4 Trends in Supplier Diversity Reporting & Risk Management

 

Author: CEO and Founder Rod Robinson

Rod

You’d be hard pressed to find a major corporation today that doesn’t have some form of supplier diversity initiative. And a key component of supplier diversity programs is the periodic reporting of progress against established goals and objectives. As more organizations move from compliance-driven to market-driven programs, they’re raising the bar in program investment, management, marketing and reporting of performance metrics.

These corporate trendsetters provide their investors, board members, government agencies and other stakeholders real value: a baseline from which to evaluate and benchmark supplier diversity program performance and impact.

In my nearly 20 years in supply chain & procurement as both a management consultant and former CPO, I have had the unique opportunity to witness an evolution in supplier diversity reporting among the best companies. This evolution has resulted in a shift from unsophisticated, manual processes that limited scale and data accuracy to more scalable, technology enabled processes that greatly improve data accuracy and reliability. Based on what I am seeing in the market, I strongly believe this trend will continue.

Here are four key trends driving increased sophistication in supplier diversity reporting:

1. Comprehensive quantitative disclosure requirements will become the norm for domestic publically traded companies.

In April 2014, New York City Comptroller Scott Stringer, on behalf of the New York City Pension Funds, wrote the Funds’ largest holdings, including Apple, Pfizer, Oracle and American Express, asking them to disclose performance figures on their supplier diversity programs. The announcement further stated that 90% of S&P 100 companies have supplier diversity programs, but less than half of that group discloses data on program performance (NYC Comptroller Calls For Greater Supplier Diversity at 20 of NYC Pension Funds’ Largest Holdings).

The letter requested that companies disclose – annually — qualitative and quantitative performance data that sheds light on program effectiveness. Specifically:

  • To disclose their annual spend with diverse suppliers in both real terms and as a percentage of their total supplier spend, preferably by category;
  • To establish and disclose quantitative performance goals for their supplier diversity program and annual progress toward achieving these goals; and
  • To describe ways in which supplier diversity goals are reinforced throughout the organization, including for example, through (a) oversight by senior management and the board of directors and (b) specific compensation incentives for employees, managers and senior executives

My initial reaction to this news was, Wow! That’s strong. But considering the significant diverse representation of pension fund participants, these requests are quite reasonable. Connecticut followed a similar path, but went a step further by recently filing a shareholder resolution demanding that Monster Beverage appoint a female or minority board member.

This isn’t an anomaly. The diversity disclosure demands of large public investors, investment advisors and custodians will continue to increase. Meanwhile, corporate supplier diversity program metrics will be evaluated and benchmarked just like any other key performance indicator. As it should be.

2. Increased focus on supplier diversity spend data integrity.

Increased disclosure requirements come with increased data scrutiny. The Dodd-Frank Act requires six federal regulators, including the Securities and Exchange Commission, to assess the diversity practices of regulated entities, including publically traded companies. As such, the accuracy and reliability of supplier diversity status and spend data will be critical.

3. Diverse supplier relationship management as a model for broader supplier relationship & risk management.

Many best practices supplier diversity companies require diverse suppliers to register on a dedicated portal that is the entry point into a database. This portal captures relevant supplier qualification data including valid diversity certification documents. While this provides companies with great visibility into their diverse supplier base, non-diverse suppliers are typically not required to register on a portal that provides such transparency.

There is no better example of why this level of transparency will be required for all suppliers in the future than the financial services industry. According to an MQ article, the increase in regulatory scrutiny stemming from the global financial crisis has now reached beyond banks, to the companies that supply them. The Consumer Financial Protection Bureau (CFPB) and other regulators are holding financial institutions responsible for the actions of their suppliers. In 2012, several big name banks paid a total of more than $500 million to settle complaints resulting from the actions of third-party suppliers (“Managing when vendor and supplier risk becomes your own,” July 2013).

4. Heightened focus on Tier2 spend tracking & reporting.

Many best practices companies leverage technology applications to collect, track and analyze the relevant diversity spend of several of their prime suppliers. This benefits the company in a couple of key ways. First, the company gets credit for the direct diversity spend associated with its contract with the prime and an allocation of indirect spend. Second, the company gains visibility to new diverse suppliers that may become primes in the future.

In light of expected increased regulatory scrutiny and more focus around supplier risk management, some companies are starting to use their Tier 2 program as a basis for increasing broader supply chain transparency beyond supplier diversity. Some are even looking to track down to the Tier 3 level and beyond.

Why not? The more information that a company can have about its key suppliers (and their suppliers) the better. Technology removes the limitations that may have existed in years past.

8 Questions Your Small Business Clients Should Ask When Seeking Capital: Question 2: What fees are involved?

 

This is part two of an 8-part small business financing blog series in partnership with The Business Backer. This blog series will clear the financial fog, providing you with the tools necessary to make the best financing decision for your diverse or woman-owned small business.

Last month we introduced you to the state of small business lending and the first question your clients should ask when seeking financing: What kind of lender are you?

