The process of procurement has always been a major part of conducting business and creating new business relationships, because it is concerned with the long-term. This makes it distinct from purchasing, which is a short-term arrangement. The long-term nature of the procurement process means that there is greater complexity in the factors to consider when making procurement decisions. The activation of procurement agreements means entering into a business relationship, governed by legal documentation and contracts, so meticulous due diligence is vital.
As we head into 2021, procurement processes look considerably different than they did just 12 months ago. This is because every new business relationship requires Third Party Risk Management processes, and Risk Management has taken on a whole new complexion since the world was engulfed by the Coronavirus pandemic in the spring of 2020. So, it is vital to consider how your procurement processes in 2021 will look, in order to properly ensure that your Risk Management strategies continue to provide adequate protection for your operation.
What is your procurement process in 2021?
When you engage in procurement in business, you follow specific steps in order to create a new business relationship.
- Identify a need for goods or service from outside your business
- Consider appropriate suppliers, and investigate their risk profile
- Negotiate terms with your chosen supplier
- Finalise the purchase order
Each of these steps is potentially impacted by the Coronavirus crisis. Your need for goods or service might be influenced by the pandemic or indeed, be entirely dictated by it. For example, you may need to upgrade digital infrastructure to better cope with the remote working of staff for the foreseeable future. The risk profiles of third party suppliers are likely to have changed in light of both the pandemic and other global changes, such as Brexit. The terms you will be negotiating with your chosen supplier will now need to reflect the potential circumstances that could arise during the pandemic – including amendments to Force Majeure clauses, for example. This is vital, following the impact of global crises on international supply chains. The purchase order that you finalise is also likely to look quite different from those you have created in the past for similar goods or services.
Part of the process of adapting your Third Party Risk Management strategies to this new, global situation is also the reassessment of your own business risk profile. For larger organisations, this is a particularly complex undertaking because business risk associated with your own operation, from the perspective of potential third parties, is impacted by those companies with whom you already hold contracts. For all parties, this symbiotic relationship can mean the difference between sinking or swimming in a flood of internationally critical situations.
While it is certainly the case that these additional factors can be taken into consideration on a case-by-case basis, bringing into effect a wholescale change in procurement policy in a gradual, phased manner, it is much more effective to take a proactive approach, and implement updated governance and policy that meets the new challenges you face while conducting business in this age of Coronavirus. This means renewing your own risk profiles, re-examining current risk assessments for active contracts, re-shaping overall Third Party Risk Management policy within the business governance documentation, and communicating all changes and amendments to the rest of the organisation.
Navigating risk in 2021
The risk landscape has changed, and your approach to Third Party Risk Management must change in response if you are to continue to thrive in a way that protects your business interests from harm. Third Party Risk Management Software is a clear solution to this problem, because it provides risk mitigation tools with a high degree of automation. The result is a secure, centralised, cloud-based digital platform that enables you to work smarter – making gains in efficiency and Risk Management without increasing the demand on company resources. This makes Third Party Risk Management software the most effective way to navigate risk in 2021.
Outside of administrative maintenance of the system, it is the research element of Third Party Risk Management that consumes the most resources, and this will have been increasingly the case as the Coronavirus pandemic gained momentum around the world. The new global situation will have triggered the re-evaluation of risk assessments concerning the most well-established, long-running business relationships for your organisation. Third Party Risk Management Software, such as Symfact, facilitates the mitigation of risk through connective research tools and configurable reporting features.
- Background checks – The software can connect with every leading external database to enable the compilation of thorough risk profiles of both businesses and individual traders. These databases include LexisNexis, Dun & Bradstreet, Dow Jones, and Thomson Reuters.
- Investigative tools – Comprehensive processes enable you to identify, authenticate, investigate, and monitor businesses and individuals. This facilitates the mitigation of risks posed by criminal activity, non-compliance with regulatory requirements, corruption, sanctions, and false identities, among others.
- Identity Management – This feature allows the close management of records concerning the commercial identities of vendors, suppliers, customers, and employees.
In addition, automated processes provide all the necessary tools for effective incident management – bolstering your ability to prevent fraud, and to detect the signs of fraudulent activity. This protects your business interests in the long-term, while also keeping costs contained.
The centralised, configurable nature of Third Party Risk Management software means that both data analysis and record-keeping are made considerably easier. While only authorised users have access to the platform, every action of those users is logged, tracked, and remains fully auditable. Moreover, the updated standards and regulations of your business are enforceable throughout the system, which increases the accuracy of third party due diligence. This enables senior managers to increase the speed of decision making and, as a result, shorten project timeframes. These elements of Third Party Risk Management are achieved with a digital workflow engine and automated audit trails.
Contact Symfact today to discuss how your Third Party Risk Management needs have changed for 2021, and to arrange your software demonstration.