Supply Chain Risk Near All-Time High

Is Your Contract Management System Helping You to Get Ready?

According to the Chartered Institute of Procurement & Supply’s Risk Index, supply chain risk is near an all-time high. The index continued its worsening trend in Q4 according to the report’s analysts. Forces of deglobalisation are threatening supply chains in advanced countries, as exemplified by the Brexit vote in the UK.

As an example of the impact deglobalisation is having on supply chains, the report cites how the potential renegotiation of the North American Free Trade Agreement (NAFTA) has led to pressure on the Mexican peso. The subsequent impact on inflation and cross-border payments have increased risks for firms with local currency earnings.

Complexity in assessing risk is also expected to rise in the coming year. As Bodhi Ganguli, Lead Economist, Country Insight Services, Dun & Bradstreet, says in the report, “As major economies make a pivot from multilateralism towards bilateralism, supply chains of global businesses will be affected most, as they will need to be cognizant of risks on a case-by-case basis rather than for one big trading bloc.”

That’s sobering news for anyone tasked with managing a global supply chain. Procurement managers need to have clear visibility into these risks to effectively protect their companies.

Per the report, supply chain managers need to have a standardized process to identify potential liabilities and manage supply chain risk. As contracts are the foundation for the commercial relationships with suppliers, the tools used to manage those contracts play a critical role in that process.

7 Key Things to Expect From Your Contracting System to Manage Risk

Procurement leaders should start by assessing how their current contract management system measures up. Does your contract management system:

  1. Allow you to quickly identify clauses affected by changing trade agreements?
  2. Categorize components of your contracts for different types of potential risks?
  3. Proactively and regularly streamline supplier checks through integration with external verification systems such as Dun & Bradstreet and Thomson Reuters?
  4. Provide you a simple, dashboard view and notifications of cycle times, deliverables, SLAs, expiries and renewal dates?
  5. Exchange data with other purchasing, account and inventory systems that help manage the supply chain?
  6. Allow you to easily modify contract workflows and language to accommodate suppliers in different regions?
  7. Enable you to scale contracting without hiring more procurement staff?

While some macro trends are beyond the control of the procurement department, having an easy-to-use, intelligent, enterprise-wide contract management platform can go a long way to navigating an increasingly risky environment.

 

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