Where Trading and Risk Management Meet Procurement

I had a chat earlier in the week that was all too short with Ted Behrens and Jarvis Cheung of Synaptic Decisions, a new type of Spend Management advisory firm that crosses disciplines and brings incredibly creative, finance-driven approaches to saving money and reducing risk in the Spend Management arena. The principals of the firm come from trading, consulting and risk management backgrounds. They use options pricing techniques, among other approaches, to understand pricing inefficiencies in the supply chain. As an amateur who was seduced by options trading in his youth, my light bulbs went off when they started to talk about their approach to contracting and risk management in complex supply market environments using financial modeling to uncover volatility, risk and pricing discrepancies. Their hypothesis that suppliers often do not price features or terms of a contract correctly -- after all, how many sales reps have studied Black Scholes options pricing theory -- creates opportunities for savings and risk reduction on the buy side. Fascinating stuff. I hope to continue my dialogue with Synaptic Decisions and share more about their total cost management and risk reduction techniques with the Spend Matters community.

Jason Busch

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