Assessing and Addressing Risk in an Omnichannel World. August 2013

Transcription

1 Assessing and Addressing Risk in an Omnichannel Wrld August 2013

2 The material appearing in this presentatin is fr infrmatinal purpses nly and is nt legal r accunting advice. Cmmunicatin f this infrmatin is nt intended t create, and receipt des nt cnstitute, a legal relatinship, including, but nt limited t, an accuntant-client relatinship. Althugh these materials may have been prepared by prfessinals, they shuld nt be used as a substitute fr prfessinal services. If legal, accunting, r ther prfessinal advice is required, the services f a prfessinal shuld be sught.

3 Presenter Jhn Snell Senir Manager Jhn is a senir manager with Mss Adams Internal Audit Services with ver ten years f internal audit and public accunting experience. He has experience directing all phases f internal audit prjects, including risk assessment, dcumentatin and testing. Jhn has develped methdlgies and practices t apply SEC cmpany guidance and Auditing Standard N. 5 (AS5) fcus n a tp-dwn apprach with his clients. He has prvided internal cntrl testing assessment cnsulting fr mnichannel retailers large and small ranging frm stre peratins f 5 t 200 acrss the wrld, ecmmerce peratins and mbile applicatins. Jhn currently serves as the Directr f Internal Audit fr three large retail and manufacturing cmpanies. Jhn is a member f Mss Adams Retail and Apparel industry grups and leads the Internal Audit Retail practice. He hlds a Bachelr f Science degree in Accunting frm Califrnia State University at San Bernardin and is a member f the Institute f Internal Auditrs.

4 Presenter Tim Marshall, CIA Manager Tim is a Manager in Mss Adams Internal Audit Services with ver 15 years f internal audit, SOX, licensing, and risk management experience. He has extensive retail and whlesale experience analyzing financial and peratinal prcesses and cntrls using data analytics (ACL) and best practice methdlgies. Tim has scped, planned, and managed audits fr varius business peratins related t financial reprting and strategic risks. He uses his business prcess understanding and acumen t drive cst and asset recveries as well as prvide insights and best practice feedback. Over the past few years, Tim has facilitated the develpment and dcumentatin f key risks and cntrls as part f glbal SAP implementatin. Prir t jining Mss Adams, Tim helped manage the internal audit, SOX, and Gvernance, Risk and Cmpliance functins fr Clumbia Sprtswear, a multimillin dllar whlesale and retail cmpany. He started his Internal Audit career with Arthur Andersen LLP in its Business Prcess Risk Cnsulting grup.

5 Areas f Discussin 1. Omnichannel Definitin and Backgrund 2. Cmmn Omnichannel Risks and Expsures 3. Expsure Mitigatin

6 Omnichannel Definitin Omnichannel retailing is the integrated prcesses and decisins that supprt a unified view f a brand frm a prduct purchase, return and exchange standpint irrespective f channel. This means yur rganizatin must cntinually enhance wrkflw integratin within merchandising, rder management, marketing and cnsumer experience.

7 Omnichannel Definitin (cnt.) Here is Yur Opprtunity and Challenge

8 Omnichannel Backgrund Key Statistics Mbile statistics: 18 t 24 year lds send 110 text messages a day 63 percent f wmen and 73 percent f men dn t g an hur withut checking their phne 24 percent f Black Friday shpping dne via mbile app 6 percent via tablet/phne nly tw years ag Surce: NRF BIG SHOW 2013 presentatins

9 Omnichannel Backgrund (cnt.) Here is Yur Market Opprtunity Brick-and-mrtar + Online + Mbile apps cme tgether Brick-and-mrtar = $1.00 in sales Brick-and-mrtar + Online = $2.50 in sales Brick-and-mrtar + Online + Mbile app = $6.00 in sales Mbile Highest Cnversin 6x sales vs. stre-nly custmer! Web $6.00 $2.50 $1.00 In Stre

10 Omnichannel Backgrund (cnt.) The Internet Retailer Guide 2012 Reprt indicated: Walmart is 10 times bigger, but Amazn grew 31 percent per year in the last 10 years vs. 9 percent fr Walmart Amazn s mst recent grwth years are faster, including grwth last year at 40 percent Web-nly merchants grew twice as fast as retail/chains Obvius cnclusin: Retailers need t make web and mbile the pririty, increase their risk diversity channels and address the need fr integrated prcesses and systems.

11 Cmmn Omnichannel Expsures Infrmatin Technlgy (IT) Cmplexities Multiple platfrms Prly integrated web applicatins and cmpatibility Multiple data sets and surces Multiple hardware strage media Applicatins nt built fr tday s mbile devices Outsurced data management Systems implementatins Cmpliance Requirements Payment Card Industry (PCI) and Persnally Identifiable Infrmatin (PII) may nt apply t mbile wallet Data privacy cncerns with custmer infrmatin maintained by third parties Custms enfrcement requirements between mbile, nline platfrms

