Rio Tinto’s CFO Chris Lynch Speaks Out on Procurement – 2 Reasons Companies Spend Money

Field Nation

It’s rare that married couples play off of each other in business. I can’t think of a better example than Tania Seary, the mastermind behind Procurious who has built numerous successful procurement recruiting, training and consulting businesses in Australia, and her husband Chris Lynch, who is CFO of Rio Tinto.

Chris generously offered his time to speak at the recent Procurious event in London and gave a truly fabulous talk offering tips for procurement leaders to work more effectively in the business when it comes to pitching and delivering big ideas (the subject of the summit itself). Coming from a seasoned CFO, this talk was priceless. A big thanks to both Tania and Chris for making this happen!

In a series of posts, I’ll share some of the highlights from Chris’ chat, starting first with his observations on why we spend money in companies, especially from a procurement angle.

Here, Chris observes that there are really only 2 key reasons for spending:

  1. Organizations spend money because they have to (i.e., spend is compulsory). Outside of COGs spending (e.g., raw materials, capital equipment, etc.), compliance is a great example here (e.g., regulatory, safety, labor or other compliance requirements). The key with compulsory spend is to “do it in the best way possible” to minimize costs, Chris suggests.
  2. We spend because we “invest in improvement,” or in other words, drive “benefits return” through an outlay of cash. This is the opposite side of the coin compared with compliance, because in making any sort of investment, we must show a hard dollar (or other benefit) return rather than simply doing something because we have to.

Yet any of the “big ideas” we have that fall into the latter bucket, happen “in spite of corporation structure,” Chris said. Many are crushed because of “politics and risk management,” among other reasons.

Given this concept of killing off ideas before they can become reality in companies, what advice does the CFO of one of the world’s largest mining companies have for procurement? Stay tuned as we explore Chris’ thoughts for turning ideas into reality despite the corporate mentality to kill them off.

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