Supply Chain Services and Solutions

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Leo Stevenson
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2 Objectives Introduction Supply Chain Concerns and Risks Supply Chain Risk Exposure and Evaluation Network (SCREEN) Overview Cargo Theft Supply chain disruptions 2

3 A truly global brand Founded in Regional Hubs 73 Offices 182 Countries 80,000 clients 37,384 standards published Experienced: The world first National Standards body founding member of ISO Thought Leaders: Shaped world s most adopted standards including ISO 9001, ISO 14001, OHSAS Copyright 2015 BSI. All rights reserved.

QRS Supply Chain Risk Analysis Customizable

Action Plans Supplier Risk Ratings & Reports

4 BSI Supply Chain Services and Solutions Intelligence Audit Platform Audit Advisory - QRS Supply Chain Risk Analysis Customizable Assessments 73 offices worldwide Financial Risk Modeling Global Risk Maps Incident Reporting Country Risk Reports Corrective Action Plans Supplier Risk Ratings & Reports Global Supplier Mapping Audit Management Platform Supply Chain Security Quality Corporate Social Responsibility Business Continuity Security Countermeasure Cost Analysis Quantifying Security Spending Over or Under-spending on Security? 4

Government Partnerships - INTELLIGENCE For 6 years, BSI Supply Chain Solutions has been the one source used by Department for Homeland Security (DHS), CBP, and AEO for supply chain and cargo risk

5 Government Partnerships - INTELLIGENCE For 6 years, BSI Supply Chain Solutions has been the one source used by Department for Homeland Security (DHS), CBP, and AEO for supply chain and cargo risk intelligence BSI provides annual security and threat awareness training to the government as well as specialized reports around specific supply chain incidents and trends Canada CBSA and PIP program uses BSI intelligence to quantify risk and BSI provides supply chain security and exposure training to PIP officers BSI Intelligence is used in over 40 countries by U.S. Customs Attaché officers including 80% of AEO countries (including Japan) UK Freight Crime Police Division data sharing agreement and co-reporting Copyright 2015 BSI. All rights reserved 5

TAPA EMEA and BSI Audit Risk Management Platform TAPA Member Company locations seeking certification will be uploaded into the TAPA EMEA audit report tool, provided by

Companies will complete the selfcertification assessment and waiver process through the TAPA EMEA audit report tool, provided by BSI Automated management and

6 TAPA EMEA and BSI Audit Risk Management Platform TAPA Member Company locations seeking certification will be uploaded into the TAPA EMEA audit report tool, provided by BSI TAPA will send a self-certification assessment (FSR C 2014 or TSR ) to Member Companies through the TAPA EMEA audit report tool, provided by BSI TAPA Member Companies will complete the selfcertification assessment and waiver process through the TAPA EMEA audit report tool, provided by BSI Automated management and facilitation of results Tracking of completion progress and macro collation of data will be easier and more streamlined through the TAPA EMEA audit report tool, provided by BSI 6

7 Today s Risks In the Global Supply Chain 7

8 Top Global Supply Chain Concerns 100.0% What Are Your Top Supply Chain Concerns? 68.3% 50.0% 41.4% 56.1% 48.8% 53.7% 36.6% 46.3% 0.0% Social Responsibilities Brand protection including counterfeiting, intellectual property rights & unmanifested cargo Government compliance including C-TPAT, AEO, PIP Supplier risk assessment Business continuity (including natural disasters, labor strikes/port outages) Political Instability Financial risks including cargo thefts, counterfeits, insurance increases as well as transport security costs 2.4% Other (specify) Survey of 310 C-TPAT, PIP or AEO Certified Companies Copyright 2013 BSI. All rights reserved. 8

business necessity, not a nice to have Managing programs are time and manpower intensive Unverified

10 Security Compliance Government Compliance to include C-TPAT, PIP and AEO Keeping goods moving efficiently across borders is more important than ever Compliance with government programs is a business necessity, not a nice to have Managing programs are time and manpower intensive Unverified supplier information could lead to loss of government certifications Copyright 2013 BSI. All rights reserved. 10

The use of a legitimate supply chain to introduce contraband, people or harmful materials Chain of

11 In-Transit Risk Direct result of theft, insurance increases, transport security costs and counterfeit goods entering the global supply chain The weakest point in the supply chain while freight is moving The use of a legitimate supply chain to introduce contraband, people or harmful materials Chain of Custody is very important Know your contractors and subcontractors Copyright 2013 BSI. All rights reserved. 11

and products needs to be inspected to ensure there aren t any issues Your suppliers must have processes and security measures in place to

