Do you know the drivers of commodity volatility? Do you know the impact of conflict minerals regulations on supply and demand?
Commodity volatility and materials risk have plagued buyers in recent years, and today’s volatility is felt throughout the supply chain to a greater degree and at a greater speed than in previous decades.
oin IHS for this 1-hour webcast where experts will discuss quantifying supply chain risk with specific focus on commodity risk, country risk, and compliance risk. They will outline the importance of having supply chain intelligence to address topics including:
- Quantification of risk: understanding the interaction between concentration of production and political instability
- Comparing commodities: evaluation of different commodities to identify the relationship between inputs, high risk, and volatility of price
- Regulatory risk: current impact of conflict minerals regulations on material pricing and availability
A recording of this presentation can be viewed here: http://www.slideshare.net/ihs_supplychain/quantifying-sourcing-risk-building-commodity-risk-ratings-to-mitigate-geopolitical-uncertainty-commodity-volatility-and-conflict-minerals-risk-26064687
Ähnlich wie Quantifying Sourcing Risk: Building Commodity Risk Ratings to Mitigate Geopolitical Uncertainty, Commodity Volatility, and Conflict Minerals Risk
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Quantifying Sourcing Risk: Building Commodity Risk Ratings to Mitigate Geopolitical Uncertainty, Commodity Volatility, and Conflict Minerals Risk
1. Quantifying Sourcing Risk:
Building Commodity Risk Ratings to Mitigate Geopolitical Uncertainty,
Commodity Volatility, and Conflict Minerals Risk
June 27, 2013
Welcome to Today’s Webcast
“ Conflict minerals” are used pervasively throughout industries Tin Tungsten Tantalum Gold Around the DRC mineral resources finance armed groups using rape and violence to control population and mining Regulated in U.S. Dodd-Frank and subsequent SEC Final Rule in 2011 Requires conflict mineral disclosure & due diligence for certain publically traded companies and their suppliers Reporting began in 2013 and filings are due May 31, 2014 The United States Congress initially took up the conflict minerals issue in 2009 in a bill sponsored by Senator Sam Brownback (R-KS). The evolving issue would eventually manifest itself into a bill passed on July 21, 2010 within six-page legislative provisions in the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Section 1502 of Dodd-Frank specifies several minerals as being potentially “conflict minerals,” including cassiterite, columbite-tantalite, wolframite and gold. These are frequently cited as tin, tantalum and tungsten, and gold (or 3Ts plus gold) used pervasively within electronics such as smart phones or laptops that rely considerably on these materials to perform critical functions. Certain publicly traded companies and their suppliers must now disclose whether they use conflict minerals in their products, and what efforts they have undertaken to ensure their use of the minerals does not contribute to human atrocities in the Democratic Republic of Congo (DRC) and adjoining countries. The first reporting year commences January 1, 2013 with filings due May 31, 2014. The complex and time-consuming nature of communicating, collecting, analyzing, and preparing information on mineral sources across a globally diverse, multi-tier supply network, gives companies little time to act. Everything from capacitors, cell phones, and GPS systems to hearing aids, pacemakers and even jet engines make use of circuitry, finishes, alloys or other materials that contain these materials. Practical implications of the law include both potential penalties for failing to comply with the SEC reporting requirements as well as the risks associated with an inability to respond adequately to customer or third-party requests. Meanwhile, companies discovering that their products contain these controversial materials may naturally seek to source new parts and materials from conflict-free sources. 07/22/13
The law has been criticized by many for not addressing the root causes of the conflict. There have been legal challenges to the SEC. My question to industry: Are the consequences to brand and market acceptance – notwithstanding regulation – a risk worth waiting ? 07/22/13
IHS offers industry’s largest database and tools for over 340 million electronic, electro-mechanical, and fastener components used in commercial and military application. It contains millions of components with conflict minerals information regarding tin, tantalum, tungsten and gold used in these products. Despite great progress made by many electronics firms like Cabot, Cisco, Intel, or HP data from our databases acts as an objective barometer for industry’s true readiness for conflict minerals disclosure. Intuitively, this midstream index on electronic components covers suppliers of components between the mineral sources and commercial and consumer products. It tells us that less than 20% of electronic component makers offer public disclosures available to their customers. As of June, 19.2% of manufacturers offered conflict free declarations although this reflected a sizeable 7% jump in the past month. I often hear about how this information must not take into account all of the great work done by companies making progress on the conflict minerals issue. Well, in full candor, this is an objective an unbias view of the aggregate electronic component industry from leader to laggard. And, progress is part of the journey, not the destination. And, I’m told in a June 2013 issue of Compliance Week that an article written by Joe Mont discusses Hewlett-Packard’s approach to conflict minerals compliance and quotes Jay Celorie, Manager of H-P’s conflict minerals program stating even “HP’s work is still in the early and evolving stages.” 07/22/13
