Risk & Procurement Analytics: A Promising
Future
Presentation Plan
Key Takeaways
Module 1: Risk Analytics
Module 2: Procurement Analytics
Presentation Plan
Key Takeaways
Module 1: Risk Analytics
Module 2: Procurement Analytics
Key Takeaways
The Global Risk & Procurement Analytics market offers immense potential for service providers
worldwide
– By 2020, Risk Analytics is expected to be a USD 50-51 billion market globally, while Procurement Analytics is expected to be a USD 16-17 billion market
India to be the preferred location for outsourcing of Risk & Procurement Analytics services,
outpacing global growth and retaining its #1 position through 2020
– The Indian Risk Analytics industry is expected to quadruple to USD 2.5 billion by 2020– The Procurement Analytics industry in India, although at an embryonic stage at present, is expected to reach USD 780-800 million in revenues by 2020
– The IT services segment is likely to be the major contributor, accounting for more than 75% of revenues, with analytics accounting for the remaining 25%
Risk & Procurement Analytics is increasingly being adopted by several sectors
– While financial service firms have already been using Risk Analytics, driven by regulatory requirements, other sectors are increasingly adopting Risk Analytics to grow their return on investments
– The widespread cost savings realised by manufacturing and retail industries using Procurement Analytics has prompted non-traditional sectors such as travel and tourism, media and financial services to adopt the same
Both the spaces are becoming more predictive and prescriptive, given the play of unstructured and
real-time data
The global shortage of analytics professionals presents a big opportunity for India
– Given its large pool of PhDs, actuaries and statisticians, India is well placed to capture the USD 2.8 billion offshoring opportunity risk and procurement analytics from the US alone
– India currently employs 5,200-5,300 Risk & Procurement Analytics professionals, which is expected to rise to ~15,000 by 2020
Concerted efforts from all arenas – service providers, academia and facilitators – to make India an
Presentation Plan
Key Takeaways
Module 1: Risk Analytics
Module 2: Procurement Analytics
Risk Analytics: Defines, understands & manages risk; well integrated
into business functions and is future-focused as a practice
Risk Analytics
is an effective tool to:
–
Make
systemic risks, credit risk and market risk to operational, reputational and cyber risk
visible
–
Use
risk assumption
,
risk avoidance, risk retention and risk transfer
for managing uncertain events
Risk Analytics – Value Chain
Action Reporting & Presentation
Risk Analytics Integration,
Validation & Storage Data Collection Internal proprietary data External data Data verification Data warehousing
Re-calibration and re-development of models
Statistical clustering
Information Normalisation
Simple Analytics such as: Alerts
Pattern recognition
Data mining
Advanced Analytics such as: Predictive modelling
Credit risk scoring
Fraud detection Stress testing Structured reports Customised Dashboards Scorecards Visualisation Tools
Analysing and interpreting results
Decision-making
Policy changes
Mitigation and optimisation strategies DSS ERP/SAP Network Systems Security Systems CRM Systems Surveys Social Media Information from Competition, Partners and third Parties MIS
Data Management
Technology Enablers
Storage Devices High Computing Devices User Interface Risk Calculation Engines/Modelling
Applications/Analytical Tools Reporting Tools Extract
Transform Load
IT-BPM (Project management, System Integration, Consulting)
Software
Risk Analytics is evolving to identify risk exposures from
social media, cyber security and real-time trading systems
Lev
el
of
Complexit
y
and
M
aturity
Risk Reports Loss Events Risk Recogni-tion Risk Alerts Catastrophic Risk Modeling Regulatory Risk AnalyticsCredit Risk Scoring
Complex Event processing
Causal Predictive Extreme Event Modelling Loss Forecasting Data Mining
Multi-variable Stress Testing
Loss Reserving & Valuation Systemic Risk
Analytics
Visualisation
1995 2009-10 onwards
Basel I & II Risk Analytics Delinquency Modelling Catastrophe Risk Modelling Forensics & Fraud Detection Evaluative Scenario Testing Social Media Risk Analytics On-demand Risk Analytics
Brand Risk Analytics Real Time Updates
Risk-based Customer Segmentation
Visual Risk Analytics
Customer Behavioural Analytics Value-at-Risk Sensitivity Analysis Operational Risk Analytics Risk-based Pricing Cyber Security Risk Analytics
Market/Credit Stress Testing
Static Stress Testing Group/LoB Stress Testing
Risk Scoring
Supply Chain Risk Analytics
Portfolio Risk Analytics 2003-04 Audit Analytics
Risk Identification & Scoring Risk Modelling
Integrated Risk Management for Meeting Growth Objectives
Phase
Time
• Why did it happen? • When will it happen
again?
