Stripping Supply Management of Supply Risk Responsibilities (Part 1)

In sales, it's often said that you earn the right to do business with a customer. The opposite is all too often the case for procurement – the business and suppliers must deal with you in some capacity whether they want to or not. In recent years, supply risk has risen to the forefront of new procurement responsibilities and concerns. ISM has even created a new risk board (of which I was a part), webinar series and conference focused on supply risk. Yet we wonder if this effort may be futile, as finance organizations slowly strip procurement and supply management teams of supply risk responsibility.

Over on Procurement Leaders blog , Paul Teague recently called attention to two surveys which together suggest why supply risk is declining not for companies, but for procurement. As he observes, "a recent report from Procurement Leaders' Procurement Intelligence Unit (PIU) says that CPOs are not so concerned about risk as they were a year ago. In fact, in its comprehensive CPO Planning Guide for 2013, based on extensive surveys with a range of CPOs, the PIU actually noted a considerable drop in concern for risk. That drop in concern is unfortunate. It seems we need a reality check here."

What is that reality check? It's the fact that CFOs now care more about supply risk than ever before. According to Paul, "CFO magazine recently released the results of a survey by its research group entitled The Finance View of Nonfinance Risks in Technology Companies. Among the top three such risks cited in the report: potential failure of vendors and suppliers. Forty-two-percent of respondents expressed concern with the risks of supplier performance."

Unfortunately, I don't believe there's a disconnect here between finance and procurement. The fact is that many finance organizations are increasingly taking charge of supply risk as part of overall GRC and enterprise risk management efforts. We'll explore why in Part 2 of this post.

- Jason Busch

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