even understand where their goods were coming from in order to shore up their manufacturing have struggled.
So, having a robust plan, a robust dialogue that is consistently looked at and stress-tested really determined a lot of the winners and losers in this past year. So, one of the things that a lot of EY clients are talking about is: what is that art of the possible? How do we build that plan? What is the governance that maintains the plan? And how do we test it with our digital twins? How do we do that scenario planning in order to be able to compete during trying times.
And so, you know, EY teams have developed multiple areas in this to both do it via simulations, as well as real- life experiences we have had in order to embed in this robust scenario planning.
We have talked about people; we have talked about process. Steve, maybe you could talk a little bit about the technologies that enable the resilience. And I did mix up the polling questions earlier, but the bit about what technologies are really important – predictive analytics was top of the top of the leaderboard on that one with IOT next. And then having that control tower visibility was third. But predictive analytics. Everybody wants to have some capability around that. Steve, talk to us a little bit about, you know, we have got people, process. What about technology?
Sure. And I think that, you know, by selecting that they are really just resonating with the trend and what is necessary. It's not good enough these days to just respond when something happens. You want to have that foresight and insight into what is coming down the pipe to give you a chance to react to it. Or, make sure that you are prepped to deal with it if that disruption is completely unavoidable. And this might be a good time to talk about the solution that we have kind of hammered out on something like this.
And that we are talking about with EY clients. They are at various stages of writing this in this space. As you think about this and are talking about with clients. EY clients are at various stages of readiness and need in this space. So, the solution as you think about this and all those different points there, you know, it needs to be relevant to them, irrespective of where they are currently, but also has to allow them to grow into a more advanced in comprehensive design. So, not only from the application itself and the supporting infrastructure beneath it, but actually how the business views itself from its critical business services that need to be always available.
It's a really interesting dialogue that happens. Brian talked about continuity plans and business management. They have spent a ton on developing a lot of those things. We need to be able to put them into real-time use, so they are not just there in the event of something happening, but they are also somewhat automated and integrated into your governance pattern, into your game plan on how you deal with it and possibly prevent things going forward.
One thing that might be interesting, especially given the interest in predictive analytics – and I apologize for just throwing this question at you, but we are getting a lot of interest around that. Talk a little bit about some of that ecosystem. There are so many companies out there that have technologies that say, we can give you this insight, we can give you predictive analytics, but what you do with it and how you then bring it internally into your business decision-making is really a challenge.
But talk about the ecosystem out there and what you are seeing. Is that accelerating? There seems to be more companies, more and more every day coming out that have this capability. How do you sort through that?
So, now I will talk a little bit more specifically about the solution offering here and put it in the context of what it is I think is important. What I have been seeing out there are solutions or platforms or tools that can grab alerts from things that exist and then dashboard them and provide some sort of an indicator as to what is going on. But they do not necessarily imprint the nature of what is the critical business service there because they are still tied very much to technology orientation or those technologies that can announce themselves and provide state versus other things that are there, right?
There is a number of other different domains that need to be managed. I find that they fall a little short in providing a truly comprehensive view about the state of the state and what is coming down in all the different domains, not just tech, but some of the things we talked about earlier. So, if we break the solution into two parts, the application itself and the critical business service models that need to be imprinted on it. That is what makes you, you. That is what makes a bank a bank or a power and utility a power and utility. Let us talk first about the application of the solutions.
What we have done here at EY we built our solution on service now, for a number of different reasons. And I think we have got a picture of something here that we can show up as well. One, given the pervasiveness of the platform in the market and information contained within it and the CMDB and other modules, clients will be able to accelerate their initial builds and have confidence in the solution’s ongoing maintenance support. That is important for people to have, which is, how is it that I can get a leg up from all the information that I already have on this right now?
Second, the nature of having a single extensible data model, this is important, too, in technology, too versus just dropping in another tool and having to go through lots of transformations. You tend to lose integrity on what is actually going on. But using a platform that has a single extensible data model that enables natural growth and integration across its own accelerators and domains, like risk and compliance, asset management and ITSM. You are starting to basically cast a fabric in the net in a much wider way.
Third, the ultimate design pattern for something like this envisions a combination of enabling human decision support as disruptive events get detected, as well as autonomic, we call, “service state switching” where the preventive or recovery patterns, which are clear and unambiguous, you know, part of the BCP right? They are clear and unambiguous. And a solution like Service Now workflow automation tool can basically direct drive those predetermined workflows and keep you out of trouble without wasting anytime because what is coming at you is clear. The UX or something that needs to be built on a solution, you know, it needs to take into account different personas that would interact with it.
There is CRO, chief resiliency officers, and COOs and CIOs. They are going to have a particular view in terms of what is the state of my services, but they might not take part in a lot of the drill through that gets down into the actual incidents being resolved. Service owners need to be able to look at that, support personnel. This platform needs to serve up information relevant to all those various responsibilities and tiering all the while keeping integrity on the data and the nature of the issue with them. This is where I think the big difference is in terms of what we see out there versus what it is that we think good looks like is the dashboards.
