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procurement risk management

Effective procurement risk management is critical for businesses to ensure that they are not exposed to unnecessary risks that can negatively impact their bottom line. Procurement risks can arise from various sources, such as supplier non-performance, quality issues, and price volatility. To mitigate these risks, companies must conduct a comprehensive procurement risk assessment and implement strategies to minimize potential threats.

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procurement risk management

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  1. Your Company Name Procurement Risk Management

  2. Conclusion & Recommendations Content Basic Approach to Risk Management Mitigating the Supplier Risk and protecting Supply Chain Integrated View of Risk Challenges to establishing a Risk Management Program Supplier Risk Events Risk Management Process Benefits of opting for Risk Management Services Procurement Risk Management Program Steps

  3. Basic Approach to Risk Management Identify Critical Risk Risk Mitigation Identify areas of Risk Strategic Compliance Financial Operational Risk avoidance Risk reduction Risk sharing Disruption in upstream suppliers Commodity risks Currency risks Corrupt practices Force majeure Bankruptcy Legal issues Environmental issues Labour issues Geo-political risks Risk management should be a continuous & evolving process that addresses all the risks associated with the organization’s past, present & future activities. Some global companies have developed in-house risk management departments establishing specific objectives pertaining to their organization & have aligned the risk management initiative to meet the organization’s business goals. This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  4. Integrated View of Risk As an integrated view of risk takes root in more businesses, executives are thinking more broadly about the risks their company faces. Many of the most significant ones are driven by relationships with other entities, such as service providers, alliances and joint ventures Internal Ecosystem Regulatory Compliance FCPA, anti – bribery Product lines Text here Business units Geographies Text here Supplier risk events Other third parties Contract (hourly) Outsourcing providers External market events Joint ventures Alliances An Integrated View of Risk Suppliers & sub-suppliers Internal organizational events Technology – related events Extended Ecosystem This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  5. Supplier Risk Events Supplier inability to obtain trade finance Rapid degradation of supplier performance Supplier inability to support new product/service introductions Unacceptable Supplier Practices Failure of an outsourcing strategy • Cost • Service • Response time • Violations of immigration law • Sweatshop conditions • Unsustainable environmental waste • Tax evasion • Unmet expectations on costs • Customer satisfaction • Productivity • Quality This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  6. Benefits of opting for Risk Management Services Greater lead time in the event of a risk materializing • Central platform for all the information • Minimize downtime & increase preparedness in the event of a disaster • Monitor the effectiveness of the program • Understand future risk Reduced Cost • Eliminates training cost – by managing risk with ready – trained skills & proficient personnel • Readily available information – risk management firms have access to experts who are spread across the numerous industries & who provide their expertise real-time • Risk management tools – developing in house or acquiring external tools for monitoring risk effectively This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  7. Procurement Risk Management Program Steps Gathering the data needed to manage the process (e.g., supplier spend levels, performance data, price & cost trends, demand forecasts, upcoming contractual milestones). Assigning a monetary value to the potential impact of each risk event (e.g., margin at risk, cost of lost productivity, cost of schedule changes. Step 4 Step 6 Step 7 Step 5 Step 9 Step 3 Step 2 Step 1 Step 8 Creating mitigation plants for the types of events that might leave the company exposed. Identifying potential risk events by supply category. Measuring overall risk exposure level, taking into account the maturity of the market, complexity of the solution, etc. Refining the plan through consideration of the impact of knows events Prioritizing risk mitigation efforts by segmenting supply categories by complexity & importunate. Monitoring the supply base for problem & opportunities. Establishing the overall goals of the program This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  8. Identification Critical Categories & Suppliers Risk Evaluation Business Continuity Plans Continuous Monitoring Risk Management Process This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  9. Overview of the Process Identification of critical categories & suppliers Risk evaluation Business continuity plans Continuous monitoring • Supply chain mapping & risk analysis • Supplier risk analysis • Disruption monitoring • Alternate sourcing locations • Alternate supplier identification • Real time or periodic monitoring of suppliers, category & other supply chain entities • Financial impact • Supply dependencies • Source of competitive advantage IDENTIFY MONITOR Beroe Risk Management MITIGATE EVALUATE This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  10. Identification Critical Categories & Suppliers High Supplier criticality criteria Highly critical categories Medium critical categories High profitability impact unique product specs critical technology limited supply base difficult to substitute Commodity high profitability impact substitutes available many equivalent suppliers Profitability Impact Highly Critical suppliers Medium critical suppliers Low critical categories Medium critical categories Commodity substitutes available many equivalent suppliers limited profitability impact Unique product specs limited supply base difficult to substitute limited profitability impact Low critical suppliers Low Supply Complexity Total Supply Base Low High This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  11. Risk Evaluation Risk Evaluation Key Outputs This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  12. Business Continuity Plans Following the risk evolution phase, business continuity plans can be created based on the risk profile of supplier for mitigating risks. The business continuity plans cover alternate sourcing locations & suppliers based on the requirement of the business. Some of the criteria used fir shortlisting alternate suppliers or sourcing locations are listed below Alternate supplier identification Alternate sourcing location • Regional production volumes • Net exports volumes • Business environment • Macro-economic scenario • Your text here • Your text here • Availability of grade/service level • Available capacities • Comparative risk • Your text here • Your text here This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  13. Continuous Monitoring Monitoring Critical supply market developments Supply chain entities Critical suppliers Critical low-tier suppliers Critical logistic hubs Critical sourcing locations It involves real-time or periodic tracking of the critical supply chain entities for developments. This in addition to improving the visibility also enable the companies to reduce the ‘Time to Respond’ & ‘Time to Recover’ in case of any supply disruption. It would also help in building intelligence on supply markets This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  14. Challenges to establishing a Risk Management Program Procurement is held responsible for supply risk but lacks a mandate or resources to address the issues Procurement mostly reacts to risk to ensure regulatory compliance rather than get ahead of the problem Procurement struggles to fund the supply risk “insurance policy” versus other “hard-dollar ROI”projects Supply risk is too big a responsibility with too many stakeholders & risk factors to manage well Procurement has not had major issues yet, & until there is a significant event, will not invest seriously Procurement does not have an explicit supplier risk measure as part of supplier scorecard • This graph/chart is linked to excel, and changes automatically based on data. Just left click on it and select “Edit Data”.

