Risk, at least for procurement, has two faces. First, there is the world of macroeconomic and geopolitical disruption and negative headlines. Second, the function must consider the behind-the-scenes mechanics that protect businesses from the effects of disruption.
Those representatives from leading financial services organisations that gathered in the Montcalm Hotel in Moorgate, London, to discuss their focus areas for 2020 were in little doubt functions have work to do if they are to approach a point at which their teams have optimum visibility and control of risks in the supply chain.
For Ivalua, which partnered with Procurement Leaders for this roundtable discussion, one of the big challenges was being clear and confident in what procurement needed to be responsible for. How deep should buyers be expected to go into supply chains? What kind of high-level view of risk should procurement executives expect?
Indeed, many teams do not have ready access to risk experts. They have lots of data but little insight; lots of focus on compliance but not always enough on resilience. Although solutions serve different areas – pre-contract, market analysis, and so on – technology can create complexity as much as it solves the problem.
As one delegate ventured: “There’s no one solution or platform that meets all the risk needs for organisations, but we’re all looking for very similar things and one day, probably soon, someone is going to clean up.”
Meanwhile, here are five points that delegates left pondering:
How to keep the intensity of focus on risk
Financial services organisations are no strangers to regulatory risk and the need to drive compliance in the supply chain. Although that provides something of a mandate for a greater focus on risk management activities, it comes with problems. Businesses that are unable to build a consistent approach to risk chase from one rule change to the next. While they might cover the necessary ground each time, they might not focus on efficiencies and proactive strategies that would be less narrow in scope. “We can build processes, checks and training but, ultimately, that has to be consistent – not just in response to the next thing that comes up,” said one delegate.
How to get space to truly understand the customer journey
Of course, one issue with limited resources is when organisations are stuck in cycles of reacting to audits and guessing the impact of upcoming law changes, it is difficult to dedicate time to develop a more strategic approach to risk. “I want us to be able to move past some of the truly manual activities – the sausage-grinder of risk – and be able to look at mapping the customer journey, taking a step back and thinking about where risk has an effect, where it matters and how we’re protecting those areas,” noted one delegate.
Who owns the definitions around risk and criticality of suppliers
It may not be a question of who owns the risk agenda, but procurement teams need to understand what is critical, as well as what constitutes an acceptable or unacceptable degree of oversight. Of course, the problem, then, is when there are conflicting messages around what is considered a risk and where decision-making can happen. Procurement may not own the risk agenda but the function can drive a more deliberate conversation around defining risk. One delegate pushed the problem further: “If we don’t have an appetite for risk, how are we supposed to be entrepreneurial? If we’re spending our time assessing some of the largest corporations in the world, are we deploying limited resources in the best way? But, if the answer is no, who then decides where that criticality lies and where the lines are drawn? If it’s not us, we risk being stuck being unable to move forward”
Making the case for risk requires more focus
Having said procurement is not the sole ‘owner’ of a risk strategy, the function does have a mountain to climb to change behaviours, adapt the culture and embed processes within the team – particularly among stakeholders with other priorities. Getting these individuals on board is vital and governance can rarely afford to be a completely blunt tool. “We have to sell it, we have to show our working”, said one delegate. Another referred to their business’ risk drills where they engaged in cross-functional scenario planning, which helped bring intangible elements to life for teams. Although data helps demonstrate vulnerability, impact and outcome, many in the room were sceptical that procurement teams yet have the capabilities to capitalise on this information and make those interpretations meaningful to stakeholders. “We have the data, but interpreting risk is difficult and it needs to be put into the context of our stakeholders’ worlds,” clarified one delegate.
Frameworks and contracts are essential but don’t sacrifice everything else
“By having signoff from across the business, having everyone in the tent, it’s not procurement’s initiative – it’s the business’ and it’s something we’ve all bought into,” explained one delegate. “On the other hand, you have to be able to understand the relationships and sense what’s going on – you can’t lose the closeness to the market that procurement has.” In that sense, the group encapsulated the dichotomy at the heart of supply chain risk management: procurement has to be everything at once. Bringing savvy is just as important as data; frameworks and processes are essential, but so is the ability have relationships and push for cultural change; the function doesn’t own risk, procurement professionals don’t have unparalleled expertise, but they must push for consistency and definition with stakeholders.
This is published as a piece of sponsored content, published in partnership with Ivalua.