Our Premise: Corporate risk
management is an essential business activity. Risk mitigation strategies lie at the heart of Corporate Governance. What is the contribution to these mitigation strategies from the Procurement & Supply Chain Management function? It is rare to find robust methodologies in place that will, in a structured way, identify the potential risks.
Proposition: Procurisk™, a web-based application, facilitates a structured assessment of Procurement &
Supply Chain Risks. The outcome enables any organisation to focus attention on those facets of risk requiring action. We have defined specific areas of Procurement and Supply Chain risks, each carefully designed Metrics against which to evaluate current practice. Contractual Risk is an example of a key area. There are organisations who have not reviewed their contractual terms and conditions for many years. There are others who trade on the supplier’s terms, or worse, trade without formal written contracts in place. Price Management Risk is another area and, for example, risk exists when the basis of contract prices are not understood because the supplier’s cost drivers were neither requested nor negotiated. Some contracts have automatic year-on-year escalation where the price is linked to an index, such as the Retail Price Index.
Intellectual Capital Risk is an area rarely evaluated. The risks presented by not developing human capital and failing to motivate the procurement and supply chain team will weaken the long-term strategy of developing relationships with strategic suppliers to encourage innovation and positive change that maintains the buying organisation at the cutting edge of performance.
Methodologies:
Procurisk™ offers our clients three alternative approaches for using our methodology. There is the BRONZE service whereby the client organisation can complete the Metrics online and receive their risk positioning status online.
There is the SILVER service whereby the client can have the services of a BFL consultant to sample the Metric responses to confirm that the client’s judgments are founded on sound logic. Finally, there is the GOLD service
whereby a client can have a consultant visit their site to lead the risk evaluation and be fully supported by the client’s specialists. In both the SILVER and GOLD service a positioning report will be issued to our client.
Business Benefits: There are many business benefits from using Procurisk™. These include a higher profit through recognising where risks can be reduced; paying lower insurance costs; guaranteeing supply chain excellence and contract performance; managing intellectual property rights and dramatically enhancing the
negotiation of contract terms and conditions. The reputational benefit from being able to demonstrate effective procurement and supply chain risk management will be a business differentiator when tendering for new contracts.
Conclusion Procurement & Supply Chain risks are unavoidable. That is a fact. The risks need to be identified, classified and mitigation strategies put in place. PROCURISK™ is the first, comprehensive modelling tool available to help you undertake a rigorous procurement and supply chain risk review.
Procurisk™, a web-based application, facilitates a structured assessment of Procurement & Supply Chain Risks.
For details, Stephen Ashcroft can be reached at 01744 20698 Twitter @Farrington1978