• What can be done to avoid it? • What caused it to happen? • What actions should be taken? • What happened? • When did it happen? • What was its impact ?
H
igh
Low
The global Risk Analytics market is likely to more
than double to reach ~USD 50-51.0 billion by 2020
The global Risk Analytics market, which is expected to generate revenues of USD 20-21.0 billion in 2013,
is projected to become a USD 50-51 billion industry globally by 2020
IT services and analytics represents the
largest share
of the market and is expected to
grow the fastest,
contributing
USD 27-28 billion
to the market by 2020
2013
2020E
20-21.0
50-51.0
Global Risk Analytics Market Size,
2013-20E,
USD billion
Global Risk Analytics Market Size,
by category, 2020E
2020
IT giants such as IBM, HP, Microsoft, SAP, SAS and Oracle are likely to take a sizable share of the Risk Analytics’ hardware and software market
The opportunity for India lies in capturing the slice of IT and Risk analytics services, including data warehousing, data management and consulting 55-56.0% 34-35.0% 10-11.0% Software Services (IT and Analytics)
50-51.0 100% = USD billion
India’s Risk Analytics outsourcing market is likely to
quadruple over 2013-20
2013 2020E
700-720.0
2,550-2,570.0
India Risk Analytics Outsourcing
(1)Market,
2013-20E,
USD million
India Risk Analytics Outsourcing
(1)Market, by
category, 2020E,
Percent
Analytics Services, 21-22.0%
100% = USD 2,550-2,570.0 million
IT Services, 78-79.0%
India, a leader in the Risk Analytics outsourcing market, is likely to continue to retain its position in 2020, with an
increase in its global market share
India’s Risk Analytics market is expected to reach USD 2,550-2,570.0 million by 2020 from USD 700-720.0
million in 2013
–
IT Services is expected to continue to be the largest segment, contributing 78-79.0% of the total revenues
generated in 2020
Note: (1). Excludes software products and hardware as their share is currently miniscule; IT services in risk analytics refers to services around SI, consulting, data integration and management, etc.; analytics services is a sub-segment of the data analytics market within the Knowledge Services industry
Risk Analytics is a dynamic market globally, due to ever-changing
regulations, increased adoption and outcome-based SLAs
Increasing
adoption by
corporates and
SMEs
Advent of
on-demand Risk
Analytics
New commercial
models
Establishing
on-shore presence
Service providers need to establish their onshore presence to capture the
market and build customer confidence
– BFSI sector continue to remain skeptical on outsourcing as risk-related modeling gives a competitive advantage to banks
– Onshore presence is also required to help banks meet the high level of scrutiny by regulators
Risk-reward based models to gain traction; service providers’ revenues and SLAs
to be closely linked with business outcomes
Service providers to build dynamically configurable Risk Analytics platforms as
organisations lack the time and capital investments for customised offerings
Risk Analytics is increasingly being adopted by corporates, in addition to the
financial services sector
– Financial services would continue to use Risk Analytics, driven by regulatory requirements, while corporates would increasingly adopt it to grow their return on investments
– Fortune 500 firms are likely to be the primary adopters; mid-tier banks and SMEs are expected to be the fast-growing segments
Real-time and on-demand Risk Analytics are the next big wave of growth in the
market, driven by
– Technology acting as a key enabler, providing live market and trading data
Presentation Plan
Key Takeaways
Module 1: Risk Analytics
Module 2: Procurement Analytics
Procurement Analytics provides insight that helps optimize procurement
functions, reduce working capital requirements and cut costs
Procurement Analytics
Encompasses traditional Spend Analytics as well as supplier performance measurement, inventory optimisation, and risk &
market trending
Helps identify areas of low performance, optimise procurement functions and reduce costs
Procurement Analytics – Value Chain
Action Reporting & Presentation
Procurement Analytics Integration,
Validation & Storage Data Collection
Data Extraction and Transformation Load (ETL) Processes Spend Consolidation Data Mining Data Cleansing Data Categorisation Category Management Data Warehousing Spend Analysis Category Management Strategic Sourcing Contract Management Invoice Management Compliance Reporting Performance Dashboards Scorecard/KPIs CSAT Reports Online Portals
Optimise Product and Component Portfolio
Item and Vendor Rationalisation
Data Management
Technology Enablers
Storage Devices/
Data Warehouse High Computing Devices User Interface Analytical Tools/Modelling Applications
/Spend Analysis Platforms Reporting Tools Extract
