Daily Archives: January 10, 2019

The Risk Disconnect is Still Big But …

As pointed out in a post a year ago on how there are at least 12 risk disconnects … but one you should never overlook! we talked about how the disconnect between risk and cost is one of the most critical in our view because:

  1. not only can one identifiable supply chain disruption wipe out all of the savings of a single sourcing event, but also increase costs well beyond that point

  2. only an understanding of the true cost of risk will convince most stakeholders and executives to look beyond cost, reliability, marketing differentiation, or whatever else matters most to them — money talks and (imminent) (potential) loss is the one thing that gets noticed

But that’s pretty hard as most sourcing and procurement solutions not only have no concept of risk, but neither do most platforms. And many of those that do are pretty basic — you can import third party risk scores, define risks to track, and query them occasionally. And that’s about it — and that is clearly not enough given that an organization’s chance of experiencing a significant disruption is now about 90%.

But that might change soon. Not that long ago (in late 2017 to be precise), Spend Matters released the Solution Maps for Strategic Procurement Technologies (Sourcing, Contract Management, Analytics, and Supplier Management) were released — with the Sourcing, Analytics, and Supplier Management maps designed (in entirety) by the doctor and the Contract Management map co-designed by the doctor and the maverick.

Each of these maps had a few elements of risk, but not many. And they were application-based, not platform based. But with the newly revised Solution Maps coming out in June, Risk Management will now be a key component of the common sourcing – supplier management component of the strategic procurement technology maps that measures the assessment, mitigation planning, [risk] model definition, monitoring & risk identification, regulatory compliance monitoring, and supplier risk management capabilities of the platform. Going forward, both Spend Matters and Sourcing Innovation will be putting a greater focus on risk management capabilities to help your organization cope with the turbulent times ahead.