In addition:

• Shipments increased 0.7 percent –up for the seventh consecutive month.
• Unfilled orders increased 1.4 percent –now up 20 of the last 21 months.
• Inventories increased 0.1 percent –up 26 of the last 27 months.

The latest report from the Institute for Supply Management also showed signs of improvement. According to the ISM Report On Business, economic activity in the non-manufacturing sector grew in January for the 25^th consecutive month.

ISM’s research found that the 12 non-manufacturing industries reporting growth in January were (in order): Real Estate, Rental & Leasing; Information; Educational Services; Transportation & Warehousing; Accommodation & Food Services; Construction; Other Services; Retail Trade; Professional, Scientific & Technical Services; Finance & Insurance; Health Care & Social Assistance; and Wholesale Trade.

By contrast, four industries reported contraction in January: Arts, Entertainment & Recreation; Mining; Utilities; and Public Administration.

ISM also reported that the nation’s purchasing and supply executives who participated in the poll were mostly positive about business conditions, although there are still concerns about cost pressures and the sustainability of the recent spike in activity.

As one respondent in the scientific and technical services sector put it, “Economy continues to show signs of improvement and the company revenue is improving slightly, but is very susceptible to pricing and cost pressures.”

In addition, I believe any optimism is tempered by concerns about continued economic uncertainty in the EU, where manufacturers are scaling back operations and investment.

Developed as part of the Fair Labor Association (FLA) and Harvard Law School?s Pension and Capital Stewardship Project and with funding from the Investor Responsibility Research Center (IRRC) Institute, this KPI initiative is the first effort of its kind to create a standardized method to assess such risks.

The nine companies involved collectively source from 1,755 factories that employ about 1.8 million workers in 62 countries. They are testing KPIs in the following areas, with a host of detailed underlying information for each category:

• Code of Conduct (issues such as child labor, freedom of association, health and safety)

• Supplier and Managers Training on Code of Conduct

• Corporate Commitment to Code of Conduct

• Suppliers with Confidential Reporting Channels for Worker Grievances

• Suppliers Monitored At Least Annually for Code Compliance

• Suppliers Subject to Independent Verification by External Monitors

• Sourcing Countries in Which Company Consults with Civil Society Groups

• Percentage of Successful Remediations of Code Violations

These KPIs were developed using an extensive process involving more than 100 entities, including non-governmental organizations, universities, corporations and investors, among them signatories to the United Nations Principles for Responsible Investment Initiative.

Ultimately, the goal is to provide a common framework to monitor and access supplier risks associated with labor and human rights, a capability that is becoming increasingly important for companies wanting to maintain competitiveness in today’s global marketplace.

“The testing of the KPI is critical milestone,” concluded Aaron Bernstein, senior research fellow with the Harvard Project. “The testing demonstrates commitment by major companies to measure and make any needed improvements related to their labor and human rights supply chain practices.  When the final KPIs emerge, companies, investors and others will have a much-needed common yardstick to monitor key performance areas — from labor and human rights standards, to grievance and confidential reporting procedures, to development of remediation plans.  This is an important next step toward providing consumers with an added level of confidence that their purchases are manufactured in facilities using improved labor and human rights metrics.”

For more information see the summary report.

What can your company do to take advantage of the benefits (low cost manufacturing, access to natural resources, market access for basic global products, buyers with access to core operations, etc.), while mitigating potential pitfalls?

For starters, you may want to read PwC’s new study, Getting on the Right Side of the Delta: A Deal-maker’s Guide to Growth Economies. After analyzing 200 deals (both publicly announced and private ones for which PwC was an advisor) and interviewing 20 leading dealmakers around the world, PwC found that:

• The majority of deal risks typically relate to one or more of three key elements: the asset itself, the seller, or the government.
• The most common barrier to deal completion is an inability to get comfortable with valuations. 40 percent of failed deals in PwC’s data set fell victim to valuation concerns.
• The most common problems that emerge after a deal closes concern partnering, causing 30 percent of problems post-deal.  Beyond partnering, the same issues that prevent deals from closing also frequently emerge post-deal (direct government interference, problems with financial information and non-compliant business practices).

