Monitoring and managing risk is a critical part of the modern procurement professional's role, the CIPS Conference heard
Ted Datta, strategic account director at Bureau van Dijk, used a graph illustrating VW’s recent share price drop and Warren Buffet's quote that ‘It takes 20 years to build a reputation and five minutes to ruin it’ to emphasise how crucial reputational risk has become to companies.
Addressing a break-out session on ‘Enhanced supplier due diligence: the implications for supplier risk management’ at the CIPS Annual Conference, he said companies must acknowledge and accept the increased regulatory pressures tied to ‘knowing your suppliers’.
He highlighted David Cameron’s clampdown on corruption and wish to increase transparency in the ownership of foreign companies investing in the UK. Datta said the UK’s Modern Slavery Act also served to underline the heightened risk facing companies. “The money coming into London, where does it all come from?” he said, pointing out that the EU had also this year issued its fourth anti-money laundering directive.
He added accessing global data was hugely important as European and UK firms increasingly relied on emerging market suppliers. “Look at the BRIC (Brazil, Russia, India and China) countries. India and China are increasingly important, yet we didn’t have much data on India until 2013,” he said.
However, Datta said the good news was that the availability of global data was improving in key markets. Time was increasingly of the essence, citing a client company that needed to renew its banking licence every four years. “The last time it approached its bank it was told sanctions screening was needed on all of its suppliers”. The company had to first work out what sanctions could be involved as they can be placed on countries, individuals and companies.
“They were given a short space of time to work in and so came to us”, he said.
Datta said de-risking a company’s global supply chain would include aligning and normalising data systems, assessing risk on an ongoing basis and adding other data to a company’s internal system including taking into account supplier issues including the value of the contract, whether it was sole or dual sourced, the lifespan of the deal and the consequence of the contract failing.
“Get set for a collaborative approach among all stakeholders,” he said.