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Supplier Stability Monitoring and Management TAG Management Team Update 1 May, 2013

Supplier Stability Monitoring and Management TAG Management Team Update 1 May, 2013. Key Objectives of the Supplier Stability Monitoring and Management System.

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Supplier Stability Monitoring and Management TAG Management Team Update 1 May, 2013

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  1. Supplier Stability Monitoring and ManagementTAG Management Team Update1 May, 2013

  2. Key Objectives of the Supplier Stability Monitoring and Management System • Ensure we do not have a repeat of the SEMA situation, where a key supplier got into significant financial difficulty without AMP having prior knowledge that there were problems with the business • Provide an "early warning system" to AMP stakeholders, if a supplier they are doing business with may experience difficulty in the future and enable them to take appropriate action ( what is "appropriate" will depend on a number of factors and this is something that needs to be worked through) • Keep key stakeholders and commercial managers informed of material changes to the business stability outlook of suppliers to enable them to establish contingency plans as appropriate • Keep key risk committees and other governance committees up to date on changes to business stability of the suppliers being monitored • Ensure suppliers that are new to AMP are assessed regarding their importance and difficulty to extract, and add to the list to be monitored if deemed appropriate

  3. Key Principles of the approach • The Principles that were adopted and are proposed are : • Ensure key business stakeholder feedback was incorporated into the selection of the suppliers to be monitored - the original iTag list of 800 plus suppliers was whittled down to 1 suppliers , through a number of discussions between TAG and key business sponsors. • Ensure key stakeholders are updated at regular forums as requested • Ensure we use a standardised repeatable process for updating the information (i.e. taking the complex and detailed information from D&B and Veda and translating it into an easy to understand format) • Transparency - ensuring that we inform key stakeholders if there are incomplete areas of data • Measured and pragmatic approach - • As we assess the information and notice changes in business stability status (particularly if the business stability outlook deteriorates markedly), we need to ensure we understand what is driving the deterioration in conjunction with our business partners • We need to ensure we don't take inappropriate actions (i.e over react to a change in stability that can easily be explained and is not significant, or under react to a change that is important).

  4. Work done to date….. • In order to be able to deliver on the objectives above, some work has been carried out over the past 6 months to : • Identify suppliers that are important to AMP and are difficult to extract from the business if they were to get into financial difficulty - this was done in conjunction with business stakeholders and confirmed through a number of feedback sessions, including risk committee sessions • Establish agreements with 2 organisations (Veda and Dun & Bradstreet) to provide AMP with • A first cut assessment of Business Stability Measures for the suppliers who are important to AMP and difficult to extract - complete • Provide updates on changes to these business stability measures on a monthly (D&B) and quarterly (Veda) basis - established • Provide alerts on a weekly basis to highlight if there are activities that have happened that may influence our views of the stability of the suppliers we are monitoring - established

  5. Supplier Stability – Initial View of Probability of Distress in the coming 12 Months * • * Probability of distress defined as : • Forced change of control (Administrator/Receiver manger appointed);or Involuntary Liquidation/ Insolvency (Ceasing operations owing money to creditors) • ** Percentage likelihood of distress in the coming 12 months

  6. So what next ? What are the key elements of the ongoing management system we need to get right ? Document Management and Control Update and communication of Business Stability Scores • Establish centralised filing system • Store history of key reports, supplier scores, status updates to all audiences, enhanced monitoring and management plans • Ensure there is a clear audit trail • Consolidate scores from Dun & Bradstreet and Veda • Produce updated stability matrix highlighting changes • Share information with TAG team • Share information with Business Stakeholders Update Appropriate Committees Regularly • Agree calendar of Risk Committee presentations • Establish a standardised updating process • Conduct the updates Establish and manage enhanced monitoring and management plans Ensure visibility of Stability Scores and Management Plans • Establish checklist and plan template • Establish enhanced monitoring plans for all suppliers in the “High” to “Highest” category in conjunction with key business stakeholders • Actively manage the supplier relationship until the scores are at an acceptable level or we have an alternative supplier providing the services • Monthly - TAG management review of scores and status of enhanced monitoring and management plans • Weekly – Share management plan updates at Team meetings

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