how will these global trends affect your operations?

HOW WILL THESE GLOBAL TRENDS AFFECT YOUR OPERATIONS?

Christine Ferrusi Ross, Partner & SVP, Neo Group Sandeep Suresh, Head of Research, Neo Group September 24, 2015

© 2015 Neo Group Inc. Proprietary

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•  Globalization Strategy •  Sourcing •  Location Strategy •  Health Checks •  Renegotiations •  Governance

"   Since 1999, we have been helping clients accelerate benefits and minimize risks associated with global talent and sourcing.

"   We have a singular focus on the global services supply chain.

"   We achieve outcomes through deep IP, real-time analytics, globally recognized experts, proven methodologies and co-creation with our clients.

"   We focus on clients' end business goals, not global talent as an end in itself.

NEO GROUP’S SINGULAR FOCUS SINCE 1999

We deliver results through three distinct and linked solutions and services:

ADVISORY SERVICES GOVERNANCE SOLUTIONS

•  Design •  Run and Support •  Ongoing Resource,

Contract and Performance Management Services

SUPPLY MONITORING & ANALYTICS

•  Country •  City •  Supplier •  Real-Time Event Alerts •  Subscription-Based

Monitoring


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TODAY’S PRESENTERS

Christine Ferrusi Ross is a senior vice president at Neo Group. She’s passionate about helping clients solve complex global risk, sourcing, and supplier issues to achieve better business results. Christine has helped some of the largest companies in the world operationalize their supplier risk efforts, and she’s a recognized expert in the space. She’s been quoted in the Wall Street Journal, on CNBC, and other national media regarding supplier risk, outsourcing, and globalization. Sandeep Suresh heads the Research and Supplier Relations division at Neo Group. With over 15 years of experience in research and operations, he regularly leads custom research projects on the outsourcing industry, including ITO/BPO/KPO, for large global clients.


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Ø Why monitor global trends?

Ø Incorporating real-time monitoring within your risk management program

Ø Overview of major global trends in 2015 and potential impacts on operations

Ø Leveraging data to take action on risks & opportunities

AGENDA


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WHY MONITOR GLOBAL TRENDS?

"   Expanding Global Sourcing Footprint = Increasing Risk •  Increasingly, regulators and boards seek evidence of supply risk monitoring.

"   Higher Exposure, if your Firm •  Operates in a Regulated industry such as Financial Services or Pharma.

o  Fines to $100MM+ for service supply issues

•  Has a large or increasing globally sourced portfolio, whether in-house or with partner. •  Globally sources critical functions from multiple countries, cities and locations.

"   Impact on Operations Can Be Drastic •  Low cost global sourcing locations face economic, political and social upheaval. •  Providers may propose/adopt alternate strategies that can impact quality. •  Attrition can skyrocket in a growing economy and strip you of your best resources.

"   Monitoring Provides the Opportunity to Take Pro-Active Measures •  Active governance often leads to pro-active actions. •  Informs negotiations, re-negotiations and company owned location strategies. •  Enables you to leverage emerging trends, tax and SEZ changes/situations, visa reforms, etc.


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THE RISK MANAGEMENT PROCESS

What risks matter?

Assign responsibility for tracking and taking action on the risks

Decide the risk indicators (with specifics

like percentages, not “declining”)

Create an action plan for what to do for each risk

as it happens Track risk data

Take action as pre-determined

Feedback loop, including process changes and

supplier/contract changes


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A FRAMEWORK HELPS STRUCTURE RISK MANAGEMENT

Supply WisdomSM Real-Time Risk Model

RISK RATING

NEGLIGIBLE LOW MODERATE HIGH EXTREME

SUPPLIER RISKS

FINANCIAL CLIENTS PEOPLE ALLIANCES

SERVICE CAPABILITY GOVERNANCE INFRASTRUCTURE THOUGHT

LEADERSHIP

CITY RISKS

MACRO-ECONOMIC FINANCIAL BUSINESS INFRASTRUCTURE

GEO-POLITICAL LEGAL SCALABILITY QUALITY OF LIFE

COUNTRY RISKS

MACRO-ECONOMIC FINANCIAL BUSINESS INFRASTRUCTURE

GEO-POLITICAL LEGAL SCALABILITY QUALITY OF LIFE

2 4 6 8 10


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SAMPLE TRIGGER EVENTS

•  Changes in Investor Holdings •  Changes in Board •  Changes in Senior

Management •  Financial Liquidity •  Revenue & Profitability Issues •  Employee Attrition •  Client Losses / Attrition •  Legal Actions •  Significant Awards •  Significant Partnerships •  IP Filings •  Company-Specific Job Actions

•  Credit Ratings / Downgrades •  Changes in Budget •  Stock Market Volatility •  Tax Changes •  New Special Economic Zones •  Cyber Legislation •  Visa Changes •  Power Imbalances •  Geopolitical Events •  Labor Union Formation &

Strikes •  Key Policy Changes •  New Center formation

SUPPLIERS LOCATIONS


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TREND #1: GLOBAL SALARIES

Global salaries are on the rise...or are they?

