Procurement Risks & How to Mitigate Them
Predicting and avoiding risks are hallmarks of effective procurement risk management departments and is essential if you want to create value as well as reduce costs for your company. While the most visible role of the Procurement Analytics Technologies function is to obtain goods and services for an organization, that’s just the “what” of procurement.
The “why”—striking a critical balance between risk and reward in order to generate both savings and added value—is where risk management comes into the picture.
Identify Supplier Risks By Using our Procurement Analytical Solution
Every purchase, from pencils to equipment, trails behind it a string of transactional data, and carries on its shoulders a set of variables exposed to risk, including vendor reliability, product quality, legal and financial compliance as well as customer satisfaction and reputation. Because it involves decision-making at all levels and can affects every part of the organization, procurement strategy must prioritize risk mitigation in order to
Common Types of Procurement Risk
- Inadequate Needs Analysis
Procurement needs to have visibility of what you need, when you need it, or who will deliver it on time and at the best price. Otherwise, you may end up purchasing too much, not enough, or the wrong goods and
services altogether, at sub-optimal prices and without the benefit of discounts and economies of scale offered by well-negotiated contracts. Rogue spending will
likely be a major concern; both financial planning and your procurement strategy will be impacted. Linking budgets to actual purchasing behaviour will be difficult, and create an incomplete audit trail, exposing you to significant financial risk. This could damage both your profitability and your ability to achieve competitive advantage, as well as your reputation with your target audience if the quality and availability of the goods and services you offer are affected.
The use of data analytics in your procurement risk management organisation can allow you to reduce your risk by analysing your transactional data for everything you buy, and allow you to identify patterns of usage and other information that make it easier both to develop smarter purchasing strategies and negotiate mutually beneficial contracts with your best suppliers.
- Poor Supply Chain in Management
Linked to inadequate needs analysis, if you don’t have a centralized, transparent, and easy-to-use vendor evaluation method, along with an equally accessible but fully vetted method for requests, approvals, purchases and payments, managing your supply chain will be tough. Rogue spending will be a given; you’ll be exposed to significant risk of false invoices and other risk by unscrupulous vendors, too. Your staff will likely spend too much of their valuable time chasing invoices or searching for terms & conditions, exposing you to the risk of late or duplicate payments. Furthermore, failing to vet your vendors using key performance indicators (KPIs) robs you of a wealth of information you can use to remove redundancies and form strategic partnerships with your best suppliers. You also won’t have contingencies in place for emergencies, and your suppliers won’t have access to the valuable information they need to offer you special incentives or discounts. This risk can be reduced through the use of a vendor portal for automated vendor evaluation and management. You can track vendor performance and issues, identify negotiation opportunities if your needs change, and reduce costs significantly by outsourcing part of your purchasing to trusted partners The system can eliminate rogue spending by defining and assigning roles for requests, approvals, and purchasing, and make sure you get the best possible price (including discounts) while paying your vendors on-time (or early).
Verified documents linking purchase orders to invoices and delivery notes will speed up the entire procure-to-pay (P2P) process thereby ensuring you don’t lose potential gains in value due to increased staffing resources.
Modern procurement risk management practitioners regard contracts as much more than a simple agreement to buy. Contracts are a strategic opportunity to form mutually beneficial partnerships with vendors who share the ideals and goals of your organization—and without an effective way to manage them, you’re sacrificing both cost savings and opening your business to compliance issues. This risk can be reduced through a centralised document library with terms automatically linked to approved vendors and rich transactional data that can be turned into reports for finance, marketing, and senior management. It makes negotiations much simpler. Review and approval by your legal team means contract information is always accurate and up-to-date, and staff can create new contracts from pre-approved templates for easier review and approval.
Data analytics can provide insight into new opportunities for sourcing, and help ensure both you and your suppliers adhere to the terms and conditions of existing contracts while helping you plan for more favourable terms and conditions when it’s time to renew.
