Deloitte SA Blog

Any experienced leader knows that little is accomplished by those who try to get things done. That’s because good leaders don’t confuse effort with results. Yet when it comes to security risks associated with technology, where a critical breach can bring a business to its knees, there’s a great deal of trying going on. And not nearly enough doing.

Not surprisingly, many executives today believe their organizations are well-protected. With broad policies in place for technology governance, risk and compliance, most have assigned responsibility for security to their IT shops, confident that their fiduciary and legal obligations are being met. But a closer look at the real risks and threats reveals a different picture. Organizations that take a compliance-oriented approach to enterprise and IT risk may not be managing many of the threats that matter most.

It’s not uncommon for companies to equate compliance and security. That’s what happened recently when a major retailer was hacked, exposing several million debit and credit card numbers to the risk of theft. The company appeared to have a rock-solid compliance program in place, asserting that they followed all the security requirements mandated by the credit card brands and others. But that wasn’t enough. A number of back-end systems were left unpatched, leaving some of their software vulnerable to exploitation. Hackers were able to penetrate the company’s systems despite their most diligent compliance efforts. Thousands of cases of fraud were linked to the breach, exposing the company to legal, reputational and financial risks.

A risk-based approach using a layered defense could have helped prevent such an incident.

Download the full article . . . .  Evolve or fail

We welcome you to visit the Deloitte South Africa Technology Risk Advisory website. If you have any questions or require a more detailed conversation, contact Cathy Gibson at cgibson@deloitte.co.za

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This Deloitte report identifies the 250 largest retailers around the world, based on publicly available data. The report also provides an outlook for the global economy, trends for retailers to consider in the coming months, and an analysis of market capitalisation in the retail industry.

Download the full report . . . .  Global powers of retailing 2012

If you have any questions or require a more detailed discussion, contact Rodger George at rogeorge@deloitte.co.za

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Water is our most precious resource. Its availability transcends political borders. While the challenge for increased competition is global, the issues must be solved on a local level by governments, businesses, non-governmental organisations (NGOs) and domestic consumers, all working together.

The aim of this report is to highlight the top issues that the Deloitte Global Deloitte Energy and Resources Water practice regard as the most important for the water sector. These issues are of course all interconnected with each other and with other resource issues, and should not be considered in isolation.

Rapid growth in demand for for this finite resource is a central theme and is reflected in all of the issues we discuss. The global water sector’s future will be characterised by efforts to manage demand and increase supply. We thank that continued awareness campaigns, more effective water pricing, a better understanding of the relationship between water, energy and food, and technology advances will play an important role in these efforts.

Climate change is also a key theme. It increases the risk of volatility in the availability of water resources and exacerbates the impact of forces driving demand. Unpredictable weather conditions also adversely affect the functioning of water assets and make planning and investment in water infrastructure more expensive.

To meet further demand, trillions of dollars will be needed on a global level to update aging infrastructure and expand water related assets. With government funding and borrowing capabilities severely impaired as a result of the ongoing financial crisis, the private sector is likely to play a bigger role in the water industry in the future. More water suppliers may be privatised, and it may be necessary to find mechanisms that allow water to be priced as a true commodity.

Efforts to demonstrate water stewardship will be a key theme for utilities and water users in coming years. Close collaboration between utilities, regulators and all users of water is required to address the ultimate issue – the scarcity of water resources in many parts of the world.

Download the report . . . . Water Tight 2012 – The top issues in the global water sector

Do you require a more detailed discussion? Contact Deloitte Consulting Director, Shamal Sivasanker, at ssivasanker@deloitte.co.za

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Mining companies today face challenges on several fronts when it comes to addressing supply risk effectively. There are people challenges, which include high turnover rates, a limited supply of skilled labour and service providers, and the logistics around getting personnel to mining sites in remote locations. There are process challenges throughout the mining supply chain that include: limited negotiating power in sourcing and procurement; coordination of complex global distribution networks across multiple regions and modes; a lack of upstream information necessary to perform adequate planning and forecasting; and ineffective processes to assess and quantify the magnitude of various risk types. Finally, there are technology challenges related to poor quality of data and a lack of effective analytical tools to support the modelling and evaluation of risk.