They synthesize critical business service sate with respect to the controls that were defined against their service map – assets, and then their domains, to allow for both live disruption monitoring as well as self-assessment and recovery activity. That is the technology that I think is important to try to think through and calibrate to when you are thinking about building a system like this. Then the most important part, which is, you know, the service model implement. This is critical to think through and calibrate well as it could mean a difference between achievable implementation, that truly enables resiliency and a science fair project that has too much noise in the system like what we talked about before.
And here is where I think the experiential wisdom of EY service teams is valuable and some of the folks we have here on the call. Knowing their industry, knowing what good looks like in terms of service and operational processes. Knowing what industry regulators want to see. This thinking and experience can be levered by clients to help accelerate their initial build and ongoing roadmap on how this type of capability, you know, can evolve. Overall, the solution here ꟷ and different from others ꟷ is a system of service maps that deconstruct critical services into assets and expected operational state.
And signals that detect when you are approaching a control point on an asset that would precipitate a necessity to change and where’s something coming at you, and then of course actions, to drive either to decision support activities for the people to make or that autonomic switching we talked about because some things can be cut and dry. There's a lot to pack in that particular one, but this is a big concept that has a couple of very key points in terms of how to think about it and how to approach a problem.
Thanks, Steve. I think that this is a great example of how to pull it together and pilot, but you know make sure that you have got a solution that can address multiple stakeholders in the company. It has to be industry-specific so you have got to have that industry domain knowledge and you have got to create it using an ecosystem of technologies that frankly some of them are new, and then having that control tower or dashboard visibility and leveraging all the data assets that are out there is going to be important because, as you say, what is the signal versus noise and how do you translate that signal into a business information and insight that you can actually act on?
Let us go to our polling question and then we are going to have EY panelists address how to really build a business case to do this, because this is not an easy undertaking, like I said, especially in lockdown. Which areas of operational resilience do you plan on tracking first? A. live incident monitoring for impacted assets B. Managing assets during disruptive events to support optimal response times so speed to response ꟷ resilience preparedness, including business continuity C. Testing and risk assessment and D. We have active projects in all of the above D. It’s N/A.
So let's go to really, how do you build a business case, especially now when resources are scarce? How do you make this pivot and really make the case to do this now. We are still in lockdown. We are still in response mode, frankly, to the largest crisis we have probably ever faced. Brian, talk a little bit about building that business case. Sometimes you look at dashboard and say, “Boy, I would love to have that, but I am dealing with this right now.”
We are seeing more and more clients focus on those critical needs, such as how do I serve my customers and how do I also ensure resiliency in my supply chain? More and more of our customers are focusing on those two areas to build out the need for this operational resiliency in this early warning system. Steve likes to talk about, do you want the call l from the CEO, or are you doing the calling to the CEO to let them know that you have the challenges handled? So, we are building around those critical aspects and understanding Steve’s point about the massive amount of data that is coming at all of our employees.
How do we shift through that to what is critically important? And we can, most of the time, look at these business cases and say what carries the day is both the customer impacts and the supply chain impacts.
So, Regenia, I think that Brian kind of kicked the question over to supply chain. In order to enable this and make this pivot, how do you balance between too much data, too much data and governance that inhibit your ability to move quickly and make adjustments to your supply chain versus having enough data and having enough flex in the system so that real-time decisions can be made throughout the organization?
This is a good question for supply chain because supply chain generates a lot of data and with the new technology that we have with sensors and IOT, it's generating even more. So key for us is going to be able – is going to be kind of what Brian said, define the data that is most important to running the business. There's of course the master data that we want to be focused on, but in addition to master data, there is the transactional data. But now we have additional intelligence from these monitoring systems.
So we have got to state what is the problem we are trying to solve and what is the data that is going to give me insights to be able to solve those problems. When we look at data governance, what is going to be key there is making sure we have some consistent processes to maintain that data, that we’ve got ways to aggregate the data, identify the data that will be most important to look at for machine learning, so we can be smarter about what is actually happening, so we can predict as well as respond more quickly.
It is about prioritization and really defining what it is we are looking for and then lining up the data that will be able to support that and being clear about it. Establishing a center for data and analytics is a trend that I am seeing in a lot of EY clients. And in establishing that, you have got a dedicated set of people that can get the requirements from the business and be able to leverage the technology and look at the data in ways that will be insightful ꟷ not just data for data's sake, but data for real intelligence real decision-making.
Thanks, Regenia, for that. Speaking of supply chain, not everyone ꟷ and maybe Steve, you can address this ꟷ not everyone is within the supply chain itself, within your ecosystem, is within the company. You have vendors as well. So you have to make that assessment and be able react and communicate real-time with your broader third-party ecosystem and there are other stakeholders as well; regulators were mentioned previously. Especially when we think about what happened recently in February in Texas, you had a number of both regulators and companies and suppliers that all had to communicate real-time and clearly there were some gaps and failures there.
So, Steve, to prevent these types of catastrophic failures, you have to stage these operational dashboards to prevent that. Talk a little bit about how you create this collaboration between both internal, stakeholders, vendors and in many industries there are critical, also the regulators, all throughout the value chain itself.