Transform Load
IT-BPM (Project management, System Integration, Consulting)
Software Hardware ERP General Ledger MIS Commodity Price Data Inflation Data Supplier Data Material Data Transactional Data
Procurement Analytics is likely to see a rise in usage
of risk frameworks and behavioural analytics
Lev
el
of
Complexit
y
and
M
aturity
Data Management Standard/ Ad hoc Reports OLAP Sourcing Analytics Contract Management Causal Predictive 1990s 2012-13 onwards Evaluative Behavioral Analytics Supplier Relationship Management Spend Analysis 2000s Time Visualisation Tools PO and Invoice ProcessingSupplier Performance Monitoring
Low Cost Country Sourcing Closed Loop Spend
Management
Cost Regression Analysis
RFI/RFP Invoice
Analysis
Contract Design & Administration Contract Compliance
Vendor Coordination and Review
Category Management Payment Processing Procurement Risk
Analytics Commodity Hedging & Trading
Supply & Demand Risk Modelling Project Risk Assessment Supplier Segmentation Sourcing Strategy Negotiation Management Category Analytics
Spend Performance Management Spend Categorisation Should-Cost Analysis Country Performance Analysis Price Point Analytics Price Forecasting Demand Planning Inventory Optimisation Price Forecasting Optimization Workflow Optimisation MIS Reporting Simulations
• How many transactions were performed in the procurement cycle?
• What percentages of requisitions are declined and why?
• What spend category represents my highest bill?
• Where are my biggest strategic sourcing opportunities? • What are my most significant areas of off-contract spending?
• What spend category represents my highest level of supplier risk?
• How can I free up my working capital?
• How changes in consumer preferences are impacting my use of raw materials?
Monte Carlo Simulation Queuing Theory
H
igh
Low
Source: CRISIL GR&A analysis
Consumer Behaviour Analysis
Procurement Analytics is expected to become a
~USD 16-17 billion market globally by 2020
The global Procurement Analytics market, which is expected to generate revenues of
USD 7-8.0 billion in 2013
, is
projected to become a
USD 16-17 billion industry globally by
2020, driven by its wide adoption by industries beyond
manufacturing and retail
Services segment (IT and Analytics),
occupies the
largest share
and is
expected to grow the fastest among all the
segments
–
It is expected to contribute
USD 9-9.5 billion
to the market by 2020
2013
2020E
7-8.0
16-17.0
Global Procurement Analytics Market Size,
2013-20E,
USD billion
Global Procurement Analytics Market Size,
by category, 2020E
2020
Global tech. giants like IBM, HP, SAP, Oracle, SAS and Ariba to play a key role
The lion’s share of the
market to be constituted by IT and analytics services,
including data warehousing, data management, consulting and procurement modeling and analysis
Indian service providers to get a sizeable share of revenues by offering services across the value chain 58-59.0%
36-37.0% 5-6.0%
Software
Services (IT and Analytics)
16-17.0 100% = USD billion
India’s growth to outpace global trend in Procurement
Analytics
2013 2020E
300-310.0
780-800.0
India Procurement Analytics
(1)Outsourcing
Market, 2013-20E,
USD million
India Procurement Analytics
(1)Outsourcing
Market , by category, 2020E,
Percent
Analytics Services, 17-18.0%
100% = USD 780-800.0 million
IT Services, 82-83.0%
India’s Procurement Analytics market is expected to rise to USD 780-800.0 million by 2020 from USD 300-310.0
million in 2013
–
IT services is expected to be the largest segment, contributing 82-83.0% of the total revenues generated in
2020
India is currently a leader in the Procurement Analytics outsourcing market, and is likely to continue to retain its
position in 2020
Note: (1) Excludes software products and hardware as their share is currently miniscule; IT services in risk analytics refers to services around SI, consulting, data integration and management, etc.; analytics services is a sub-segment of the data analytics market within the Knowledge Services industry
Procurement Analytics space to witness play of new-age technologies such
as Cloud and Big Data, moving towards adoption of automated tools
Benefits of Adoption
Procurement Analytics
enables firms to improve
margins by atleast10-15% by
providing visibility into
spending areas
Potential to release 30% of
working capital from
operations by optimising
inventory levels and reducing
working capital requirements
Leads to 80-90% increase in
compliance to contractual
obligation
TRENDS
Adoption across verticals
Initial adopters:
Manufacturing and retail
New adopters:
Tourism, media and financial services
Advent of Big Data
Blogs, emails, web chats, IVRs, M2M, RFID and social
media
leveraged to identify customer preferences,
real-time pricing of raw materials, etc.
