The Smart Cube’s Sayan Debroy offers insights into the key pillars of supplier risk transformation. This article originally appeared on Solutions Review’s Insight Jam, an enterprise IT community enabling the human conversation on AI.
Very few organizations currently have the combination of reliable intelligence, consistent processes, and holistic visibility they need to manage and mitigate their supplier risk effectively.
Now, let’s turn our attention to how procurement leaders can change that. Here are the four pillars of effective supplier risk management transformation.
Enable Wide & Continuous Risk Listening
Supplier risk comes in many forms. So, the first step towards effectively managing and mitigating them is to actively monitor as many of them as possible.
Some forms of risk are relatively widely tracked, such as financial risk. If a supplier has poor finances or looks set to enter a period of financial uncertainty, that represents a clear risk to their ability to meet customers’ needs in the long term – putting your operations in jeopardy.
But, there are numerous other risk vectors you should be monitoring too. ESG risk is a growing area that leading procurement teams actively track today. By carefully and continuously monitoring the ESG impact of a third party’s operations, you can detect any issues that could negatively impact your reputation or ability to comply with increasingly stringent regulations.
However widely your organization listens for risk, it’s crucial that your listening efforts are continuous. Risk isn’t static, and snapshots of conditions can’t be relied on long-term. Only by continuously listening to the right risk vectors can you consistently respond to risks in the right way, at the right time.
Conduct Integrated & Dynamic Risk Assessment
Wide listening helps you identify and track all relevant risk signals. But, to have the right impact on your organization and its supply strategy, the signals you monitor need to be brought together and assessed holistically.
By looking at diverse signal and performance data in one place, procurement teams can gain a true understanding of a supplier’s risk profile. That holistic view of risk can then be used to make balanced, informed decisions about how best to engage with a particular supplier.
Once again, it’s crucial that these assessments are dynamic rather than static. They can’t just be run once and relied on for months. As conditions and signals shift, the supplier’s risk profile must evolve with it, so that everyone has a reliable and up-to-date view of supplier risk.
Provide Access to Specialists & On-Demand Intelligence
Once a risk has been identified, organizations need to respond to it in the right way. To do that effectively and consistently, internal teams must be able to access specialist support and actionable intelligence related to their identified risk.
For example, if your team detects that a particular commodity is likely to rise in demand soon, they’ll need access to bespoke, contextualized intelligence that helps them clearly see:
- How that shift in demand is likely to impact your organization and its operations
- How significant its impacts will be on price and availability in both the short and long-term
- Alternative suppliers or regions that could help you mitigate the impacts of rising demand
- Alternative commodities that could be procured instead
With on-demand access to intelligence, procurement teams can ask the right questions at the right time to ensure they respond to risks in the right ways. But, sometimes, they’ll need more than just intelligence to mitigate risk effectively.
Industry partners can provide on-demand access to specialists in multiple disciplines to help procurement teams make complex supplier decisions. Having access to objective, supplier-agnostic expert advice can help procurement teams think outside of their established patterns, and not only mitigate the impacts of detected risks but turn them into opportunities for value creation.
Enable Collaborative & Well-Defined Remediation Actions
Having identified the right actions to take in response to an identified risk, organizations must have a framework in place to ensure that action is taken.
By building an action planner, you can make actions and responses visible right across your organization. With a clear view of what they need to do, and when, every person in your procurement team and beyond can start responding to risks quickly and consistently.
In most cases, risk remediation is a task that must be completed by multiple people working in unison. Your action planner functions as a single source of truth for all required and past remediation actions, so everyone is on the same page, and empowered to collaborate with ease.