It is complex, especially when you start integrating outside of your own entity walls, the concept of trust becomes important as well, and reliability and stability on these. But briefly, I see those abilities growing is kind of a natural outgrowth of the resiliency evolution, particularly within industry. Within industry, the critical services that define that industry will tend to consolidate into a static set of expectations. So, for instance, the financial sector, payment services, trade execution services, client reporting services, these will tend to be services that everybody does in that particular industry.
And one of the things that will help those firms, those services, and those service maps, and the signal and information needs settle down, because they do not want to be constantly changing these things. They want to stability there. One of the things that will help them settle down will be the standardization of the supplier-provided information and access. This move will create a new set of expectations from the clients to the suppliers.
And as more resiliency-minded clients require them, suppliers will look to standardize their access methods and signals to address what the new market norms are and how to maintain their competitive reach. I believe that data sharing and trust within that will grow as the standardization of resiliency-based thinking permeates the entire supply chain, where we might even see over time, the introduction of certifications that suppliers would achieve through their ability to provide this new level of business integration with their clients, and trust, and standard methods and APIs by which they provided.
I think that we have some time for questions. We have a lot of questions coming in, specifically for the panelists. When we talk about making the pivot, where do you start? You have to build your business case clearly, especially today where capital is scarce, and we are still reacting to the pandemic. You need to take inventory of your current assets and leverage what you have today, and that is important, including your people and your processes that you have that may need to change. Around data governance and this last point, creating trust within your entire ecosystem of suppliers, partners and stakeholders, that includes external stakeholders. We had some really good questions.
This is a tough topic to undertake it, but the first question is for you, Steve, and any of the other panels that want to jump in. What is the role of the board of directors in terms of operational resilience oversight? This could get too deep in the weeds for the board of directors, but it has really risen to the top of the house strategically. Steve, you want to take that one?
I can give at least my view in terms of where it is that I know. For instance, in the financial services sector, for instance, the board has obligations to the US of A in terms of expectations around resiliency, transparency that is provided when things are. So, in financial services, the board itself actually has a responsibility, and expectation set on it in terms of the practices that are being performed within the firm, and there needs to be, you know, evidence on the ability for them to be able to do this.
Back to the conversation earlier on what makes a good solution a good solution is, this is not just calibrating down within what is going on in tech but that ability to raise up and address the different persona and perspectives that each of them have in terms of, you know, when you are up at the board level, you are talking about critical business services, not a server. You are talking about the potential for systemic disruption that you do not want to have happen.
So, they are going to be very much part of the conversation here, especially post the too-big-to-fail activities, which is, you know what enacted a lot of the legislation and Dodd-Frank coming in. So, I do not see them separating from this dialogue at all. A matter of fact, I see what would make their world simpler permeate down into the organization and help accelerate the nature of resiliency-minded thinking from front to back within the supplier.
Deborah, just to add onto that, you know, the role of the board is that the board should expect it, that the board should demand that it be completed. Now, based on size, the industry, it is all about focus and looking at what is critical aspects of your business to meet your stakeholders’ demands, whether that is your employees or your stockholders. There's a question in here about, you know, this may be great for large companies, but how do smaller companies with smaller budgets undertake such initiatives? I would reiterate it is about focus. Look at what is the true critical aspects for you to achieve your mission and focus there and scale it appropriately.
Those are two great points. This is very much at the board level. Brian, it is important that this isn't just about big companies impacted, a lot of midsize companies to small businesses need to leverage some of these assets and thinking, because they could be impacted as well when we talk about disruption being really the new normal. Regenia, I think we have time for one last question.
We talk a lot about the supply chain and how it is important to get visibility into the data, but one of the things that we run into a lot, especially going outside of the organization, they consider that to be proprietary data, so how do your work with your suppliers who may not be willing to share that proprietary data? What are some of the workarounds to manage that?
Well, Deb, I do not know if there are really any workarounds for it, it is just making sure that there is increased emphasis on supplier relationship management. We have said it a lot in the past, but have we really done it? What happened with COVID focused us on, you know how are we actually communicating with our suppliers, and do we have a shared understanding of what we will need from our suppliers and do we also have an understanding of what our suppliers need from us? What are the tools that we need to put in place to make sure that we can enable that handoff?
Yes, and especially in the manufacturing industry, there is always the concern of intellectual property and sharing of that type of data, but as things become more and more commoditized there is going to be a greater separation or more clear definition of what is truly data that, you know, me as a supplier would want to keep versus what I can actually share. It starts with a mutual understanding of what is important and how it will be used. I think that that alone will help overcome some of the barriers of sharing of the information.
Yes. As we have found out, we are kind of all in this together, right? We are all on this journey together and sharing that information not only helps you, but it also helps us all kind of get through this crisis together. So that's a great point. And maybe that is a great place to wrap up as we talk about working together. Today, that is the end of the webcast. I hope you have gotten some insight around operational resilience, why it's important now more than ever, and that disruption is the new norm, but you can be ready and your operations can be resilient and even thrive through this pandemic as we come through this and the economy begins to rebound.
For more information, please visit us at www.ey.com. We look forward to our next session where we will continue our discussion about gaining more insight into your business for operational resilience. Thanks for joining us today.