Productised revenues:
Shift from labour-oriented to
automated tools and platforms
Simplified data extraction tools
for one view of data
Visualisation and analytics tools
with embedded
modelling techniques
Play of cloud computing
Increased
volumes of data
,
storage capacities
,
scattered procurement teams and high software costs
Presentation Plan
Key Takeaways
Module 1: Risk Analytics
Module 2: Procurement Analytics
Service providers are actively forging partnerships, establishing
onshore presence, hiring analysts and undertaking M&As to further
penetrate the market
Opening analytics centres at both onshore and offshore locations
Adding analytics capability to their global in-house centres
Partnering with service providers across the value-chain to offer end-to-end solutions
Hiring professionals with advanced knowledge of analytics and the industry
New product launches across the analytics value-chain
Introducing dynamically configurable Risk and Procurement Analytics platforms
Undertaking M&A activities to build capability and enter new markets
Integrated IT/BPO
In-house global
centres
Consulting firms
Pure-play analytics providersRisk/
Procurement
Analytics
Providers*
* Represents an indicative list of service providers for Risk Analytics or Procurement Analytics or both
1
4
3
2
India is a hot destination for analytics due to gap in
demand-supply of analytics professionals globally
Annual Potential Talent Pool Available for Analytics in India,
Number of people
India’s Risk and Procurement Analytics Talent Requirement,
2013-20,
Number of analysts
Source: CRISIL GR&A analysis
Rank Country Industry Maturity Spectrum of Services Talent Availability 1 India 2 China 3 Poland 3 Romania 5 Philippines 6 Australia 7 Chile 8 South Africa 2013 2020E 2,800,000 700,000 500,000 350,000 300,000 250,000 14,000 8,500 5,000 IT Professionals Graduates in Math/science Engineers Graduates in Economics Post graduates in Math/science MBAs PhDs Actuaries Graduates in statistics ~5,200 – 5,300 ~14,500 – 15,000
Over the next five years, in the US alone, there is likely to be a talent shortage of 30,000 high-end professionals for Risk & Procurement Analytics
Given its large pool of PhDs, actuarial graduates as well as statisticians, India is well-placed to capture the USD 2.8 billion offshoring opportunity from the US alone
Nil Low Medium High Very High
While total talent availability is high, ready to hire talent for
Risk & Procurement Analytics would be just ~3%-5% of the
total
Source: CRISIL GR&A analysis
Procurement Analytics Services Market in India, 2013-20E, USD
Scenario A: Current Momentum Scenario B: Potential MomentumRisk Analytics Services Market in India, 2013-20E, USD
Proactive industry measures can enable the Indian Risk &
Procurement Analytics industry to capitalise on the global growth
2013 2020 2.5-2.6 billion 2013 2020 700-720 million 500-550 million ~3.0-3.1 billion 260-270 million ~1.0-1.1 billion In an ideal scenario, the Industry can garner additional revenues of half-a-billion dollar from Risk Analytics
In an ideal scenario, the Industry can garner additional revenues of USD 260-270 million from Procurement Analytics 2.5-2.6 billion 2013 2020 700-720 million
Scenario A: Current Momentum Scenario B: Potential Momentum
2013 2020 300-310 million 780-800 million 300-310 million 780-800 million
Steps to enable India to garner a
majority share in the global Risk &
Procurement Analytics space
Talent Development: Focusing on:
Creating the right blend of knowledge of
industry and advanced analytics
Developing certifications and professional
courses to make analytics a mainstream in curricula
Establishing on-shore presence:
Expanding in developed markets to capture the market and build customer confidence
Investing in innovation and R&D to develop in-house analytics tools and platforms
Establishing a foothold across the value chain: Building end-to-end capabilities for data management, integration, analytics and consulting
Inorganic growth: Undertaking acquisitions or JVs to expand the geographic footprint and product capability