  15. Mitigating the Supplier Risk and Projecting Supply Chain Enrich internal data with third-party information to increase visibility and create actionable intelligence Certify Monitor Analyze Mitigate Integrate risk mitigation and dependency into the sourcing process Develop disaster recovery plans in the event of supplier failure Identify the suppliers that have the most impact on your business Choosing a supplier has inherent risk. A strong sourcing process mitigates that risk, and incorporating risk into your current metrics can help ensure that suppliers coming into your organization can meet business requirements and will be able to successfully deliver their product or service Not all suppliers are of equal value in your supply chain. Stratify them into categories that make sense for your business One cannot predict supplier failure with 100 percent certainty. But one can protect your business by planning for it. Proactively prepare for these potentially damaging supplier disruptions by having alternative source strategies in place. Develop supplier contingency plans by documenting competitive suppliers and continually researching for new suppliers Technology in today's marketplace combines the data automatically to reduce the amount of time and resources required to manually analyze and create reports This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

  16. Conclusion & Recommendations Identify potential risk mitigation and contingency steps required Measure and monitor the changes and benefits from the new process Use supply intelligence and scenario planning Identify and leverage the burning platform These tools identify the universe of potential supply-risk events (including both frequency and severity. Formally document the findings and, more important, ensure that key stakeholders understand and accept the findings This helps obtain support from the business for the new or revised process, whether it’s safety, security or some type of business-continuity platform This will help avoid or at least minimize the frequency and severity of the risks. Know the risk position and associated costs by developing options with associated timelines, resourcing & costs Make sure to document successes and use them to continue the momentum. Again, make sure that the measurement systems are updated in order to keep risk management top-of mind This slide is 100% editable. Adapt it to your needs and capture your audience's attention.

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