Fortunately, PwC’s report also includes five key recommendations for dealmakers when pursuing deals in growth markets. PwC advises dealmakers to:

• Understand the strategic rationale early. Due diligence will be imperfect and valuations are high, so a strong strategic rationale is critical to completing a deal.  Educate the board and management, and be sure to address any preconceived notions or concerns about growth economies.
• Prioritize markets. Limiting investments in individual markets allows a company to focus scarce resources on fewer markets to increase the chances of building scale positions that can support future growth.
• Visit. Although there are common themes across growth economies, each market is different.  Being on the ground helps reduce a variety of risks, such as stakeholders concerns, quality of diligence, understanding valuations, identifying the right partner  and working with the local government to obtain regulatory and compliance approvals.
• Put key people in place. Ultimately, the people involved will most influence whether a deal is successful or not.  Companies should identify a short-list of local advisors and build a dedicated team of deal specialists.
• Adopt proven approaches. You’ll have to think differently.  A ‘normal’ deal approach is not appropriate for a growth market.

A full copy of the PwC study is available here.

Business performance in Q4 improved in most categories quarter over quarter, and even though certain metrics remain negative from a year-over-year perspective, it’s clear many companies are working toward a more positive business profile.

For example:

Risk scores remained relatively stable over Q4 and the previous year. Interestingly, the largest businesses (those with more than 1,000 employees) showed the greatest quarter-over-quarter improvement (2.2 percent), but the largest decline (14.7 percent) year over year.

Days beyond terms (DBT) appears to be stabilizing quarter over quarter, as well. However, DBT remains significantly negative year over year, increasing by as much as 13.8 percent.

The percentage of dollars delinquent was relatively flat quarter over quarter, with the exception of larger businesses (those with 250 or more employees) which showed significant improvements, reducing their debt by as much as 11 percent. Experian found that the Communications sector showed the greatest decrease in delinquent dollars and the greatest decrease in percentage of dollars considered severely delinquent. Conversely, the Legal Services and Real Estate sectors were among those with the largest increases in percentage of dollars delinquent and percentage of dollars considered severely delinquent.

“The general stabilization and signs of improvement seen in Q4 are encouraging. No matter what the business size, industry or geographic region, having a strong risk score, paying bills on time and reducing delinquent debt are important elements to achieving a positive business profile,” said Allen Anderson, president, Experian’s Business Information Services. “Building and maintaining positive credit is critical to a business’s success, because it helps them obtain more favorable payment terms or interest rates.”

Many more insights from the Experian Business Benchmark Report are available in this press release.

Unfortunately, though, a new survey by the Zurich Financial Services Group (Zurich) found that only a small fraction of business executives are confident in how their organizations are managing risk.

Here are a few of the key findings from the study. Among the 1,419 business executives surveyed:

• Few are certain of their company’s approach to manage risk. More than two-thirds said the topic of risk management has increased in the wake of the 2008 financial crisis and recession. Yet, only one in ten said their executive management is “highly effective” in creating a strong risk-management culture. Only 14 percent felt their organization link risk information to strategic decision-making “extremely well.”
• Less than half consider their approach to ERM “proactive.” This “best practice” group –the companies that took a comprehensive approach involving the board, as well as business and functional leaders at all levels of the organization –included financial services, health care and energy companies and those with 10,000-plus employees.
• Three top barriers to better risk management emerged. The top challenges included over-focusing on compliance rather than fundamental processes (42 percent), lack of strong management support (41 percent) and reluctance to de-silo related information (35 percent).
• Integrated risk management improves operational performance. Most of those who participated in the poll cited the top benefit of integrated risk management as helping their companies achieve better operational performance by removing siloed communication and fostering: improved strategic decision making (39 percent), improved governance (34 percent) and increased management accountability (31 percent).

Interestingly, the survey also found that two series of events – natural disasters and financial and economic crises – have risen to the top of companies’ risk lists.

And perhaps even more striking, beyond these so-called “headline” risk events, the other most-often-cited risks were largely operational matters, ones that underpin the ability to deliver on strategic goals and maintain a viable, competitive organization going forward.

For example, more than half of companies mentioned risk related to talent retention and acquisition as having risen significantly. Meanwhile, corporate and/or brand reputation has become a more significant concern at half of the companies, while business planning and continuity, as well as legal risks, were mentioned by nearly half.

