How to mitigate procurement risks?

Studies have shown that that risk has been the key element of procurement. Some researchers even say that risk acts as the nervous system of procurement. While some researchers say that risk may act as the backbone for procurement, it comes with a demerit which is not providing the full business value of the organization leading to a complete downfall of the organization.

This article discusses some of the common risks in procurement and lets you decide how you should manage them. Some of the risks involved in procurement are as follows:

Internal hiring
When an employee applies for a job we cannot ignore the fact that it requires the procurement certificate which is either CPM OR MCIPS. The implementation of risk management principles in procurement mainly serves two activities. Firstly it ensures that the employee who has applied for the job has undergone procurement training and second if anything goes wrong in an organization it helps in verifying that the hiring manager has chosen the right employee, at least in terms of training and certifications.

Now for a business to run successfully there are ideas and innovations that the employee could come up with but since they have not gone a standard procurement indoctrination they are not considered as potential candidates. Thus in order to run a successful procurement program a business must be open to new ideas. In simple terms a simple pragmatic view must be considered.

Suppliers & vendors
Most organizations ask for certifications related to quality, environment, labour, etc. from their suppliers. To be truthful these certifications hold no value unless the main aim of the organization is to have a stable procurement process, so that if anything goes in an undesirable direction, the hiring managers can prove that the supplier they chose was prima facie certified and skilled to do the job well.

As technology becomes more and more advanced and as more industries move towards more centralized systems like enterprise resource planning (ERP), there arises a question: does it need to have a large procurement team in the first place. The answer is ‘yes’. It may not be ‘large’ but ‘right-sized’.

Technology and machines can replace mundane jobs but they can’t manage inherent risks. Also, in order to tap into the true potential of automation, organizations still need skilled procurement professionals.

#supplychain #procurement #SCMtrends #automation #businesstransformation #efficiency #bestpractice #digitization #outsourcing

Author – Aval Sethi, Founder

Aval Sethi is the founder & CEO of ProTaiga and is based in New Delhi, India. As a result driven entrepreneur, Aval leads Business Transformation and Procurement Automation initiatives focusing on new-age innovation for businesses through his company.

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