Similar to disruptive innovation theory, IHS studies have repeatedly shown that organizational adoption to regulations focused on environmental, social, and sustainability pressures resemble discontinuous innovation. Everett Rogers, a professor of rural sociology, popularized the theory in his 1962 book Diffusion of Innovations. He said diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Diffusion of Innovations is a theory that seeks to explain how, why, and at what rate new ideas and technology spread through cultures. Everett Rogers, a professor of rural sociology, popularized the theory in his 1962 book Diffusion of Innovations . He said diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. The innovation must be widely adopted in order to self-sustain. Within the rate of adoption, there is a point at which an innovation reaches critical mass.The categories of adopters are: innovators, early adopters, early majority, late majority, and laggards An innovation that creates a new market by applying a different set of values, which ultimately (and unexpectedly) overtakes an existing market A disruptive innovation is described as an “innovation” that helps create a new market and value network , and eventually goes on to disrupt an existing market and value network (over a few years or decades), displacing an earlier technology. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically first by designing for a different set of consumers in the new market and later by lowering prices in the existing market.
Regulation requiring disclosure or restriction of specific minerals, chemicals, and materials introduces a disruption to supply chain equilibrium By the time social pressures manifest into regulatory obligation, an irreversible displacement has been as initiated by leading players within effected supply chains It is a transformative period lasting for years – or decades – as companies must adapt to new market requirements which displace traditional ecosystems Adoption varies by company in a predictable fashion over time – from visionaries and early adopters to laggards – behavior that lasts well past the regulatory deadlines This period is characterized by price and availability instability for materials in scope due to the bifurcation of traditional supply and demand pools
EU RoHS 6 in this context are lead, mercury, cadmium; hexavalent chromium, polybrominated biphenyl (PBB) and polybrominated diphenyl ether (PBDE).
The scores in Foresight range from 0.1 to 10 and are split into five risk level bands. They capture both frequency and severity of risk over the forward one-year time-frame. A high score may indicate a high frequency of low impact events, or a low frequency of very high impact events. ‘Impact’ may refer to asset damage, business disruption, or interference with personnel. 07/22/13
The scores in Foresight range from 0.1 to 10 and are split into five risk level bands. They capture both frequency and severity of risk over the forward one-year time-frame. A high score may indicate a high frequency of low impact events, or a low frequency of very high impact events. ‘Impact’ may refer to asset damage, business disruption, or interference with personnel. 07/22/13
First Mover – We wait for no one and set our own standard A Fast Follower – Not the first but quickly among companies leading the way Early Majority – Conservative; wait and see what others do first Late Majority – Skeptical; compliance enforcement or standards must be established Last to Adopt – Reluctant; only if we absolutely must act or are forced to 89.6% say such regulations have required a change in their behavior or a modification to products, services, or materials the organization relies upon 63.1% say conflict minerals regulations were important or very important to their organizations 07/22/13
Regulation requiring disclosure or restriction of specific minerals, chemicals, and materials introduces a disruption to supply chain equilibrium By the time social pressures manifest into regulatory obligation, an irreversible displacement has been as initiated by leading players within effected supply chains It is a transformative period lasting for years – or decades – as companies must adapt to new market requirements which displace traditional ecosystems Adoption varies by company in a predictable fashion over time – from visionaries and early adopters to laggards – behavior that lasts well past the regulatory deadlines Economic and country stability of sources for materials correlates to price volatility while geo-political risk can threaten to disrupt supply chains 07/22/13