Earlier this month, I sat down with riskmethods’ Co-Founder and Managing Director, Heiko Schwarz, to learn about his background in business, his impetus for establishing riskmethods, and what he believes is the future of supply risk management. It was a fascinating and fruitful interview, and like most of our Procurement Influencer spotlights, we broke it down into two parts. Today’s article is the first of two articles profiling Schwarz and riskmethods.
Education and Background
Schwarz began his business career in the mid 1990s at Deutsche Bank and went on to earn a Master of Arts in Finance and Banking. But in the early 2000s, Schwarz left Deutsche Bank and the finance and banking world entirely for the IT industry. He began selling software solutions for workforce management. After a couple of years, he jumped ship to Xcitec GmbH, a Munich-based procurement solutions provider that offered a strategic solution suite. According to Schwarz, Xcitec achieved 40% market share to become one of Germany’s largest companies and grow internationally.
When Xcitec was acquired by Emptoris in 2011, Schwarz led the global supplier lifecycle management practice as a subject matter expert (SME), and was responsible for driving revenue and sales enablement to educate pre-sale consultants. He guided and led projects in Australia, China, Europe, and Middle East for almost three years until IBM acquired Emptoris. Schwarz kept his global SME role within IBM’s product line, IBM Commerce. But after a year, he left IBM Emptoris and, along with Rolf Zimmer, founded riskmethods in January 2013.
Why riskmethods?
The idea for riskmethods began back in 2008 when he was still with Xcitec. Triggered by the global financial crisis, Schwarz began to create the concept of a supplier risk management tool. He helped to build a product with Tier-1 automotive suppliers that had to spend millions of dollars just to keep their manufacturing lines running during the recession. They were looking for ways to identify financial risks within their supplier base, but credit ratings, alone, were not enough. By implementing this supplier risk management solution, these suppliers learned through trial and error the best indicators of financial and supply risks.
“One of the major burdens of the entire risk management process,” said Schwarz, “is information capture. It shouldn’t be manual from the buyer or category manager’s perspective; it should be automated as much as possible.” Although the solution he delivered to his clients was adequate, they all knew it could be better.
As the dust settled on the financial crisis and economies began to recover, more companies realized that financial risks are not the only risks that can impact businesses. External risks can hit their supply chains and cause massive disruption. Recall the devastating earthquake that hit Haiti in early 2010; or the eruption of Eyjafjallajökull volcano in Iceland in April and May of 2010; or the earthquake, tsunami, and nuclear meltdown that ravaged Japan’s Fukushima prefecture in 2011. Clearly, supply risk goes well beyond the suppliers’ internal operations or even their direct supply chain: like procurement, it has extended to logistics. Thus, Chief Procurement Officers need to have end-to-end supply chain transparency – from source to customer – and be able to manage (or avoid, ideally) the associated risks.
Indeed, supply risk goes beyond weather-related supply disruptions. When the Rana Plaza clothing factory tragedy occurred in Bangladesh in 2011, it forced consumers and businesses to reckon with the human cost of inexpensive clothing manufactured halfway around the world. Much of it is made in poorly-regulated sweatshops by men, women, and children that are not only working in unsafe conditions, but may also be working against their will. For a moment, if a retail clothing company had operations at Rana Plaza or even in Bangladesh at all, its brand was tarnished by the incident. The ramifications of the tragedy are still felt today, and it has contributed to the growing awareness of the need for industries to manage supply risk comprehensively – beyond trying to save mere dollars and cents.
In 2013, Schwarz and Zimmer combined a growing need for holistic supply risk management with emerging technologies, like Big Data analytics, cloud-based solutions, and intelligent business tools, and found a valuable use case for supply management. “There are now digital levers available,” said Schwarz, to harness and leverage “the enormous amount of data available – every publication available on the internet, and all of the isolated data sets that have pieces of information that are relevant to this process.” Intelligent technologies, like machine learning algorithms and analytics engines, can cut through the “noise” in the world to isolate meaningful information. They can study supply networks and auto-generate search terms to monitor everything that is happening along those networks. When applied to threat identification, impact assessment, and risk mitigation, he said, enterprise procurement and supply chain management teams can avoid or better respond to supply risks.
To move forward with their business case, Schwarz and Zimmer had to then build a solution. Refreshingly, they were 100% confident that companies would be willing to pay for it because most of the companies they spoke with had undergone “at least one painful exercise” that had cost them millions of dollars in damages, lost revenue, or reputational damage.
And just like that, riskmethods was born.
What riskmethods Does
According to Schwarz, riskmethods “provides a solution that automatically identifies threats around supply networks, both inbound and outbound.” Artificial intelligence (AI) is a central part of risk methods solution. Integrated with AI capabilities, riskmethods’ platform “supports the assessment framework to identify the impact to the individual customer organization.” By combining innovative data analysis with prescient supply chain data and information, riskmethods can help customers holistically understand their supply risks and begin to prepare the organization for various threat and risk scenarios that could result in supply disruptions, downtime, lost revenue, reputational damage, or fines and penalties.
Riskmethods’ newest innovation, RISKY, was unveiled at its user conference in Boston last October, and was demonstrated before a captivated audience of practitioners and industry analysts. RISKY is riskmethods’ take on a digital assistant. It takes an ecosystem approach to supply risk management by blending automation, Big Data analytics, cloud, connected devices, machine learning, mobile applications, and natural language processing / voice recognition to put the power of riskmethods’ platform in the palm of one’s hand or on the tip of their tongue. RISKY leverages real-time data and information to alert users of emerging events or sudden supply chain disruptions. With voice recognition and vocal interface, it provides users with intelligence, fields queries, and executes on voice command. It can retrieve data and intelligence from internal sources, from external sensors (like those embedded within a shipping container), pull up alternative suppliers for a particular category, and make spot buys based on current or anticipated business disruptions. RISKY is indicative of where procurement and supply chain risk management in particular are headed.
Final Thoughts
It is always enlightening to speak with influential business leaders that continue to shape the supply management industry, especially supply chain risk management. Stay tuned for the second part of our conversation with Heiko in which he shares his thoughts on the future of risk management, the distinction between artificial and augmented intelligence, whether robots will take our jobs, and how the political climate in the United States casts a long cloud over Europe. Stay tuned!
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