Supplier risk management in the spotlight

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Although organizations have adopted key risk management practices, they need a more robust program.


Supplier risk management

Supplier risk management- As the world continues to adjust to the “new normal” brought about by global disruption, organizations must consider the lessons learned from the impact of the pandemic on the supply chain. In this case, widespread shutdowns made a sudden, dramatic impact on many suppliers and the availability of components and other materials. Sourcing, procurement and purchasing professionals are often the first responders in such instances. However, the risk management practices in place at an organization determine whether procurement and purchasing staff have the tools needed to adequately and efficiently mitigate supplier risk.

APQC has gathered insights on supplier risk management as part of its Open Standards Benchmarking research focused on procurement. As part of a global survey, APQC asks respondents from various industries to indicate their adoption of key supplier risk management practices. The findings of this research indicate strength in the area of risk management governance, but weakness related to process and enabling technology.

Clear governance

The good news is that in one area, organizations have clearly developed practices for supplier risk management. In 89% of organizations, procurement is responsible for executing operations related to third-party risk management to a moderate or very great extent. Having clear owners of risk management means that this group has the full scope of information gathered by the organization, rather than sharing responsibility with other groups. Another benefit is that, because they are focused on addressing supplier risk, procurement professionals can negotiate risk management terms into vendor and supplier contracts.

As shown in Figure 1, APQC’s research also finds that 64% of organizations have a highly developed risk governance team for procurement processes. For this group, their team, metrics and progress reporting are not only effective, but are also continuously reviewed for improvement.

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Article Credit: SCMR