12 Brand Protection Increased threats to include counterfeiting, intellectual property rights and corporate social responsibility You must know your supplier s labor practices in today s market Visibility into supplier s environmental practices is important Quality of the facility and products needs to be inspected to ensure there aren t any issues Your suppliers must have processes and security measures in place to protect your IP Exposure in any one of these areas can damage your reputation and your companies brand Copyright 2013 BSI. All rights reserved. 12

mitigate supply chain disruptions Having a back-up plan in case of a natural or man-made disaster is key Knowing if your

13 Business Continuity Man-made supply chain shutdowns as a result of political / labor instability, along with the threat of natural disasters in the region Having complete, up-to-date intelligence on your supplier locations is imperative to mitigate supply chain disruptions Having a back-up plan in case of a natural or man-made disaster is key Knowing if your redundant suppliers are really redundant or just a agents for a single manufacturer is critical Copyright 2013 BSI. All rights reserved. 13

15 LOSSES Reasons to Model Risk We need to spend more Can we spend better? Can we safely spend less? SPENDING 15

16 Avoid the Security Spending Pendulum Reactive Low losses, pull spending High losses, increase spending Reactive Acceptable losses, Efficient security Proactive responses to predictable risks 16

BSI s Supply Chain Risk Management Framework Smart Resource Allocation This

distinct risk components Probability Vulnerability Impact Risk Index

e- critical commodity, high spend with supplier, high volume of transport

operations How vulnerable are you to an event happening due to

17 BSI s Supply Chain Risk Management Framework Smart Resource Allocation This integrated supply chain risk management solution in delivered in three distinct risk components Probability Vulnerability Impact Risk Index Compliance with TAPA TSR/FSR Standards Company Business Risk Variables i.e- critical commodity, high spend with supplier, high volume of transport Likelihood of supply chain disruption events occurring in your global operations How vulnerable are you to an event happening due to policy/procedural compliance How consequential would the event be to your business if it happened in your supply chain? 17

SCREEN-Supply Chain Risk Exposure Evaluation Network BSI combines a variety of risk factors,

scale Low Guarded Elevated High Severe Intelligence is gathered from a wide range of sources:

synthesis of local news sources Information from governments, NGOs, and industry A dedicated team of

19 SCREEN-Supply Chain Risk Exposure Evaluation Network BSI combines a variety of risk factors, quantifies them, and produces threat ratings for 203 countries Countries are rated on a five-panel scale Low Guarded Elevated High Severe Intelligence is gathered from a wide range of sources: Proprietary incident database Information from auditors around the world In-depth analysis and synthesis of local news sources Information from governments, NGOs, and industry A dedicated team of analysts is constantly updating and refining our intelligence, making sure our risk ratings reflect the situation on the ground 19

20 BSI Country Intelligence BSI Proprietary Geographic Risk Intelligence Components Security Business Continuity Social Responsibility Human Rights Environmental Cargo Disruption Cargo Theft Natural Disaster Exposure Business Impact of Natural Disaster Overall Human Rights Child Labour Overall Environment Air Pollution Hijacking Political Stability Women s Rights CO2 Emissions Illicit Smuggling Social Unrest Discrimination Water Pollution Counterfeiting Economic and Financial Stability Working Conditions Stringency of regulations Supply Chain Terrorism Man-made Disruptionstrikes, labour unrest Freedom of Association/Collective Bargaining Enforcement of Regulations Sea Piracy Civil Liberties Political Rights 20

21 COPYRIGHT BSI

Malaysia Cargo Theft Trends Threat of cargo theft in Malaysia remains, but new data suggest a downward trend Both median and average loss values have seen significant reductions Mirrors trend of

23 Malaysia Cargo Theft Trends Threat of cargo theft in Malaysia remains, but new data suggest a downward trend Both median and average loss values have seen significant reductions Mirrors trend of overall crime rate, which has dropped by as much as 13 percent, according to Royal Police Law enforcement efforts are helping improve security situation for cargo transporters Includes task forces designed to combat organized criminal groups and vehicle theft (includes cargo and personal vehicles) Country still lacks task forces specifically focused on reducing cargo theft Police in Malaysia recover a stolen cargo truck 23

Malaysia Cargo Theft Trends Average and median theft values declined into 2015 2014: $198,600 (median); $234,059 (avg.) 2015: $53,800 (median); $74,389 (avg.