The-Business-Backer-Logo

 

Let’s dive into the next question:

Question 2: What fees are involved?

Hidden fees are commonplace in the consumer world, tacked on to a wide variety of purchases including airline tickets, cell phone plans, and medical treatments. Another frequent example is cable and internet service; we’ve all heard something about the Comcast debacle. It’s no surprise these fees are also common in the unregulated small business lending space. The truth is that some fees are necessary, such as those that intend to cover risk or services needed to process the loan. Other fees are completely frivolous and do not supplement anything except the broker’s or lender’s pockets.

HOW BAD IS IT?

With new lenders and brokers opening their doors every day and more capital available in the market for small businesses than ever before, the fight for the lowest rate is a cut-throat battle. The desperation to gain market share while continuing to make a profit has led some lenders and brokers to add unnecessary “fees,” which allows them to post a lower rate than the competition to earn business despite charging more. Fees may be disclosed and defined or they could be included within a blended, lump sum cost in the agreement, which is extremely confusing to the client.

Read More Here.

8 Questions Small Business Owners Should Ask When Seeking Capital: Question 3: What Items are Needed to Get Funding?

This is part two of an 8-part small business financing blog series in partnership with The Business Backer.

Last month, we introduced the second question: What fees are involved?

Let’s discuss another much questioned topic:

Question 3: What items are needed to get funding?

First things first: Have you approached your bank? At The Business Backer, we always recommend that our clients check with their banks first before seeking outside sources of capital. A short conversation with your bank about their requirements and expectations can give you an idea of whether or not you should apply for a loan, and will save you a lot of time and prevent headaches if you aren’t qualified. If your bank can’t help, they may be able to point you in a different direction or at least give you feedback on what to do next.

It is also important to keep in mind that if you do not qualify with your bank, you could still qualify with a smaller community bank or credit union. In addition to doing your own research on these institutions, seek the help of your trusted advisors, the SBA, SCORE or local small business resource centers for guidance and referrals.

With all of this in mind, ask yourself a few key questions before you begin your search for non-bank alternatives:

WHAT IS MOST IMPORTANT TO YOU REGARDING THIS LOAN? SPEED? EASE? TERMS? COST?

Having a clear understanding of your goals can help narrow down the types of lenders you should target. For instance, if you have an opportunity to get inventory at half the cost if you buy X amount by X date, and it will generate significant revenue, then speed may be more important to you than term or cost. Or maybe you are preparing for a remodeling project you are hoping to tackle in the next few months. If you have more time to work with, cost may be your most important factor.

There is a wide spectrum of products available in the alternative funding market. You will have a number of options from near-prime to high risk with a variety of terms, costs and speed to funding. Be straightforward about your goals and get multiple offers in order to compare.

WHAT IS YOUR CREDIT SCORE?

Collect your business and personal credit reports from major credit rating agencies and resolve any discrepancies before you go through the application process. Knowing your credit score will also help you set expectations. If you have a lower score, you still have options, but they may be limited and expensive.

WHAT DOCUMENTATION SHOULD YOU PREPARE?

When you are ready to finally start applying, having a few key items ready can significantly expedite the process. Every lender and funding company will request different information and documentation, but the following items are generally required across the board:

Complete application – In addition to basic personal and business information, also be prepared with:

  • Company federal tax ID
  • Company start date
  • Company gross annual sales
  • Business type (sole proprietorship, LLC, etc.)
  • Business owner(s) Social Security number(s)
  • Landlord contact information (if applicable)
  • Ownership percentage
    • If you own less than 50% of the company, most lenders will require complete information from all other owners

Personal and business credit history – Prepare for a soft or hard pull of your credit

Personal and business financial statements – Usually 3 months to 3 years depending on the lender and the type of loan

Business tax returns – Usually 3 months to 3 years depending on the lender and the type of loan

Financial statements – Often includes P&L, balance sheet, cash flow (if available), A/R and A/P aging

Bank statements – Personal and business

References – Could include one or all of the following: trade, landlord, franchise, bank

Legal documents – Business licenses and registrations, commercial leases, articles of incorporation, third party contracts, franchise agreements

Other legal information – Tax liens, judgments, bankruptcies (if applicable)

Other possible documentation

  • Business plan with details of where your business is today and your future plans and projections
  • Cash flow projections for at least one year
  • Collateral – May not be necessary if loan is unsecured
  • Resumes of owners
  • Copy of owner(s) driver’s license
  • Voided check for the business account
  • Personal guaranties from all principals (more than 20% owners) from previous 3 years

Next month’s question: Are there limitations on how I use the money?

PREVIOUS: Question 2 – What fees are involved?

Hello World!

Fusce volutpat sodales mauris quis dapibus. Maecenas convallis, libero eu ultrices interdum, leo mauris commodo diam, sed cursus sapien ligula nec leo.