12 Cmmn Omnichannel Expsures (cnt.) Operatinal Efficiency Inventry integratin and distributin amng all systems fr reductin f effrt, cst, and mvement Unifying the frnt-end (shpping experience) with the back-end (fulfillment) Pricing integratin between mbile, stre and nline Sales functinality Lack f prcess standardizatin Strategy and Brand Management Scial media and brand management cncerns Daily interactin with custmers and hw t accunt fr efficiency and effectiveness Limited r nnexistent scial capabilities All surces present ne unified marketing t a custmer abut the brand and nt just the prduct

13 Expsure Mitigatin Risk Assessment Identify the key channels yu perate in and assess relevant key perfrmance indicatrs (KPIs) Determine prcesses and systems f greatest imprtance Summarize the systems that supprt thse channels Determine interfaces between multi-channel prcesses t deliver infrmatin (prduct, price, etc.) t the cnsumer

14 Expsure Mitigatin Risk Assessment (cnt.) Channels t Cnsider in Yur Risk Universe Past Retail, whlesale, nline Present Mbile Custmer lyalty prgrams Cupning/discunts Gemarketing Purchase lgarithm suggestins Scial cmmerce Self scanning and check-ut Future Mbile wallet Others?

15 Omnichannel Backgrund Risk Assessment $6.00 $1.00 $2.50

16 Expsure Mitigatin Risk Assessment (cnt.) Cnsider Bth Macr and Micr Risks Macr Risks Brand management and cannibalizatin Cmbating shwrming Custmer lyalty and interactin Online reviews Shared services placement Custmer interactin Omnichannel systems radmap

17 Expsure Mitigatin Risk Assessment (cnt.) Cnsider Bth Macr and Micr Risks (cnt.) Micr Risks Operatinal (efficiency and effectiveness) Unifrm pricing Integrated rder fulfillment acrss channels Speed and cnsistency in data Cnsistent cmpliance Payment card industry standards Cnsumer safety act Lead paint requirements Integrity f financial reprting infrmatin Infrmatin technlgy prcesses and cntrls

18 Expsure Mitigatin Risk Assessment (cnt.) Identify single versus multiple surces f data used t manage prduct sales and distributin channels Flag pprtunities t streamline prcesses, systems and integratin f data Pricing tables Planning and lgistics infrmatin acrss lcatins Inventry recrds Pricing, cupn and discunt management Data warehuses

19 Expsure Mitigatin Risk Assessment (cnt.) Assess impacts f key mnichannel links Identify key mutually dependent data sets and transactin vlume Obtain and analyze infrmatin in autmated versus manual frmat Assess Data availability Cmpany wned r utsurced Cnduct a skills assessment Cnsider Bard, Management, Internal Audit and Infrmatin Technlgy Rank Highest Risk Integrated Prcesses and Data Sets

20 Expsure Mitigatin Example Internal Audit Areas Verify pricing cnsistency and discunting cntrls design and implementatin acrss channels Assess crss-channel planning and lgistics integratin t address demand, inventry level management and n-time delivery Analyze the capabilities and methds applied t fulfill crsschannel demand frm any distributin center Assess the means and cntrls t address in-stre pick-up as well as direct custmer shipments and returns Review resurce investment prcesses and cntrls t maximize single channel and mnichannel prfitability

21 Expsure Mitigatin Example Internal Audit Areas (cnt.) Review methds and incentives t drive crss-channel supprt Assess methds t identify and address pckets f bslete and slw mving prduct fr crss-channel pricing and distributin Analyze methds applied t identify crss-channel purchasing requirements fr favrable supplier pricing, terms and crdinated lgistics Review methds used t prevent in-stre stck-uts while cnsidering crss-channel inventry level requirements and lcatins Benchmark crss-channel technlgy driven business analytics and inventry metrics by custmer and gegraphic prximity Review crss-channel prcesses and cntrls designed t ensure a cnsistently gd experience fr custmers

22 Expsure Mitigatin Match Planned Audits with Cmpetency After yu have identified and ranked yur audits, cnduct an internal audit skills assessment t leverage in industry and functinal cmpetency needed Link audit plan t current in-huse skills t determine what training r c-surcing may need t be cnducted. General Audit Infrmatin Technlgy Inventry Management Data Security Scial Media Analytics Pricing changes

23 Expsure Mitigatin A Management Suggestin r Tw Recgnize channel sils and crss-purpse incentives Priritize mni-channels based n custmer needs cnsumers will shp differently fr different types f gds Capture demand wherever it may be fund nw and in the future Measure custmer satisfactin acrss tuch pints Orient the stre with 95% f sales ging thrugh stres, enabling stres is key Stres are a key lcatin fr prduct delivery, shared inventry, prduct shwcase and returned prduct Fcus n utward versus inward lking prcess and system slutins Pilt crss-channel integratin and stre/custmer cmmunicatins

24 Take Aways Inventry yur mnichannels Assess the risks in thse channels Fcus n crss-channel impacts and integratin Leverage the expsures identified tday Define an audit plan that fully addresses mnichannel expsures Macr and micr Add value thrugh data drive peratinal audits Leverage the audit area identified tday Match yur internal skills with external skill sets needed Yu have a tremendus pprtunity t add value!

25 Cntact Us Jhn Snell, Senir Manager Internal Audit Services Office: (949) Cell: (760) Timthy Marshall, Manager Internal Audit Services Office: (503) Cell: (503)