Leading practices in supply risk management address risk quantitatively and strategically, and take an integrated view of risk across the value chain and the enterprise. Strategic risks need to be segmented and separated from financial and operational risks in the current environment. Identifying the key drivers of change can help organisations prepare for changes across different time durations. Core supply chain and supply management capabilities must include an organisation, with the appropriate skills and abilities, charged with managing and reducing overall supply risk. In addition, core supply chain processes in the areas of forecasting and planning, inventory management, strategic sourcing, contract management, and supplier relationship management are a basic first line of defence to combat supply risk.

Those organisations who are more advanced in addressing supply risk deploy specialised risk management capabilities to address the more complex threats posed by regulatory and geopolitical shifts. These advanced capabilities include: focusing on market intelligence by partnering with strategic suppliers to share and evaluate data on market and economic conditions; enhancing internal systems to capture data that supports dynamic decision making; and intelligent risk modelling tools to conduct scenario analysis and optimise supply decisions.

Overall, mining companies today are faced with pressure to meet rising demand for mining commodities in a climate where the cost of supply disruptions is greater than ever. Mining companies that effectively develop the capability to manage supply risk will be better positioned to meet market demand and exceed stakeholder expectations amid volatility and uncertainty.

Download the full article . . . .  A guide to effective supply risk management in the mining industry

If you require a more information on the topic of supply risk management, the South African members of the Deloitte Global Mining Team will be more than happy to have a more detailed discussion with you. Their contact details are Werner van Antwerpen, Manager – wvanantwerpen@deloitte.co.za, Genevieve de Carcenac, Manager – gdecarcenac@deloitte.co.za and Tomek Jekot, Senior Manager – tjekot@deloitte.co.za.

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A World Economic Forum Report in collaboration with Deloitte Touche Tohmatsu Limited

With a call to action from stakeholders at the 2011 Annual Meeting, in January 2011 the World Economic Forum’s Mobility Industries team initiated the Future of Manufacturing project to address how the global manufacturing ecosystem is evolving. The project explored the pivotal drivers of change, today and in the future, to generate insights and a platform for informed dialogue between senior business leaders and policy-makers.

Introduction

Over the past several decades, manufacturing has experienced significant change as rapid globalisation shifted a significant proportion of manufacturing capacity from developed to emerging economies and substantial new markets and new competitors emerged. The globalisation of manufacturing was enabled by a combination of forces coming together simultaneously, including a significant change in geopolitical relations between east and west, the widespread growth of digital information, physical and financial infrastructure, computerised manufacturing technologies, and the proliferation of bilateral and multilateral trade agreements.

These factors, along with others, have permitted the disaggregation of supply chains into complex global networks allowing a company to interact in the design, sourcing of materials and components, and manufacturing of products from virtually anywhere – while satisfying customers almost anywhere.

The manufacturing industry is of great interest to investors and business leaders hoping to take advantage of the opportunities presented by rapid globalisation and the significant growth of the middle class in emerging markets, as well as serving high-value customers in developed markets with innovative new products and services.

Policy-makers, still coping with the aftermath of the financial crisis and hoping to stimulate high-value job growth and create sustained economic recovery, are keenly interested in the benefits of having a globally competitive manufacturing industry. While the changes that have occurred in the recent past are important to understand, it is the future of competition in the manufacturing industry that has the most interest to both business leaders and policy-makers.

Download the Deloitte article . . . .  The future of manufacturing – Opportunities to drive economic growth

If you have any questions or require a detailed discussion, contact Andrew Mackie (Deloitte Manufacturing Industry Leader) at amackie@deloitte.co.za

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This Deloitte paper presents the results of surveys and interviews, conducted amongst leading global market analysts, about the impact that leadership can have on share price. Deloitte believes that the results of the survey may help quantify the risks of a leadership deficit to an organisation.

The Leadership Premium – How companies win the confidence of investors

“Based on our research, we have developed some practical recommendations for businesses on how they can enhance their leadership effectiveness and demonstrate it to the financial markets, their stakeholders and, ultimately, their wider stakeholders.

As a firm, we believe that leadership can be developed, that organisations can be set up to create long-term, sustainable leadership capability, and that doing so can improve bottom line results and increase shareholder value.

In compiling The Leadership Premium, we’ve combined survey data and perspectives from interviews with analysts with our own expertise and experience. We hope that the result is a  blueprint for successful leadership”.

Download the Deloitte paper . . . .  The leadership premium – How companies win the confidence of investors

If you have any questions or require a more detailed discussion, contact  Jack Sellschop at jsellschop@deloitte.co.za.

