For businesses in highly-regulated industries, compliance, transparency and risk management are mission critical. Especially now.
The list of industries that are becoming more regulated are growing by the year. On top of the more traditional industries like healthcare, banking, and manufacturing, we are seeing e-commerce and data processing companies have to tighten up how they do business. As our report with Supply Management Insider illustrates, all of these point to a need for greater visibility and control into your company’s procurement operations. Something that’s especially true — and potentially more difficult — during periods of severe business disruption.
I wrote in my last blog how IACCM recommended establishing strategies for putting the right people and processes in place for risk management. Now I want to touch on the technology that is necessary to making that strategy a reality.
CPO’s have two choices when it comes to mitigating risk:
- Even when the entire concept of “business as usual” has gone out the window, there are still those for whom “hope for the best” is the default choice. Too often they are unaware of vendors who aren’t compliant — either with certifications and/or contract obligations, overcharging for their services compared to competitors, or even facing solvency issues.
- The second choice is to take full control of risk management processes by including risk as a key element of every procurement strategy, and implementing P2P solution technology that integrates data from across the organization.
There are some “low hanging fruit” areas that CPO’s and their procurement teams can focus on. For instance, a 2017 Paystream Advisors report said that 49% of companies are not aligned when it comes to procurement and accounts payable. Getting functional alignment also includes legal/contracts, supplier management, IT, finance…you get the picture. Errors — and risk — creep in where process gaps exist. That’s where data integration and transparency is critical.
Having a contract management system that tracks the entire lifecycle will keep all the members of your business – suppliers, businesses, end-users, and stakeholders – compliant. This is accomplished by having complete visibility and control into the contracting process. During this unprecedented business disruption from Covid-19, just about every company is having to do a full contract audit to identify the biggest areas of compliance risk. Force majeur clauses are being invoked like never before, but if you don’t know which contracts FM is in or what it applies to, the result could be significant negative impact.
Pairing that with a supplier management system is just as important. You are able to score vendors more precisely, and report on performance more accurately. You will also be able to collaborate more closely and in an innovative way with your suppliers. This is also ground zero territory for business disruption right now; with global economies at a virtual standstill, supply chains are severely interrupted so suppliers may not be able to meet obligations, at least for awhile. In the worst cases, CPOs and procurement teams are scrambling to find replacement sources for critical items — an exponentially more difficult task if your supplier management capabilities are not managed through a robust software solution.
As the Supply Management Insider report demonstrates, ultimately, being compliant and managing risk are about the bottom line. The need to spend for a technology tool upfront will develop trust between the executives and procurement teams — and beyond, and will build trust between the executives and external stakeholders.
In the world’s most highly regulated industries, the ability to measure, manage and mitigate risk intelligently will increasingly become a powerful source of not only competitive advantage, but business continuity and the resilience to weather business disruption.
If you’d like to see how our technology can help solve some of your most pressing business and risk management issues right now, schedule a personalized, no-obligation demonstration.