Tag Archives: risk

4 Ways Procurement Could Better Manage Risk

Procurement pros need to get better at managing risk. Because supply chain disruption can come from any angle, whether it’s caused by a supplier site failure, environmental or geopolitical factors, or even adverse weather… 

If it’s not already, risk management should be a top priority for businesses. The consequences from not actively identifying, managing and mitigating supply chain risk can significantly impact an organisation’s profitability, not to mention brand reputation and potentially, its sheer existence.

riskmethods set out to determine the current “state of risk management and mitigation” in today’s global business ecosystem by surveying more than 250 senior procurement executives from across the globe. The study unveiled important findings around how prepared procurement leaders are to tackle rapidly evolving business environments brought on by new, more complex threats, and the current methodologies employed to manage risk in the supply chain. Here are four areas the survey explored, which indicate where procurement teams are failing in terms of risk management.

  1. Preventing disruption

All senior procurement professionals identify ‘avoiding significant disruption to the supply chain’ as a top priority, but when survey respondents were asked whether their organisation had a significant disruption in the past 12 months, more than 47 per cent indicated that they had experienced between one and five.

Additionally, a surprisingly high 13 percent indicated that they had 20 or more significant disruptions in the past year. Arguably the most alarming statistic – 12 per cent of respondents did not even know whether there were any serious disruptions to their supply chain during this time.

This is a testament to the 12 per cent’s minimal visibility into their operations. According to this data, nearly all organisations faced a disruption in the past year, speaking to the prevalence and nature of supply chain threats at they continue to increase. 

  1. Improve ability to uncover risks

The current landscape has made it critical for procurement professionals to have real-time, thorough views into potential risk and their impacts to make well-informed purchasing decisions. Many organisations have implemented some form of tracking mechanism for risks, but how often the data is updated is another issue.

When we asked respondents about the frequency in which data is refreshed, less than one third of respondents answered continuously. This is an alarming percentage.

Risk monitoring in today’s digital business environment needs to be a 24/7/365 task. Organisations that aren’t receiving continuous updates are falling behind and can’t possibly be making the best decisions for their business.

The underlying cause of this lack of complete information is usually associated with traditionally highly manual processes. Not only is the manual approach an extremely tedious and time-consuming task, it also takes away resources from other critical objectives. Most importantly, it severely limits big-picture insights and increases the chances of a serious supply chain disruption. When survey respondents were asked what level of automation their organisation employed to refresh critical information, less than one per cent of respondents indicated that it is completely automated.

An additional 39 per cent indicated that they were in the low to moderate rage of automation, relying heavily on manual tools such as Excel in conjunction with some outside sources. A full quarter of respondents indicated that they have no automation capabilities at all and are completely reliant upon manual search.

  1. Supplier risk impact assessments are key

Understanding a supplier’s potential impact on the business is key for procurement teams when it comes making purchasing decisions. For example, if a major supplier gets hit by a severe weather event which causes a delay in shipping, that could cause a ripple effect that halts production and eventually leads to a loss in revenue.

When survey participants were asked if their organisation had a mechanism in place for measuring the impact a supplier has on the business, almost half said that their organisation had no structured assessment of supplier criticality or impact.

Having no such assessment means organisations are at times putting their fate in the control of someone’s best guess. Organisations must have clear visibility into their supply chain, including which suppliers have the greatest potential impact, so they can refocus resources on reducing risk and preparing for a crisis.

  1. Organisations must be better equipped to mitigate emerging threats

While being able to identify potential risk is a crucial procurement workflow, having the ability to act on that information and mitigate evolving threats is equally, if not more, important.

Only slightly more than 20 per cent of study respondents indicated they have plans in place. An additional 27 per cent indicated that no such plans exist and 53 per cent indicated that there were only partial plans in place. These numbers demonstrate how difficult it is to evolve into a mature organisation when it comes to prioritising risk because businesses lack the necessary level of stakeholder collaboration.

Supply chains will never be free of risks, but an organisation’s ability to prepare for, identify and mitigate emerging threats will set them apart from the competition. Procurement teams can’t possibly make well-informed business decisions without a risk management strategy in place. As the number of risks continues to increase in this environment, the need for accurate, actionable insights will only become more critical.

When it comes to risk management, companies need to consistently be moving forward as the current threats will only continue to evolve.

Download the report: Procuring Risk: The State of Risk Management and Mitigation in Today’s Global Supply Chain to read riskmethods’ full findings.

