Buyers turn to compliance tools in fight against risk

14 February 2018

Brand protection is becoming an increasingly important part of procurement’s role, buyers have been told.

A mixture of tighter regulations, including modern slavery regulations in the UK and US, and growing customer demand for ethical products are driving a greater need for brand protection, said Brian Alster, global head of supply and compliance at Dun & Bradstreet.

Alster said procurement departments were meeting these new demands by embracing tools usually used by compliance departments to delve “deeper in the rabbit hole” when conducting due diligence.

Speaking to SM, Alster said historically procurement leaders’ number one goal was reducing expenses. “What we’ve seen more and more is that they’re being asked to protect the brand as well.”

Unethical trading makes it onto the front pages of newspapers and consumers are increasingly voting with their feet or taking to social media if they feel injustices are happening, he said. “That has become a reason why companies want to protect their brand and it’s why procurement officers are now being asked to ensure that the supply chain is free of any kind of nefarious actions that could tarnish the brand – even if it’s not directly linked to them.”

Procurement professionals are in a better position than they’ve ever been to protect their brands, but the risk is also higher than it’s ever been as firms diversify their supply chains. Alster said: “In this global, multinational world economy that we’re working within you’re starting to see that there is five, six, seven, eight layers of supply chain that could potentially negatively impact you. 

“I believe that companies are starting to turn to newer tools to ensure that they’re going deeper in the rabbit hole to understand where potential risk can rear it’s ugly head.” 

Among these tools are automated systems and systems driven by third party data usually used by compliance departments. Procurement is using these to vet suppliers against at sanctions lists, lists of politically exposed people, media reports, and litigation proceedings. “I think if you were to ask a chief compliance officer they’d say, ‘Well we’ve been using a lot of these tools for years.’ If you were to ask a chief procurement officer, I think they’ve been using these tools relatively recently.”

But there is still a gap between high performers and firms that need to improve their due diligence, said Alster. Some companies, for example, are still reliant on suppliers self-verifying their diligence data. Firms need executive support for strong due diligence processes, and they need to invest.

“You have to first make sure you have the culture permeated from the top down of an organisation. And make sure you have the money. These programmes are expensive because it requires you to put a level of due diligence in that most companies don’t have today.

“It’s not expensive to the point where it doesn’t have a strong return on investment, it just requires a front-end investment where companies have to be able to invest the time, energy and people in putting the processes in place,” he said. 

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