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Procurement

SIG event tackles risk, scoring tech adoption, measuring procurement

The professional association SIG (Sourcing Industry Group) holds one-day speakers’ gatherings called SIGnature Events, in addition to its larger summits. On Wednesday, SIG hosted online sessions for procurement professionals to network and learn best practices for pivoting procurement in a COVID-19 pandemic world.

It’s no secret that COVID-19 has altered procurement and posed unique challenges. The SIG event brought together hundreds of procurement professionals and share the lessons learned from the coronavirus crisis. The sessions highlighted in this article cover third-party risk management, a Jaggaer exec exploring how we keep score, and Ivalua CMO Alex Saric’s looks at procurement success in the time of COVID-19.

SIG was founded in 1991 to provide thought leadership, networking and training opportunities to executives in sourcing, procurement and outsourcing from Fortune 500 and Global 1,000 companies. The organization — and its conferences and events — bring together practitioners, service providers and advisory firms in a non-commercial environment, SIG says.

Below are some key findings from the SIG workshops and talks.

Third-party risk management — How do we do it in a COVID-19 age? 

The online conference kicked off with a discussion of third-party risk management. It’s a worthy topic at any time, but it’s especially important during the coronavirus disruption and the recovery phase.

The session was led by long-time SIG member Linda Tuck Chapman, CEO of the Third-Party Risk Institute.

Key points that she stressed include:

  • In risk planning, one size doesn’t fit all.
  • Procurement is good at getting to contract, but not so much managing risk post-contract.
  • You’re evaluating the third party in its environment, not yours. Does that vendor have controls to reduce risk? Risk professionals need to be able to explain that to their own stakeholders.
  • One participant in the session said her unit that evaluated third-party risk once reported to IT, then Operations and bounced around to different stakeholders. “I like third-party risk and procurement being together,” Tuck Chapman said.
  • Procurement and risk management need to improve cycle times to resolve cases. If you’re not friendly to the rest of the business, then other departments will go around your process — and that increases risks for everyone. You need to have a system that works so you can drive adoption of your risk practices.
  • The notion of an oversight committee gives you a sounding board. It’s also called a challenge or escalation process, which allows risk specialists to challenge a business decision or a senior directive that may not be compliant. Experts know that you can restructure a contract to mitigate risk, so business decisions should also be challenged if they pose a risk. Tuck Chapman said that an EVP once told her to do something that wasn’t compliant. The challenge process helped get others involved to assess the decision. Also, the practitioner mentioned earlier said the escalation process at her firm helped point out inefficiencies in business decisions and improved outcomes overall.

And in a workshop, the SIG event attendees and Tuck Chapman came up with these “top line” findings about third-party risk topics that have come up during the pandemic:

  1. Financial viability risk: lack of reliable risk insight
  2. Cyber, privacy and physical security risk: third-party employees working from home
  3. Country and location risk: COVID-19 hot spots and NPPI (non-public personal information)
  4. Concentration risk: Sourcing strategies put too many eggs in one basket
  5. Contingency planning: unrealistic plans for exiting critical third parties
  6. Business continuity risk: single points of failure with “less critical” relationships; lack of visibility into fourth-party relationships
  7. Multi-jurisdiction regulations: It’s hard to keep up and harmonize processes
  8. Disjointed practices: Processes need to be truly collaborative and tightly coordinated
  9. Training and staffing: First line of defense is not set up for success
  10. Questionnaire fatigue: It’s harder and harder to get third parties to respond

“Effectively managing third-party relationships and risks has never been more important,” Tuck Chapman told Spend Matters. “Risk, compliance, performance and cost management are the value proposition that procurement professionals can and must deliver — in good times and in bad.”

Keeping score — What’s good or bad?

In a SIG Talk with Brett Hapke, the senior vice president of customer engagement at Jaggaer, listeners explored whether keeping score really impacts value when it comes to a solution or new tool.

More often than not, we think of a solution expectation in terms of a “score,” which is usually set at a pretty high level of numbers or characteristics. If the solution gets a “good score,” then maybe the decision we made is good. But therein lies the question — what is the industry version of “good?”

When it comes to business solutions, we tend to think of a score in terms of monetary value. But what’s missing from that? If we are waiting and watching the scoreboard intently and hoping for a good outcome, that does not commit us to a specific positive outcome. Once you see the score and know the results, it’s already too late to do anything about it.

In the SIG talk, Hapke quoted a CNBC study that states $1.3 trillion was spent on transformation last year, 70% of which was wasted on failed programs. Of those programs that did not fail, only 16% saw an improvement in performance.

That’s where the operational determinants come into play. These are the factors that predict if the outcome will in fact have a high-scoring game. It is the operational determinants that helped the 16% see an improvement in performance — steering and understanding the idea of behavioral change at the ground level, ensuring that the people doing the work are engaged in the outcome. Without a baseline, it’s hard to move the organization forward and be committed to change — and not just a good “score.”

Procurement success — What does it look like in a pandemic world?

One hurdle for many companies — especially in their earlier stages — is evaluating the success of procurement. A SIG talk with Alex Saric, CMO at Ivalua, discussed the importance of measuring success in procurement and how it has changed with COVID-19.

Saric shared the importance of using quantifiable measurements, regardless of what you’re measuring. He said that once an organization has numbers, everyone cares.

In a global survey of procurement organizations big and small, Ivalua found that there was a huge, widening gap between top, laggard and intermediate companies in their effective procurement performance. A lot went back to the company’s measurement capabilities. Companies that were better at measuring success were making more improvements.

“There is a tremendous opportunity to create value, but if you’re not measuring it, not being rewarded based on performance of it, it’s unlikely you’ll drive meaningful change in behavior and actual results of the organization,” Saric said.

Saric did point out that there is a discrepancy in how companies measure. Again, the largest companies were better at managing measurement. His lesson: If you put in the right processes and systems to measure success effectively, it won’t be as a big of a burden for companies.

Digitization can help tackle the challenges of measurement by creating and showcasing a holistic approach, including:

  • Seamless data flows
  • Universal analytics
  • Integrated AI
  • Collaboration or project management

Saric said that COVID-19, while being a crisis, has become a catalyst for elevating the role of procurement in an organization. At the end of the day, it’s OK for companies to start small in their measurement as long as they start smart.

SIG has hosted multiple events discussing procurement in light of the COVID-19 pandemic. Read some of our other coverage. 

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