24 Malaysia Cargo Theft Trends Average and median theft values declined into : $198,600 (median); $234,059 (avg.) 2015: $53,800 (median); $74,389 (avg.) BSI also notes increasing diversity among commonly targeted goods Movement away from electronic goods thefts Base metals, consumer goods, and food and beverage items continue to be targeted Other causes of downward-trending risk include Lower-value commodities being increasingly targeted, suggesting diversification in targeted goods Reduction of Mamak Gang and other organized groups role in Malaysian cargo theft 24

Cargo Theft in Malaysia Reduced cargo-related activity by Mamak

gang members Remaining Mamak Gang members appear engaged in

robberies Some pharmacy robberies No evidence to suggest

25 Cargo Theft in Malaysia Reduced cargo-related activity by Mamak Gang members likely contributor Multiple deaths and arrests of gang members Remaining Mamak Gang members appear engaged in non-cargo crimes Theft of luxury personal vehicles Bank robberies Some pharmacy robberies No evidence to suggest pharmacy robberies will transition to targeting of pharmaceutical cargo shipments 25

Cargo Theft Trends in Indonesia The risk of cargo theft in Indonesia remains Cargo trucks targeted for most thefts, though warehouses increasingly targeted Hijackings remain a concern, particularly

27 Cargo Theft Trends in Indonesia The risk of cargo theft in Indonesia remains Cargo trucks targeted for most thefts, though warehouses increasingly targeted Hijackings remain a concern, particularly for West Java province Data from past two years show a shift towards a more even distribution among modalities Warehouses targeted in more than 23% of thefts over past two years; BSI rarely recorded warehouse thefts prior to

in Indonesia Agricultural products and other food items most commonly targeted (36%) Industrial goods

28 Warehouse Thefts in Indonesia BSI has noted a distinct rise in the number of warehouses being targeted for theft Commodities targeted in warehouse thefts largely mirror overall cargo theft trends in Indonesia Agricultural products and other food items most commonly targeted (36%) Industrial goods also heavily targeted (27%) Warehouse thefts often small in scope and value (avg. loss value is $26,790) 28

Moving Truck Thefts in China BSI has recorded a number of thefts from moving trucks throughout China Most prominently in Guangdong Province Known locally as kaitianchuang ( 开天窗 ) open sunroof thefts

30 Moving Truck Thefts in China BSI has recorded a number of thefts from moving trucks throughout China Most prominently in Guangdong Province Known locally as kaitianchuang ( 开天窗 ) open sunroof thefts Soft-sided trailers are targeted more often Hole is usually cut on top rather than opening from the back as seen in other countries Electronics and pharmaceuticals have both been targeted in these thefts 30

Cargo Theft in Guangdong Province Guangdong Province is one of the few places BSI sees thefts by highly-organized cargo theft gangs High-risk highways G4 (JingGang

31 Cargo Theft in Guangdong Province Guangdong Province is one of the few places BSI sees thefts by highly-organized cargo theft gangs High-risk highways G4 (JingGang Ao) highway between Huadu and Shaoguan north of Guangzhou G45 highway north of Guangzhou More thefts occur during the summer Jurisdictional issues harm investigations 31

India Cargo Theft Increasing in Sophistication BSI has recorded a rise in sophisticated cargo theft techniques over the past two years Threat of cargo theft in India is Theft groups targeting

33 India Cargo Theft Increasing in Sophistication BSI has recorded a rise in sophisticated cargo theft techniques over the past two years Threat of cargo theft in India is Theft groups targeting shipments after customs seals placed on container, prior to container reaching port Shipments diverted to group-controlled warehouses where paneling is removed Customs seals often left intact, delaying discovery until after shipment reaches customer First instance of a theft from a moving truck in July 33

India Cargo Theft Increasing in Sophistication Occurrence has been geographically dispersed New Delhi, Navi Mumbai, and Chennai Supply chain employees integral parts of

tampering detection in India Ability to counterweight consignments exposes capacity for UMC introduction into export shipments Criminals ability to break into shipments

34 India Cargo Theft Increasing in Sophistication Occurrence has been geographically dispersed New Delhi, Navi Mumbai, and Chennai Supply chain employees integral parts of these criminal groups Multiple high-profile cases of supply chain employee thefts in 2016 Implications for cargo integrity: Incidents underscore gaps in security and tampering detection in India Ability to counterweight consignments exposes capacity for UMC introduction into export shipments Criminals ability to break into shipments without breaking customs seal poses major UMC risk due to seeming legitimacy/verification of shipments Background security checks a must for supply chain employees/contractors 34