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This Deloitte paper presents the results of a survey conducted amongst 628 executives to understand where they perceived the greatest revenue opportunities in emerging markets, which growth strategies have proved most successful, and the challenges companies face.

Fortresses and footholds – Emerging market growth strategies, practices and outlook

At a time when most developed economies are still struggling to fully recover from the 2008 global financial crisis, China, India, Brazil, and other emerging markets are projected to account for a majority of the growth in global gross domestic product (GDP) over the next several years. While multinational companies have historically used emerging markets primarily to reduce costs, organizations are increasingly looking to these markets as a platform for revenue growth through 2014 and beyond.

In mid-2011, Deloitte Consulting LLP conducted a survey of 628 executives to understand where they perceived the greatest revenue opportunities in emerging markets, which growth strategies have proved most successful, and the challenges companies face. The survey respondents included 389 executives from companies that currently generate revenues from one of 10 key emerging market countries or regions: China, India, Southeast Asia, South Korea, Brazil, Latin America outside Brazil, Eastern Europe and Russia, Turkey, Egypt, and South Africa.

The companies surveyed found that the greatest success in emerging markets came not from simply establishing a sales office and selling their existing products and services. Instead, these companies came to understand the special requirements of customers in each market and then designed offerings to meet their needs at market appropriate prices. A key ingredient in success was to establish company-owned production, service, distribution, R&D, and other operations in emerging markets to become closer to customers and part of the local business community.

Download the paper . . . . Fortresses and footholds – Emerging market growth strategies practices and outlook

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Any number of pandemic threats such as power outages and floods, pose a threat to your business. The question is: is your company ready?

“Risk Intelligence in the Age of Global Uncertainty: Prudent Preparedness for Myriad Threats” suggests that responding to the threat of a pandemic is not something effectively done in isolation. Rather, it should be viewed in a larger assessment of potential business impacts – such as people, supply chain, and finances – and alongside the development of appropriate risk management plans.

Companies that take steps to improve their shock resilience before an event takes place will clearly have an easier and faster recovery, as well as competitive advantage in the marketplace. This white paper contains essential reading for companies that hope to successfully navigate the business challenges of the 21st century. The stakes are enormous, because we believe organisations that are most effective and efficient in managing risks — both to existing assets and to future growth — will outperform those that are less so.

Download the paper . . . .  Risk Intelligence in the age of global uncertainty

For more information contact Cathy Gibson at cgibson@deloitte.co.za or Braam Pretorius at abpretorius@deloitte.co.za.

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Rather than stabilising since our 2011 CFO Survey, the global economy has become even more unsettled. In the wake of a sovereign debt crisis, the European economy is showing distinct signs of sagging, a fact which has overshadowed the H1 2012 CFO Survey conducted during January and February 2012. Reflecting this slowdown in the Eurozone – China’s largest trading region – the Chinese economy is also flagging with manufacturing production slipping for five months.

So serious is the situation in Europe that most analysts are predicting that a recession is only a matter of time. This grim outlook is echoed by many, including the International Monetary Fund (IMF) and the European Commission whose interim report released in February 2012 saw forecasts revised downwards and a mild recession now expected this year.

Despite the economic uncertainty and the pervasive negative mood, South African companies report that they are performing well – a fact borne out by strong dividend flows from listed companies and a Johannesburg Stock Exchange (JSE) that saw record levels being established during the first quarter of 2012, piercing through the 34000 mark for the first time.

At the time of our last CFO Survey in mid-2011 CFOs were cautiously optimistic, taking only a modest approach to growth, while keeping a careful eye on costs and margins. Given the subsequent deterioration in market conditions, this was probably the most appropriate strategy to have followed. This time, we are not so sure. CFOs have become far more conservative and we believe that the market warrants a more assertive approach. By building towards a platform for growth now, businesses would be in a better position to profit from the growth when it materialises.

Mining companies have emerged as the most concerned of all, coming under pressure from rising costs while unable to set prices and having to contend with currency uncertainty. By contrast, the financial services industry is showing positive signs, albeit with customary caution.

As with previous CFO Surveys, we have maintained a set of core questions which we report on. In addition, we have probed for the
attitude and approach to certain topical issues. We have noted a great appetite to expand operations into Africa and this is further explored in this survey. Significantly, almost two-thirds of the CFO respondents believe that Africa is a better investment proposition now than it was six months ago.