“The disasters of the past three years have prompted companies to ramp up their ERM processes and work harder at installing a risk management culture. Some companies have also made more basic changes designed to forestall similar occurrences or enable executives to respond to them more effectively,” said Axel Lehmann, Chief Risk Officer at Zurich. “And at the same time, however, the threat of unanticipated “black swan” events has encouraged many companies to broaden their search for potential risks.”

The full report, Risk Management in a Time of Global Uncertainty, conducted in collaboration with Harvard Business Review Analytic Services (HBRAS), is available here.

But, of course, that global population is on land. If you’re out on the open seas, it’s a different story.  Not surprisingly, the oceans are the last “white spot” for the mobile communication industry to connect.

Earlier this month, Maersk Line, the largest shipping company in the world, announced that it is taking steps to change all that.  The company has appointed Ericsson to introduce end-to-end systems integration and deployment of mobile and satellite communication to the entire Maersk Line fleet.

More specifically, over the next two years Maersk Line will outfit 400 of its 500+ container vessels with Ericsson antennas and GSM base stations. Upgrades to the remaining vessels will be made soon after.

It’s an important step, because as Ericsson points out, mobile communication provides opportunities for the shipping industry to upgrade several essential processes.  For example, until now, Maersk Line’s high-tech modern container ships have been equipped with satellite connectivity primarily intended to support communication for vital shipboard functions.  But Ericsson says its new integrated maritime mobile and very-small-aperture terminal (VSAT) satellite solution will allow Maersk Line to better address:

• fleet management,
• delivery times,
• interaction with vessels,
• information sharing with customers and
• energy efficiency.

These improvements can lead to greater reliability and cost reduction. They also pave the way for immediate access to remote expertise, resulting in extended access to information and, in turn, improved efficiency in the vessels’ daily operation.

“We’re proud to be able to connect Maersk Line’s fleet with our technology,” said Hans Vestberg, President and CEO of Ericsson. “We believe in a Networked Society, where connectivity will only be the starting point for new ways of innovating, collaborating and socializing. The result will be automated and simplified processes, higher productivity, real-time information allowing quicker, more informed decision making and problem solving.”

As strange as it sounds, Vermont topped the list of states with the highest risk of loss due to embezzlement in 2011, according to new research from Marquet International Ltd.

The 2011 Marquet Report On Embezzlement, examined 473 major employee theft cases active in the US last year and found that:

• Vermont had the highest risk for loss due to embezzlement. The states next on the list were: Connecticut, Pennsylvania, Montana, Virginia, Iowa and Idaho.
• Overall, the number of major embezzlements dropped slightly, down 2 percent from 2010.
• Non-profits, including religious organizations, experienced the most embezzlement cases of all industry categories, second only to financial institutions.
• The average loss was about $750,000, and the average scheme lasted nearly five years.
• The most common embezzlement schemes in 2011 involved the forgery or unauthorized issuance of company checks.
• Nearly three-quarters of the incidents were committed by employees who held finance and accounting positions.
• Almost two-thirds of all incidents involved female perpetrators. However, by reviewing data from the past four years, Marquet concluded that men embezzle significantly more than women per scheme.

Marquet’s annual study of major embezzlement cases in the US gives us some intriguing insights into the costs –and prevalence –of employee theft.

“Employee theft is not going away any time soon,” concluded Christopher T. Marquet, CEO of Marquet International. “Banks and financial organizations – perhaps because that is where the money is – and nonprofits, including religious organizations – probably due to their weak business controls environment – are most often the victims of this type of white collar crime.”

More specifically, a new study by BNP Paribas Securities Services and InteDelta found that insurers are facing key challenges around:

• Risk governance. More than half (57 percent) of the insurers surveyed reported high or medium exposure to third-party data providers. As BNP Paribas Securities Services points out, adopting dedicated data work streams within their overall Solvency II programs will build a clear view of critical external dependencies for data sourcing and risk reporting.
• Data provision. 80 percent of those polled identified affiliated and third-party fund managers as key data dependencies.  Many are concerned about securing granular data for complex products and fund of funds. In addition, they worry about meeting increasing requirements for risk modeling and securities services providers.
• Establishing a risk team.  A fully-functioning risk team can ensure risk management is embedded at all levels and day-to-day processes and is now considered critical to improved business management.

