A few weeks ago we held a webinar titled RISK, The Four Letter Word Your Mother Never Told You About. The webinar focused on the real-world lessons learned in risk management including the strategies implemented by procurement organizations for strengthening supplier engagement in order to effectively assess, monitor, manage and mitigate risk to the business. The webinar highlighted:
- why supplier “value” management is critical for risk management
- what actions are crucial for identifying and mitigating emerging risks
- what key processes are required for proactively analyzing potential risks
- how integrated, strategic procurement technologies support and manage risks
The focus was on people, process and technology improvements to reduce exposure and minimize supplier-related risks. At the end of the webinar we answered quite a few questions; however a few we did not have a chance to answer. Here are the remaining few questions and answers from the webinar:
- What’s the best way to initially engage suppliers in a risk management program?
The best way to engage a supplier in a risk management program is to have a discussion regarding your program. If you have a risk management program, simply meet with the suppliers for information exchange and discussion from a general standpoint. It could be a supplier day, a webinar, a letter from the CEO and procurement, or a combination of these events. You want to outline why you need the risk management program, what the program entails and how it will work. The latter section will be the most important to the supplier as it will detail what your expectations are of the supply base and set the ground rules of how you will function together to mitigate and manage risk.
Segmenting your supply base will help you focus your supplier risk management program from the most basic needs (for every supplier that your technology and third party services can help you manage) to the more detailed business processes and review processes needed for the most strategic relationships.
- What is the frequency of supplier evaluation? Annually, or more/less often?
Supplier evaluation frequency typically varies based on your supplier segmentation exercise and the most at-risk suppliers (based on your risk level and tolerance for your organization). Some of the best practices include evaluations for initial onboarding to the supply base to those that are done yearly to each quarter or three to five times a year. The evaluation needs are based upon the risk areas that are not meeting expectations or where more information is needed to reduce your risk.
- How do you manage a supplier your customer has directed you buy from?
The best practice is the same as you handle your other suppliers in your risk management practice. The important point is to make sure you have details in your contract calling out notifications of risk issues from an escalation and governance standpoint. You will also need to make sure you understand the criteria for risk issues your clients consider important and tie that into your risk management process. It is extremely important for you to pass along the requirements from your client to their supplier, manage to these requirements and keep the client in the loop.
- What software do you suggest for supplier risk management?
Supplier risk management requires a supplier centric view of your supply base. Supplier relationship management software, such as BravoAdvantage Supplier Value Management is a terrific way to gain a comprehensive view of your organization’s suppliers across the entire procurement process.
In addition, best practice supplier risk management processes also tie services such as financial risk, news, weather and other services into the dashboard so the risk monitoring occurs at all times.
