Risky Business: How Procurement Technologies Help Reduce Risk

In many ways, procurement leaders are still trying to solve the same problems they were facing twenty years ago. Manual processes, key information gaps, and lack of spend control, among other factors, continue to plague the modern enterprise. The lack of innovation in procurement has left many an organisation staggeringly vulnerable – so how do CPOs and CFOs fight this?

While the operational risks have remained the same, one thing has evolved enormously over the past two decades: procurement technology. Today’s procurement technology can help mitigate strategic and operational risks in unprecedented ways. Business leaders would be doing a disservice to their companies by failing to investigate how modern procurement technology can protect their business.

Supplier risk can add up for your business

Procurement technology can reduce risk across the enterprise in several ways, but one of the most important ways it can help is in the supplier relationship and related management areas.  Without a centralised system to track and automatically match purchase requests, purchase orders, invoicing, and supplier information, it’s easy for suppliers to get overpaid or for Accounts Payable to get caught unaware by a stray invoice. Over time and across categories, this type of spend leakage can noticeably eat into profits.

How much do you know about your suppliers?

Another area of risk related to suppliers is the vendors’ own financial health and reputations. Do you know how each of your suppliers is doing? Are there any legal judgments against them? What is their history with regard to fair trade and social responsibility? As a procurement leader, the more you know about your suppliers, the better you can protect the business from unexpected circumstances. Procurement technology today can auto-vet suppliers using public data, saving time lost to repetitive processes on both the supplier and procurement side.

Newer technologies ensure fairness for all

With automated bidding processes and transparent auctions, procurement organisations can better ensure they are paying fair prices for goods or labour. Far too often, business stakeholders approach procurement with a supplier already in mind for their project. By taking the project to the bidding table and allowing suppliers to fairly compete for the project, procurement can easily reevaluate incumbent suppliers, identify possible instances of corruption, and ensure fair play for all involved.

Supplier contracts are a notorious risky area

Finally, contract management is an inherently risk area that must be dealt with judiciously. Auto-renewals and surprise service cancellations can be equally damaging to the business, and it’s procurement’s job to get ahead of these and protect the company. This area is much too complicated to manage manually. With the right tools, you can set up automatic 30-, 60-, or 90- day alerts that will advise procurement of upcoming expirations or auto-renewals.

Procurement technology must be aligned with your business

With all this risk to manage, it may be tempting to run out and buy the first procurement system you can get your hands on. To better serve your business, take a step back and identify the most important risk areas, and let that prioritisation help guide your search. When evaluating a procurement system, keep your current technology stack and digital strategy, organisational culture, and future strategic procurement needs in mind. Technology that is not aligned with the three outlined factors may leave the business even more vulnerable, but the right technology can immediately mitigate and manage the risks of doing business for the long term.