Procurement Risk

Mitigating risks as part of a procurement process is an important part of successful procurement. Risks can be categorised into three groups:
1. Operational: This might be at the initial request stage or an ongoing supply stage. An inadequate needs or requirements assessment increases the risk of failure, or at least reduces potential effectiveness of outcome. There is a supply chain risk in both the initial evaluation and then the subsequent management of an ongoing supply process. Failing to live up to expectations for efficiency and effectiveness in managing the procurement process can result in missed targets and under performance which can impact on finances. Ensuring contract terms and conditions are fit for purpose is an essential early-stage activity. Inadequate management of an inventory, along with supply chain disruptions, data breaches, and generally inadequate controls over procurement activities introduce significant risk issues into the operational management of procurement.
2. Reputational: If deadlines are missed, with poor quality products and outcomes, failing to live up to customer expectations, or poor supplier performance are evidenced then this will reflect poorly on your own performance and this will influence the perception of the effectiveness of the procurement process and the reputation of individuals and organisations involved. Suppliers who do not meet delivery times can impact negatively on the reputation of the organisation. Failure to comply with contractual obligations and regulations can also severely affect reputation. Bribery, corruption and fraudulent activities will all compromise the integrity of an organisation, so ensuring transparency in procurement and adequate oversight checks are carried out is an essential element in reducing the likelihood of these occurring.
3. Technical: Failing to achieve the desired standard of outcome, with non-compliance and quality being compromised. The technical capabilities may be significantly reduced when assessed in a practical, working environment when compared to a laboratory, more clinical environment; this can have a detrimental impact on both operational and reputational issues. Products or services that are of a poor quality can lead to operational disruptions, product defects, customer dissatisfaction, warranty claims, and potential liabilities for organisations.

To mitigate the many risks associated with procurement, organisations need to ensure that robust procurement policies and procedures are implemented, monitored and audited on a regular basis. In addition, ensuring due diligence is carried out, making impartial objective decisions in procurement and ensuring clarity of contractual agreements, can all contribute to reducing threats and vulnerabilities in the procurement process.