37 Terrorist Extortion of the Supply Chain Leading groups for supply chain terrorism attacks are also most likely to extort or exploit the supply chain Groups often perpetrate attacks to threaten or intimidate businesses into paying extortion fees Extortion can increase as revenue from other sources declines ISIS tax on trucks reached as high as $4,000 per vehicle in 2015, up from $200 in 2014 Revenue from the extortion of local businesses is a major financing source for terrorist groups Other supply chain concerns Contraband introductions Smuggling for supplies, revenue February 2016 case in Spain Hijacking and cargo theft Group FARC New People s Army ISIS PKK MEND AQAP Communist Party of India - Maoist Leading Supply Chain Terrorism Groups Often Exploit the Supply Chain Supply Chain Exploitation Tactic Extortion, Kidnapping, Illegal taxes, Drug smuggling Extortion Extortion, Kidnapping, Illegal taxes Extortion, Hijacking, Drug smuggling Kidnapping Explosives introduction, Oil smuggling Kidnapping, Cargo Theft Supply Chain Terrorism Attacks ( ) 37

38 Increasing Terrorism Risk to Commercial Supply Chains Terrorists targeted a wider range of industries and cargo transport modalities in 2015 than any other recent year Increased targeting of industries associated with private/corporate supply chains rather than stateowned infrastructure since 2013 Agriculture/food and beverage attacks more than tripled Attacks on industrial/manufacturing materials and pharmaceuticals more than doubled, metals nearly doubled Portion of fossil fuels targeted dropped from 75% to 51% Decline in previous hotspots for targeting of government supply chain One cargo truck attack in Afghanistan in 2015 compared to average of nearly four annually over past decade Leading Industries and Modalities Targeted for Supply Chain Terrorism Attacks ( ) Fossil Fuels/Minerals Agriculture/Food and Beverage Industrial/Manufacturing Materials Base Metals Pharmaceuticals/Chemical Pipeline Production/Processing Facility Truck Storage Facility Worker 38

39 Increased Terrorist Targeting of the Supply Chain Supply chain terrorism activity increased by virtually every metric in Proportion of supply chain terrorism attacks grew 16% from 2014 Geographic distribution increased 38% to a record of 33 countries Top 10 countries for supply chain terrorism exported $664 billion $96 billion exported to the United States Highlights significant volume of international trade at risk of disruption by terrorist groups 39

41 Labor Unrest in China Q Update Factory Strikes in China by Grievance Average Major protest in Dongguan in late May highlighted increasing concern of protests over factory closures and relocations Portion of relocation-related factory strikes in China has increased significantly over the past year Absolute number of strikes over relocation issues has also risen dramatically Protest numbers likely to continue rising as operational costs in China escalate Relocation Wage Arrears Factory Strikes in China by Grievance 2016 (YTD) Other Grievance Relocation Wage Arrears Other Grievance Copyright 2016 BSI. All rights reserved. 41

42 Copyright 2016 BSI. All rights reserved. Factory Unrest in Asia Other countries in Asia have witnessed protests over grievances seen in China Timely payment of wages, factory closures, and contract employment vs. physical working conditions, higher pay Most demonstrations in the garment manufacturing industry Cambodia Recent protests over factory closures Industry representatives blame closures on rising operational costs, especially increasing wage rates Bangladesh Officials identified nearly 360 factories vulnerable to protests over wage non-payment, holiday bonuses Likely an increasing concern as factory investment continues rising in these areas 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Growth in FDI and Wages in Cambodia Foreign Direct Investment Growth Minimum Wage Growth 42

Strategic Program Design with Operational Program Toolbox An integrated approach to managing organizational risk, adhering to compliance objectives & instilling knowledge Social

Hijacking Illicit Smuggling TAPA FSR/TSR Standards Logistics Security Site Security Physical Access Controls Personnel Security IT Security Questions are weighted Business Impact

44 Strategic Program Design with Operational Program Toolbox An integrated approach to managing organizational risk, adhering to compliance objectives & instilling knowledge Social Responsibility Environment Supply Chain Corruption Political Stability Cargo Theft Counterfeiting Supply Chain Terrorism Natural Disaster Exposure Legal Compliance Ethical Trading Hijacking Illicit Smuggling TAPA FSR/TSR Standards Logistics Security Site Security Physical Access Controls Personnel Security IT Security Questions are weighted Business Impact Variables Business Specific Components Volume of Throughput Criticality of Commodity Security countermeasure spend % of site production on site Probability Vulnerability Impact Risk Index 44

45 Risk-Based Results Lead to Smart Audit Strategy Continuous Improvement Financial spend 45

46 Contact Information Emmanuel Herve BSI Supply Chain Services and Solutions 46

Customs Trade Partnership Against Terrorism An Introduction

Customs Trade Partnership Against Terrorism An Introduction WHO WE ARE Securing the Borders of the United States while simultaneously facilitating the flow of legitimate trade & travel It s a challenging