0 5000

10000 15000 20000 25000 30000 35000

In US$

ITO -‐ Salary of Entry Level Talent (0 to 2 years)

2014

2015

0

5000

10000

15000

20000

25000

In US$

BPO -‐ Salary of Entry Level Talent (0 to 2 years)

2014

2015

0 10000 20000 30000 40000 50000 60000

In US$

ITO -‐ Salary of Mid Level Talent (3 to 8 years)

2014

2015

0

5000

10000

15000

20000

25000

30000

In US$

BPO -‐ Salary of Mid Level Talent (3 to 8 years)

2014

2015

0 10000 20000 30000 40000 50000 60000 70000 80000

In US$

ITO -‐ Salary of Senior Level Talent (8 + years)

2014

2015

0

10000

20000

30000

40000

50000

In US$

BPO -‐ Salary of Senior Level Talent (8 + years)

2014

2015


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10.6% 8.9%

4.6%

4.0%

7.7%

10.7%

8.0%

4.8%

3.0%

9.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

India China Mexico Poland Turkey

In %

2014

2015

Outsourcing Salary Growth Rates


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§  How will this impact the wages you pay in these regions?

§  How will this impact your contracts with suppliers? Prepare to renegotiate terms.


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TREND #2: IMMIGRATION & VISAS Crossing Borders Becomes Easier Than Ever

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

In Num

bers

Labor Pool

IT Labor Pool

BPO Labor Pool

0%

5%

10%

15%

20%

25%

India China Mexico Turkey

7% 9%

4%

23%

7%

NA

4%

14%

In %

Head Count Growth Rate

ITO

BPO

0%

5%

10%

15%

20%

25%

30%

35%

40%

India China Mexico Poland

17%

23%

5%

15%

37%

30%

5%

15% In %

ANriOon

ITO

BPO

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

In Num

bers

Graduate Pool

IT Graduates

Non -‐IT Graduates


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TREND #2: IMMIGRATION & VISAS

Crossing Borders Becomes Easier Than Ever

§  Talent is mobile – where is it coming from and moving to?

§  How will this impact your workforce? Prepare to build and manage a multi-cultural workforce.


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TREND #3: REGULATORY ENVIRONMENT

§  China implemented tough national security laws with sweeping powers in tandem with its tough stance on corruption

§  Malaysia is building momentum to counter corruption in its business environment by revising its anticorruption laws such as the Malaysian Anti-Corruption Commission Act 2009 (“MACCA” or “Act”)

§  Thailand made amendments to its anti-corruption measures by extending the maximum penalty of capital punishment to foreign nationals

§  Australia introduced stricter norms against terrorism, with penalty of stripping citizenship if a citizen is found to have links with terror outfits.

APAC Takes a Tough Regulatory Stand


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TREND #3: REGULATORY ENVIRONMENT

§  Regulations are on the rise globally - how do you ensure effective monitoring to stay current on latest updates and revisions?

§  Must ensure that your organization and all third parties are in compliance

APAC Takes a Tough Regulatory Stand


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OTHER GLOBAL TRENDS

§  LATAM Currencies Weakening – A Domino Effect

§  Infectious Diseases Globally Highlight Need For Epidemic and Pandemic Planning

§  Crossing Borders Becomes Easier Than Ever

§  International Business Rules Get Simplified

§  Taxation: Out with the Old, In with the New

§  Maturing Tier 1 Outsourcing Markets and New Developments In Tier 2 Locations

§  Human Capital: A Long Term Investment

§  Smog-Filled Skies Are A Growing Concern


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BENEFIT OF PROACTIVE RISK MONITORING

ü  Smoother operations: Fewer disruptions to delivery or supply

ü  Competitive advantage: Proactive management likely means you were able to achieve a better outcome than your competitors in that location or working with that supplier

ü  More options: Faster, more proactive response means you have more options than if you had waited (regardless of what competitors do)

ü  Ability to innovate: not all risk-events are negative, some are positive, like a country building more infrastructure in key locations. Looking for risk-lowering events helps you create opportunities for your firm


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THANK YOU

NEO GROUP GLOBAL HEADQUARTERS 340 S. Lemon Ave. #3252 Walnut, CA 91789, USA ASIA-PACIFIC HEADQUARTERS No.13, B-2, 1st floor, C Block Embassy Heights, Magrath Road Bangalore-560 025, India AMSTERDAM, NETHERLANDS AUSTIN, TEXAS BOGOTA, COLOMBIA LONDON, UK NEW YORK, USA ATLANTA, USA SAO PAOLO, BRAZIL SILICON VALLEY, USA SYDNEY, AUSTRALIA

CHRISTINE FERRUSI ROSS Partner & SVP [email protected] SANDEEP SURESH Head of Operations & Research [email protected] www.NeoGroup.com www.SupplyWisdom.com [email protected]

how will these global trends affect your operations?

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