Risk management is playing an increasingly bigger part in the procurement function

Published March 2014

Half of CPOs believe procurement related risk has increased in the last 12 months, according to the Deloitte Global CPO Survey 2013.

Whether risk has actually increased or CPOs are simply more aware of it due to heightened media attention is immaterial. Risk accountability is now a key trend for procurement functions, but few currently have a comprehensive strategy in place. As business confidence increases, companies’ appetite for risk is increasing too, this drive for profitable growth places new pressure on procurement departments. Couple this with the complexities brought about from the rise in the levels of outsourcing and global sourcing and the likelihood of risk events occurring is greatly increased. According to Deloitte, “Attending risk related meetings is currently the primary means by which Procurement have involved themselves in risk management, whilst process governance and policy guidance are the two most commonly used mitigation methods.” While this may previously have been sufficient, moving forward CPOs will need to play a larger part in auditing and monitoring, working closely with the board in order to understand and manage the trade-offs and options available. Technology distributor, Avnet explains : "Proactively assessing potential risk and developing a risk management strategy is critical to a company's ability to continue to manage supply to meet demand, as well as the expectations of business stakeholders, regardless of the economic or environmental challenges." This new strategy will be heavily reliant on data and the use of information; supplier management technology will be essential in order understand and manage the risk related to each and every supplier, be that through a clear picture of the supply chain or easy access to location information in the event of a natural disaster. Implementing a comprehensive risk management strategy means businesses can minimise their exposure to potential problems, allowing them to take calculated risks; but it can also offer a competitive advantage. According to a study by Capgemini, 55% of companies believe that a strongly-performing supply chain is a valuable asset.