Managing EBusiness Risk

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Managing E-Business Risk September 18,
2000 Tony Tortorice Partner - Global Risk
Management Solutions anthony.d.tortorice_at_us.pwcglo
bal.com 213.236.3210
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Why are CEOs focusing on E-Business?

• Media predictions
• Internet Information Revolution
• Stock market valuations shareholder
  expectations
• Technology changes continue
• Diversity of client platforms
• Increasing bandwidth at lower cost
• E-Business impact
• Threats and opportunities
• Industries restructuring
• Industries converging

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Market predictions Projected revenue from
commerce on the Web
Billions of Dollars
Source IDC, 1999
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Technology changes Telecommunications

• Bandwidth now available on telecommunications
  networks
• Death of distance
• Bottleneck is at the Last Mile
• POTS (analog over twisted pair) is too slow
• Fibre optic cable to the home is long term but
  not currently economically viable
• Focus is on technologies that can leverage
  existing wire plant (e.g. phone xDSL cable
  modem)
• Increasing mobile usage, but bandwidth very low
  for data

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E-Business impact as enabler, impacts three
areas of company activity
Supplier network
Customer network
Company internal infrastructure
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E-Business impact focus moves from E-Commerce to
E-Business
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E-Business impact varies by industry
E-Business will impact marketing, selling and
customer service
E-Business will impactoperations,
infrastructure, and customer service
E-Business will impact structure of offerings and
how delivered
E-Business will restructure the entire industry
Source Gartner Group, 1998
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E-Business impact new business models

• Market segmentation individualised
  products/pricing

• New pricing models auction, reverse auction

• Self service direct access

• Disintermediation, reintermediation

• Service models

• Virtual organization

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E-Business impact Summary
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E-Business impact Understanding the nature of
risk
Hazard, e.g. Legal and regulatory Security
strategy E- business resilience
Operational efficiency, e.g. Deficient logistics
processes Ineffective integration with
back-office applications Lack of scalability
Opportunities, e.g. Anticipated cost savings
Revenue assumptions
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e-business how do you get there?
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e-business how do you get there?
We Understand the Challenges and Opportunities
You Face
How do we integrate mergers and acquisitions to
recognize and capture new business opportunities?
How can we best leverage our product across
emerging distribution channels?
How might e-business change the paradigm of my
business?
How best can we leverage and protect
intellectual property?
What changes are needed in my processes, skills,
organization and systems?
How can I develop even closer relationships with
my trading partners?
How is the Internet going to affect various
revenue streams or cost structures?
What will be the impact and where is the return
on investment of the electronic commerce
revolution?
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emm_at_ the e-business maturity model
emm_at_ will help you to understand how well your
organization has adopted -- or can adapt to --
e-business

• Developed by PricewaterhouseCoopers and Carnegie
  Mellon University
• Offers an holistic approach to e-business by
  integrating those key functions essential to
  e-business operations.
• Provides a comprehensive and consistent
  assessment framework
• Helps identify and manage risk within your
  e-business enterprise

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emm_at_ domains
emm_at_ addresses e-business maturity in nine key
business domains.
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emm_at_ issues
Each emm_at_ domain includes a set of critical
business issues.

• Perform marketing
• Develop products
• Perform sales
• Procure materials and services
• Produce products
• Manage logistics and distribution
• Manage customer service

• Technology infrastructure
• Applications to support customer-facing
• Supply chain management applications
• Knowledge management applications
• Payment systems
• Information technology management tools

• Content creation and management
• Information and systems management
• Methodologies
• Project and program management

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emm_at_ good practice statements
Experts in these nine domains have identified
over 750 good practice statements addressing each
of the business issues.
3.3.4 The organization has guaranteed a high
degree of interactivity so that the customer can
easily create, edit, send, confirm, and track
orders.
5.1.12 The organization integrates its on-line
electronic catalogue with the existing
operational product databases.
6.4.10 The organization controls the Electronic
Business plan on a cross functional and cross
divisional base
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emm_at_ maturity levels

• emm_at_ defines five levels of maturity in the way
  firms are engaged in e-business.
• These five maturity levels reflect how an
  organization will face different issues and
  respond differently as it progresses through its
  use of e-business.

