Methods for Managing Procurement Risks
There is always some level of risk when it comes to contract management in procurement. Learning how to best analyze and monitor these risks before they become a threat to your contract, or worse yet, your relationship with a good supplier, is imperative.
There are many risks in all stages of the supply chain, of which procurement is only a portion. Identifying these risks before they become a problem can help you seamlessly work your way through the procurement process more safely.
Read on to learn more about contract management, and methods for managing procurement risks that can help you along the way.
What Is Contract Management in Procurement?
Simply put, contract management is being in charge of contracts of vendors or for other parties. In procurement or purchasing, it refers to the management of contracts between the suppliers and you (the procurement or purchasing manager).
Managing contracts in procurement isn’t always easy, but using procurement management software can make the process a little easier.
Contract management software, or procurement management software, can help you walk through the tougher portions of contract management so you don’t have to try to figure out these pieces yourself. For example, if you’re trying to collect bids, you can use eAuction software.
If you’re negotiating contracts, procurement software can help you here as well. If you’re trying to analyze who may be the best supplier for your needs, eSourcing software, and optimization tools that can help you effectively compare between suppliers become a great asset.
However, you can also use software as one of your methods for managing procurement risks. The right software can help walk you through these steps as well.
Methods for Managing Procurement Risks: Evaluating Risk
Whether you’re looking for the best procurement software as one of your methods for managing procurement risks, or you’re still participating in face-to-face meetings, there are ways to minimize and evaluate risk as you move through the procurement process.
A good rule of thumb is always to have things put in writing. You’d be surprised how often things are talked about in the pre-negotiation stage and then left out during the contractual stage. Make sure everything carries over from the sourcing phase to the contract. Having a software solution transfer the right information and data automatically can facilitate this process.
Don’t be afraid to assign risk to each other. Always be upfront and talk about risk factors openly with your supplier partners. Both you and your designated supplier can sit down and talk about risk factors and methods to make improvements. They will also be interested in reducing any inherent risks in their own organization.
This is a common method for managing procurement risks. Also, have contract auditing as part of your business process. This holds suppliers—and you—accountable for your contracts.
Methods for Managing Procurement Risks: Ethics
When you think about methods for managing procurement risks, it’s important to consider ethical issues in procurement management. When assessing and evaluating risk, and especially when avoiding it, keeping ethics in mind should be second nature.
Some of the ethics businesses and suppliers need to keep in mind when it comes to procurement are:
- respect for rules and regulations (including contractual obligations)
- due diligence
- avoidance of impropriety, transparency
Ensuring that you always act ethically when you are employing methods for managing procurement risks ensures that you will keep the respect of your colleagues and suppliers.
To learn more about methods for managing procurement risks, or to learn more about eSourcing or eAuctions with a demo, contact us by calling EC Sourcing Group today at 1-888-353-9737, option 1.