The additional regulatory burden that has been evident in the wake of the 2008 financial crisis continues to frustrate CFOs. The extra load risks stifling growth both at the company and at the macro level.

Rather than stabilising since our 2011 CFO Survey, the global economy has become even more unsettled.

The South African CFO Survey has continued to grow in stature and awareness and we are proud to announce that we will now conduct the CFO Survey on a half-yearly basis instead of annually. This will enable us to plot the CFO environment more dynamically and identify trends with greater nuance. We have experienced a further 24% increase in respondents this year after rising by a third in 2011. The CFO sample was selected from 479 of South Africa’s top organisations nationally, spanning listed and unlisted entities in the private sector as well as major state owned enterprises.

A healthy spread of players across all industries participated in the survey, and we noted a fair representation across the size spectrum, from those with a turnover of less than R1 billion to those with revenue in excess of R20 billion. In addition, respondents showed an even spread of experience with an uptick in CFOs with 12 or more years in the position.

Companies are entering 2012 in a defensive mode and we are concerned that, by remaining in a holding pattern, companies will miss out when an upturn arrives. While CFOs are in survival mode, companies are in fact performing well. Being too defensive now puts potential future growth at risk.

We urge CFOs and their respective organisations to take a more forward-looking approach to managing their businesses and prepare now for a growth phase that will certainly arrive. This is not to say that they must throw caution to the wind, but we believe that companies should be investing now, a trend that has been hard to discern. We would encourage CFOs to be more adventurous and optimistic regarding their potential.

In business, as in life, it is a case of “adapt or die”. Companies need to change as the environment and circumstances change. Those which remain as they are, will find that they are no longer relevant and will potentially see declining performance and eventual disappearance.

Download the full report  CFO Survey 2012

If you have any questions relating to this article, or require a more detailed discussion, contact Rodger George (Director of Strategy and Innovation, Consumer Business – Deloitte South Africa) at rogeorge@deloitte.co.za

As cloud offerings added vertical business capability offerings to the horizontal IT capacity services, the adoption question changed from “if” to “when” – and the answer is frequently “now.” Along the way, leading organizations moved from cautious exploration to the reality of multiple individual cloud offerings handling critical pieces of their business operations – and sourced from multiple public and private providers. In each instance, these offerings needed to be connected back to the core of the business, often through traditional data-driven on-premise integration solutions. Advance one step further, and the organization is managing both exception and routine workflow across a growing range of disparate cloud offerings with point-to-point links to legacy systems and data.

This shift from “cloud” to “clouds” provides new opportunities, but it also brings challenges beyond just integration – security, data integrity and reliability, and business rules management for business processes that depend on enterprise IT assets composed with one or more cloud services. Welcome to the world of hyper-hybrid cloud.

Integration, master data management and enterprise architecture have historically served as the linchpins in modern IT shops – a role that has only become more important with the adoption of multiple cloud solutions. As more functional business leaders independently subscribe cloud offerings outside of the trappings of traditional IT, underlying business processes can become riddled with multiple cloud players that the organization itself must integrate and orchestrate. As a result, much of the “IT-free” value proposition can dissipate at the enterprise level.

A true cloud broker may eventually emerge, delivering bundled, composite business capabilities that are meaningful to the end subscriber, while hiding the complicated integration, orchestration and rules management plumbing. But today’s reality forces enterprise IT to fulfill these services. Leading CIOs will do so in terms the business can understand – outcomes, value, assurance and service levels – to create the next level of IT services catalog.

The debate around “to cloud, or not to cloud” is beginning to subside. As adoption becomes more widespread, businesses are increasingly willing to deploy multiple applications and infrastructure services on cloud platforms. For large corporations, efforts
remain focused on “edge” applications such as sales, services, marketing and human resources. As usage grows, however, ambitions will likely follow. Enterprises will source more capabilities – leading to custom extensions, more interfaces back into the core, and a growing mix of cloud-based solutions to fulfill business needs. CIOs need to build the foundation for a hybrid-cloud future today, and use it as a stepping stone towards tomorrow’s outside-in architecture.

Would you like to read the full article? Click Here to download Deloitte Tech Trends 2012

If you have any questions relating to this article, or require a more detailed discussion, contact Kamal Ramsingh (Head of Technology – Deloitte South Africa) at kramsingh@deloitte.co.za

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