6 Top Tips From 6 Procurement Influencers

We interviewed some of procurement’s most influential leaders to hear their advice for the global procurement community. Here are there 6 top tips…

Are we running out of humans who can get the procurement job done?

Is the future office-free?

Should every procurement team have a Chief Data Officer?

How do you sell yourself, your team and the profession to the stakeholders that really matter?

Can procurement teams make themselves indispensable?

These are some of the questions that we addressed at last week’s Big Ideas Summit in London, where we brought together the top procurement minds to connect, collaborate and innovate.

Couldn’t join us on the day? Not a problem! We’ve documented all of the highlights for our digital delegates and pulled together this list of 6 top tips for procurement pros from some of the function’s most influential leaders.

1.Become an essential partner to the business – Bob Murphy CPO, IBM

IBM’s CPO, Bob Murphy, believes that while procurement leaders “need to be able to use technology to get the insights and knowledge, their focus should be on developing their emotional intelligence (EQ) rather than their IQ, and their ability to talk to clients in a consultative manner. Listening is critical – When we’re talking, we’re not learning.”

“Project management, empathy, innovative thinking and an agile mind-set are also critical skills at IBM.

“You hear a lot of people talk about procurement leaders becoming “trusted advisors” to their businesses, but I think we need to take it to the next level and become ‘essential partners.’

“We should enhance everything that we touch.”

Read more from Bob Murphy in this article.

2. Procure with Purpose – James Marland Vice President, SAP Ariba

James Marland, Vice President – SAP Ariba argued that it is an exciting time to be part of procurement an professionals should seize this opportunity. Procurement professionals are often told that they’re the ones who save the money, deal with suppliers and cut purchase orders.

But now procurement can have a new agenda; bringing to the table initiatives that achieve crucial social goals such as eradicating slave labour, improving sustainability and creating an inclusive and diverse workforce.

Take that opportunity and procure with purpose!

Read more from James Marland in this article. 

3.  Engineer Serendipity –  Greg Lindsay, Urbanist and Futurist

Greg Lindsay, Futurist, Urbanist, Journalist and Author, is a firm believer in the fact that innovation is fundamentally social. Indeed, case study after case study has demonstrated that the best ideas are more likely to arise from a casual chat around the water fountain than in any scheduled meeting.

They are the result of serendipity – a chance encounter at the right time by the right people, regardless of their rank, affiliation, and department or whether they even work for the same company.

The most innovative companies in the world are busy engineering serendipity and harnessing social networks and new ways of working designed to cultivate the discovery of new ideas. And that’s exactly what procurement should be doing!

Read more from Greg Lindsay in this article. 

4. Take More Risks – Professional Poker Player Caspar Berry

Professional poker player Caspar Berry believes “People are broadly hard wired to be risk-averse. It keeps them alive. Its kept our species alive for however many thousands of years.”

“What we call risk aversion is essentially a desire to succeed in the short term. And a desire to succeed is another way of describing a fear or aversion to loss and risk.

“I don’t judge anyone negatively for not being able to push the latitude and risk level but it’s important to engage in a conversation in order to try.

“Its our own results we’re sabotaging, sometimes inadvertently, if we don’t!”

Read more from Caspar Berry in this article. 

5. Gather data and do something with it- Chris Sawchuk, Principal The Hackett Group

Top procurement teams achieve their superior performance because they have higher-caliber people who apply their skills to effectively harness digital technologies and capabilities.

Chris Sawchuk, Principal The Hackett Group discussed the need for procurement professionals to develop two fundamental skills:

  1. Procurement has to get better at gathering and creating big data in order to provide meaningful insights for the business and go beyond the data that we have access to today.
  2. Procurement needs to improve their advanced analytics capabilities, to be able to look at data and draw out the opportunities it offers.

The future of procurement is not about the way we execute processes. It’s really about the insights and intelligence we provide to our organisations to give them an advantage.

Read more from The Hackett Group in this article.

6.  Prepare for the worst – Nick Ford, Co-Founder Odesma

Nick Ford, Co-founder – Odesma discussed how procurement professionals can help turn Brexit into an opportunity for their organisation.

It’s an uncertain time for procurement professionals; who must consider how the function will be impacted by an increase in the cost of imported goods, freedom of movement (or lack thereof!) and a potentially depleted talent pool.

As businesses prepare, the role for procurement teams is increasing dramatically and it’s a real opportunity to put procurement at the front and centre of organisations. We just need to prepare!

Read more from Nick Ford in this article. 

Want to explore more content and video footage from Big Ideas London 2018. Sign up here (it’s free) to register as a digital delegate and gain access.