- Fraud and Corruption
While some risks are created by a lack of available data or unintentional inefficiencies, others are both intentional and malicious. The specific risks include invoice fraud, embezzlement, and theft via false record keeping. A decentralized and opaque procurement function robs hinders your ability to spot red flags that might otherwise arise during risk analysis.
This risk can be reduced through clear and automated procurement functions, limited catalogues from approved and preferred vendors, and complete transactional information with document cross-checking make it very hard for potential fraudsters to submit a fake invoice or conceal corruption. In addition, the full audit trail available for every transaction and a fully documented approval process increases your visibility of potential red flags.
Avoid business losses, reputational damage, and losing out to your competition by ensuring risk identification and mitigation is part of your procurement plan. Contact us today. Find Out How Minimize Risk. Maximize Value. With PLANERGY Managing Risk Is Easy.
Procurement Risk Management Redefined with Agilus
Join us in your quest to conquer procurement risks, enhance your business value, and optimize costs. Agilus empowers you to predict and mitigate future challenges through meticulous procurement risk management, ensuring a seamless and efficient procurement journey.
Navigating Procurement Risks with Agilus
Procurement extends beyond acquiring goods; it’s about striking the right balance between risk and reward to maximize savings and procurement effectiveness. Agilus is your trusted partner in guiding you through the intricacies of risk management within procurement.
Unlocking Supplier Risks with Agilus' Procurement Analytical Solution
Every procurement transaction, regardless of size, leaves behind a trail of data, encompassing product details, supplier reputation, dependability, legal compliance, customer satisfaction, and product quality. Eliminating risks should be your foremost priority, as procurement strategies resonate across your entire organization.
Common Procurement Risks We Address Together
1. Inadequate Needs Analysis:
Agilus assists you in deciphering your genuine procurement requirements, their timing, and identifying the best sources for optimal pricing. Bid farewell to the risk of over-purchasing, under-purchasing, or acquiring unsuitable items. Our insights enable informed decisions, cost-cutting, and deriving maximum benefits from well-negotiated contracts.
2. Rogue Spending Control:
Bid farewell to financial surprises. Agilus aligns your expenditures with your procurement processes, ensuring transparency and traceability. Sustained quality in goods and services translates to improved profitability, competitive advantage, and reputation enhancement.
3. Data-Driven Procurement:
Imagine wielding the power of data analytics to scrutinize each procurement transaction. Discover usage trends, gain actionable insights, and make informed decisions. It’s akin to having a superpower—a gateway to smarter procurement practices and mutually beneficial deals with your top suppliers.
4. Enhancing Supply Chain Efficiency:
Simplify supply chain management with Agilus. Bizarre spending, fraudulent invoices, and unscrupulous vendors become a thing of the past. We streamline and optimize your entire procurement process. No more chasing overdue invoices or struggling with procurement-related paperwork. Access to key performance indicators (KPIs) fosters strategic collaboration with your premium suppliers, transforming the procurement landscape.
5. Effortless Contract Management:
Contracts aren’t mere agreements; they’re opportunities. Agilus simplifies contract tracking, negotiation, and management. Our central document repository, linked to approved vendors and enriched with transactional data, expedites negotiations. Legal team approvals ensure compliance, and pre-cleared templates expedite contract processing, saving money and upholding compliance.
6. Mitigating Fraud and Corruption:
Not all risks are accidental; some stem from malicious intent. Agilus fortifies your procurement process, narrows vendor choices to reputable ones, and provides meticulously vetted transactional data. This safeguards against billing fraud, embezzlement, and deceptive record-keeping. A comprehensive audit trail and stringent approval procedures expose red flags promptly.
Fraud and dishonesty can tarnish your business and reputation. Agilus empowers you to proactively uncover and mitigate risks as an integral part of your procurement strategy.
Are you prepared to embark on a journey of comprehensive risk management within your procurement processes? Contact Agilus without delay, and let us fortify your procurement journey together.