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0. Existing business processes
Push
Buying
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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emm_at_ maturity levels
The organization uses electronic channels to
provide basic information about it, and using the
services provided online by its suppliers and
customers.
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1. On-line presence
Corporate and Marketing information on web site
Push
Buying
Pull
Benefits - Better communication to customers -
More efficient marketing
Update
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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1. Issues with on-line presence
Content management - is it legal and compliant
with regulations? - how do you keep the
information up to date? - ergonomics
Privacy - what do you say to your customers on
entry to web-site? - how do you comply with Data
Protection regulations?
Push
Buying
Pull
Security - could someone amend or replace your
content? - how would you know?
Performance management - do you have enough
capacity for of visitors? - how do you measure
whether your site is a success?
Update
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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emm_at_ maturity levels
The organization uses a stand-alone website as an
alternative channel, or uses basic structured
exchange of data in the supply chain to replace
traditional media (phone, fax).
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2. On-line business
Low volume customer transactions - air gap
between web server and core business systems
Push
Buying
Benefits - More facilities for customers -
Revenue generation - Reaching new markets or
customers
Pull
Buying
Update
Update
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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2. Issues with on-line business
Reach - can you reach new customers/markets? -
what about markets where you are not allowed to
carry out business?
Tax - are you inadvertantly establishing a tax
presence?
Push
Buying
Pull
Buying
Manual update - how do you prevent errors
creeping into the transactions? - how do you
minimise the cost per transaction?
Security - how are you capturing payment
details? - how will you build confidence in the
customer?
Update
Update
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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emm_at_ maturity levels
The organization uses electronic channels to
support core processes that are integrated with
the systems and business processes already in
existence.
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3. On-line integrated business
Automatic interface between web site and core
business systems
Push
Buying
Benefits - Harness legacy technology - Improved
efficiency and effectiveness - Support greater
revenue generation
Pull
Buying
Update
Update
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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3. Issues with on-line integrated business
Availability/ Speed - is your web-site available
with enough capacity to meet customer demands?
Awareness - how do you make sure that staff in
your existing distribution channels know what is
on your web-site?
Push
Buying
Pull
Buying
Security - could someone break into your core
business systems through the web-site?
Interfacing - how do you validate the information
at web-site stage? - can you web-enable your ERP
systems?
Update
Update
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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emm_at_ maturity levels
The organization exploits the e-business
infrastructure to reinvent business processes, or
expand the direction and markets of the
organization. The organization is or has built
new e-business processes that integrate elements
of their customer-facing activities with their
supply chain and supporting activities to gain
competitive advantage.
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4. Advanced on-line business
Sophisticated web-based marketing and product
redefinition
Enhanced marketing channels
Links from other Web sites
Push
Buying
Benefits - Improved customer loyalty through
exploiting customer base - New products and
services - Improved time to market - More
efficient and effective processes
Push
Newspaper or magazine
Buying
Pull
Update
Customers
Update
Product
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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4. Issues with advanced on-line business
Advertising - how do you know you are getting
value for money from your virtual advertising?
Push marketing - how do you use IT to make your
push marketing enhance the relationship with your
customer?
Enhanced marketing channels
Links from other Web sites
Push
Buying
Push
Products - can you make your products easier for
your customers to tailor? - new opportunities?
Newspaper or magazine
Buying
Pull
Security - should you be using advanced payment
technologies (e.g. SET, Cybercash, tokens, etc.)?
Update
Customers
Update
Product
Customer information - How effectively can you
extract and analyse it? - Data warehousing/ Data
mining
Mail addresses
Core business systems
Update
Product information
Update
Sales Invoicing Payment collection
Mailing lists
Customers
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emm_at_ maturity levels
The organization uses e-business to focus upon
their core capabilities, and achieve a seamless
integration between themselves and their business
partners and customers. The distribution of
products is managed electronically.
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5. Full e-commerce
Elimination of traditional channels
Push
Buying
Push
Buying
Pull
Benefits - Major cost savings through
elimination of less efficient business processes
Update
Customers
Update
Update
Core business systems
Product information
Update
Sales Invoicing Payment collection
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5. Issues with full e-commerce
Digitalisation - can you make your products
electronic and remove physical distribution? -
tax/legal issues
Availability - how do you ensure that your
web-site is always available? - what fall-back do
you have if it is not available?
Push
Buying
Push
Buying
Outsourcing - have you outsourced everything that
isnt a core competence?
Pull
Channels - how do you make sure that you are in
sufficient on-line distribution channels?
Update
Customers
Update
Update
Integration - can your web-server now replace
your core business systems? - call centre
integration
Change management - how do you manage the risks
involved in major restructuring?
Core business systems
Product information
Update
Sales Invoicing Payment collection
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emm_at_ maturity levels
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Emm_at_ Level 2 Assessment Performance Wheel
(2) On-line Business
You are here!
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Emm_at_ and E-Business Strategy
Convergence
Industry Transformation
Risk Reward
Value Chain Integration
Channel Enhancement
Leverage of E-Business (e-business maturity level)
(1) On-line Presence
(2) On-line Business
(3) On-line Integrated Business
(4) On-line Advanced Business
(5) Full E-Com
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emm_at_ supports the full lifecycle
Assess
Envision
Operate
Design
Implement
emm_at_
emm_at_
emm_at_
What are your current capabilities?
How will you achieve your strategy?
How will your organization continue to improve?
emm_at_ can help your business measures its
performance and successfully implement its goals.
emm_at_ can identify how well your business is
performing now and can identify current risks and
areas for improvement.
emm_at_ can identify and help address the issues
your business will face when rolling out your
strategy.