Procurement strategy

Market supplier risk analysis

Published By
Olivier Audino
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Procurement strategy

An analysis of market supplier risks “serves to determine market ills and effective techniques to avoid or correct them,” says Diana Baumert, Director of Strategic Procurement for a major telecommunications firm. “By finding what could go wrong, through the identification of risks, through the identification of risks, we are ahead of Murphy's Law*.” Major business leaders analyze projects in a completely logical and systematic concept, following a sequence of events. This idea is no different from an analysis of market risks. “Once we have identified the risk, we can assign it to a level scale,” explains Diana Baumert. “You can use numbers, from 1 to 10, the ABC letters, or any other ranking system.” Analyzing market supplier risks is an essential step in business risk management. Suppliers play a key role in a company's supply chain, and any issues with these suppliers can have serious consequences for a company's operations, reputation, and financial results.

Analyse des risques fournisseurs

Supplier risk analysis: identification, evaluation and strategic management

The first step in analyzing supplier risks is to identify the potential risks associated with these business partners. It is important to consider all possible types of risks, such as financial, operational, legal, and reputational risks. This can be done using various methods, such as risk analysis and risk mapping. Once risks have been identified, it is essential to assess them in terms of probability and criticality. The probability of a risk refers to the possibility of its occurrence, while criticality refers to the potential impact on the business if the risk is realized. This assessment makes it possible to prioritize risks and determine priorities in terms of supplier risk management. Once risks have been identified and assessed, it is important to put risk management measures in place. This may include preventive measures to prevent risks from happening, control measures to limit the impact of risks if they occur, and response measures to manage risks once they have occurred. It is also crucial to establish a clear and detailed action plan to manage supplier risks effectively.

Here's how to reduce the complexity, effort, and cost of the risk mitigation process through 5 key points:

Map All Levels of Your Supply Base

As the horse meat scandal demonstrated, supply chain visibility, across multiple levels, is now absolutely essential to protect a business.Trusting in the products and services a business offers will increasingly require risk mapping and assessing the supply base; this helps to understand the relationships that exist between different levels of suppliers.Industries need to work collaboratively to identify where their supply chains procurement are interdependent, so they can proactively identify and address potential risks. For example, the automotive industry is developing a global community for mapping and assessing supplier risks.

Know Your Suppliers

As supply chains become more global, with components from multiple countries, one of the biggest challenges for purchasing organizations is to ensure of:Compliance with country-specific laws and regulations around ethicsCorporate social responsibilityFinancial health and securityFinancial health and securitySupplier involvement in their own supply chainSupplier involvement in their own supply chainVerifying and updating information Organisations need to centralize supplier information and set up processes that create consistency between data from all businesses, worldwide.A standardized approach asks suppliers the right questions:The correct depth of data collected is adapted to the risk presented by the vendorInformation is supported by methods that allow the data provided to be verified

Ensuring that the information offered by suppliers is verified

If the aim of businesses is to reduce supplier risks regarding anti-corruption requirements, health and safety, health and safety, insurance coverage, CSR practices, financial stability... These purchasing organizations should ensure that all information received from suppliers is verified and controlled.The information should be carefully checked, certificates reviewed, and financial data verified using a reputable credit service. For high-risk suppliers, a professional site audit is essential. Tools and processes to identify and classify supplier risks should be used to understand and manage risks in a controlled manner. Working in a collaborative community on supplier information brings savings and efficiency in managing this process.

Stay up to date on EU legislation

Buyers should ensure that their procedures and contracts are watertight and in compliance with current legal requirements. Potential disputes with an unscrupulous supplier can take months to resolve and cost hundreds of thousands of Euros in compensation or amicable settlement.

Stratégies de Surveillance

Working collaboratively to reduce complexity

Gathering information across the world on suppliers in a coordinated manner, ensuring the integrity of data and the verification of documents submitted by suppliers, is a complex and expensive process.Buyers must work in collaborative communities adapted to their industry to create visibility on common suppliers and a decrease in costs on managing and verifying supplier data.Through the outsourcing of this task to a central coordinating resource, information Is updated, verified, and aligned with common standards — in order to improve processes, cost sharing, and risk reduction. The final part of the risk analysis strategy is the action plan. “The risk plan includes the measures needed to avoid the risk or to mitigate the impact of the risk if that happens,” explains Diana Baumert.

By knowing the risks, understanding how each of them is likely to occur, and having an effective plan to deal with them, we are all in a position to successfully complete our projects.Using a risk plan can help the procurement department demonstrate its value to the organization. “Most internal customers don't understand why the procurement department must follow all the measures set out by the company to the letter. And for them, it's not important.” she says. Thus, the use of a risk plan becomes an educational tool. It teaches internal customers the repercussions that could have if the supplier panel analysis steps are not followed. It shows them in black and white what can happen — the risk.It shows them that the purchasing department wants to help them do business in a less risky way.So, in summary, identify the risks, assign levels to these risks, determine the measures to avoid or mitigate them, and share the action plan with the stakeholders.

  • Murphy's law is an adage that goes like this: “Anything that can go wrong will go wrong” according to E.A. Murphy.

Strategies for Monitoring and Ongoing Supplier Monitoring

Supplier risk management is not limited to the simple identification and management of risks, but also requires continuous monitoring and monitoring of risks. It is important to assess supplier risks regularly to ensure that they are still under control and that risk management measures are effective. This can be done by using risk management tools such as risk monitoring dashboards or trend analyses. It is also important to involve relevant stakeholders in the process of analysing supplier risks. This may include risk managers, the risk department, project managers, as well as other key stakeholders. A collaborative approach makes it possible to gather different perspectives and expertise in order to better understand supplier risks. In conclusion, the analysis of market supplier risks is essential for effective risk management in a company.

By identifying potential risks, evaluating their probability and criticality, implementing risk management measures and ensuring regular monitoring, companies can better understand and control the risks associated with their suppliers. This ensures business continuity, prevents disruptions, and optimizes business performance.

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