“New data traceability processes, additional data governance and new criteria for mandate reporting were all identified as being of critical importance to insurers. Yet, each of these appears challenging for some insurers that hold assets with third party managers, or those that hold externally-pooled funds requiring look-through reporting,” said Maxime Gibault, head of insurance companies at BNP Paribas Securities Services. “What is clear is that insurers must re-engage with their asset managers over Solvency II in order to be compliant by 1 January 2014.”

Unfortunately, the search may be more difficult than you realize.

Results from a  new study by Deloitte indicate there’s both a growing shortage of executive leadership and evolving regional differences in talent needs around the globe. Consequently, organizations are going to have to invest more in talent priorities and initiatives in order to find the appropriate executive leadership required for continued success.

Here are a few key finding from Deloitte’s new report, Talent Edge 2020: Redrafting Talent Strategies for the Uneven Recovery:

• Leadership development pipelines and programs must be strengthened. About one-third (30 percent) of the executives surveyed ranked developing leaders and succession planning as today’s top talent priority—the highest of any response in the survey. Additionally, 29 percent predicted this specific issue will likely remain the top talent concern over the next three years.
• As talent demands expand, expect a growing focus on regional markets. Asia Pacific (APAC) executives said they face urgent needs with significant shortages anticipated in research & development (68 percent), operations (64 percent) and strategy and planning (62 percent). Survey participants in the Americas also reported executive leadership and operations as the main talent gaps (both 56 percent). But, Deloitte found business leaders in the Europe, the Middle East and Africa (EMEA) region are far less concerned about shortfalls in talent.
• Corporate talent programs need improvement. Only 17 percent of those polled believe their talent programs are “world-class across the board,” and a full 83 percent acknowledge that significant improvements need to be made in their organizations. Not surprisingly, executives that regard their talent efforts as “world-class” are more likely to report —by margins of 20 percentage points or more—that their companies are investing in these programs at a “high” level.
• Talent priorities continue to evolve. A majority of executives surveyed say performance management (73 percent), talent assessment (72 percent) and high-potential employee development (71 percent) are core talent priorities that will increase over the next 12 months.

“The standout findings from our research are two-fold: the near universal agreement about the existing and potentially growing shortage of executive leadership and the significant regional differences in talent needs around the globe,” said Alice Kwan, principal, Deloitte Consulting LLP and talent services leader. “Talent leaders in today’s business environment are taking responsibility for their futures by focusing investments and capabilities on rebuilding and developing new talent programs for leaders and critical employees within their organizations.”

Last Friday –and for the first time ever –Apple released a comprehensive list of its major suppliers and a detailed report on factory inspections throughout the company’s sprawling supply chain.

In addition, Apple recently became the first technology company accepted by the Fair Labor Association (FLA), an organization that monitors workplace environments worldwide.

These moves come on the heels of stepped-up pressure from activists worldwide. Earlier this month, workers from a Foxconn Technology factory in China waged a large protest that involved threats from some to commit suicide.  The protest, based largely on a wage dispute, is the latest in a long series of labor troubles with Foxconn, a supplier to Apple and several other leading electronics manufacturers. On Thursday, The New York Times reported that Foxconn had resolved the dispute, but it’s clear that tech companies (and others) run a great risk if they are perceived as being exploitive employers.

Apple’s Supplier Responsibility 2012 Progress Report outlines the company’s commitment to “driving the highest standards for social responsibility throughout (its) supply base.” Still, much more needs to be done, and I’m pleased to read that Apple is taking additional steps to monitor and improve factory conditions. Joining the FLA is another step in the right direction, and the company says it is expanding its worker education program and increasing audits in Malaysia and Singapore, as well.

Apple’s supplier list includes the 156 companies that account for more than 97 percent of what the tech giant pays to suppliers to manufacture its products.

“We welcome Apple’s commitment to greater transparency and independent oversight, and we hope its participation will set a new standard for the electronics industry,” Auret van Heerden, FLA’s President and CEO, said in a statement.

Workers at other factories that supply leading global brands have been making headlines, too. For example, last week a Nike factory agreed to pay $1m in unpaid overtime to Indonesian workers – a move that The Guardian says could force other suppliers of multinational companies to follow suit. Also, the US government is investigating forced child labor alleged in an organic and fair-trade cotton program that supplies the lingerie retailer Victoria’s Secret.