Curabitur sagittis elementum felis at sodales. Nullam fermentum at urna quis accumsan. Nam bibendum leo nisi, lacinia molestie arcu consequat quis. Morbi at suscipit risus. Sed consequat eleifend metus, vitae malesuada eros elementum sed. Fusce risus felis, viverra et dignissim at, lobortis non est. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nullam sit amet consectetur lacus. Vestibulum neque lectus, egestas non cursus vitae, aliquam at magna. Etiam aliquam, justo et varius eleifend, dui lectus egestas nunc, vel malesuada nisl purus nec metus. In gravida turpis a pharetra commodo. Donec non turpis vulputate, faucibus metus a, consectetur nunc. Morbi tortor nisi, hendrerit sed laoreet eget, fermentum et justo. Suspendisse potenti.

Heading 2

Curabitur sagittis elementum felis at sodales. Nullam fermentum at urna quis accumsan. Nam bibendum leo nisi, lacinia molestie arcu consequat quis. Morbi at suscipit risus. Sed consequat eleifend metus, vitae malesuada eros elementum sed. Fusce risus felis, viverra et dignissim at, lobortis non est. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nullam sit amet consectetur lacus. Vestibulum neque lectus, egestas non cursus vitae, aliquam at magna. Etiam aliquam, justo et varius eleifend, dui lectus egestas nunc, vel malesuada nisl purus nec metus. In gravida turpis a pharetra commodo. Donec non turpis vulputate, faucibus metus a, consectetur nunc. Morbi tortor nisi, hendrerit sed laoreet eget, fermentum et justo. Suspendisse potenti.

Heading 3

Pellentesque ultricies ligula vel neque dictum, eu mollis tortor adipiscing. Etiam congue, est vel tincidunt vestibulum, nunc nunc porta nulla, at adipiscing neque tellus quis urna. Quisque dignissim neque a ipsum sodales, mattis aliquam ante dictum. Vestibulum elementum pellentesque tortor ac congue. Mauris vel nibh id metus tincidunt eleifend. In interdum gravida ligula, at venenatis odio fermentum at. Donec dapibus enim lectus, quis venenatis tellus volutpat in. Nullam in velit tortor.

Heading 3

Donec blandit lectus nec neque ullamcorper rhoncus. Sed adipiscing tempus sem eu molestie. Aenean laoreet pretium ante vitae ultrices. Aenean eu gravida magna, vel aliquet magna. In auctor convallis gravida. Phasellus est erat, adipiscing nec lobortis quis, eleifend at sem. Curabitur fringilla viverra dolor, in rutrum ipsum rutrum sit amet. Vestibulum feugiat porttitor ipsum vel condimentum. Suspendisse at tempus libero. Sed eu tempor enim. Etiam convallis eleifend rutrum. Donec porta diam quis tellus feugiat dignissim. Cras posuere, massa eget laoreet laoreet, urna libero lobortis dolor, sed consequat elit urna eget massa. Donec aliquet pellentesque consectetur.

nestle 3 blog entry name

lksdajflkasdjflkasdjflksadjflkasdfjlaksdfjlaksdfjlaksdfjlkasdfjlaksdfjlkasdfjladksfjlaksdfjlkasdfjlaksdfjladksfjlkasdfjlaksdfjlkasdfj

Another Blog Post

Curabitur sagittis elementum felis at sodales. Nullam fermentum at urna quis accumsan. Nam bibendum leo nisi, lacinia molestie arcu consequat quis. Morbi at suscipit risus. Sed consequat eleifend metus, vitae malesuada eros elementum sed. Fusce risus felis, viverra et dignissim at, lobortis non est. Lorem ipsum dolor sit amet, consectetur adipiscing elit. 

CMS To the Rescue!



Nullam sit amet consectetur lacus. Vestibulum neque lectus, egestas non cursus vitae, aliquam at magna. Etiam aliquam, justo et varius eleifend, dui lectus egestas nunc, vel malesuada nisl purus nec metus. In gravida turpis a pharetra commodo. Donec non turpis vulputate, faucibus metus a, consectetur nunc. Morbi tortor nisi, hendrerit sed laoreet eget, fermentum et justo. Suspendisse potenti.

Learn more at concrete5.org 

Thursday Afternoon Post

test

Thursday Blog Post

This is a post with post format of type Link

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Aenean commodo ligula eget dolor. Aenean massa. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Donec quam felis, ultricies nec, pellentesque eu, pretium quis, sem. Nulla consequat massa quis enim.

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Aenean commodo ligula eget dolor. Aenean massa. Cum sociis natoque penatibus.

This is a standard post format with preview Picture

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Aenean commodo ligula eget dolor. Aenean massa. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus.

Donec quam felis, ultricies nec, pellentesque eu, pretium quis, sem. Nulla consequat massa quis enim. Donec pede justo, fringilla vel, aliquet nec, vulputate eget, arcu. In enim justo, rhoncus ut, imperdiet a, venenatis vitae, justo. Nullam dictum felis eu pede mollis pretium. Integer tincidunt. Cras dapibus. Vivamus elementum semper nisi.

Read more