By Bill Huber, Director, CPO Services, TPI
The 2009 International Association for Contract and Commercial Management (IACCM) (http://www.iaccm.com/americas/) Americas conference opened yesterday in Orlando. The conference theme focuses on the tools, techniques and organizational models that result in the responsible management of risk and ensure high-performing business functions.
In the words of IACCM President Tim Cummins, “Today's market conditions have increased the pressure for responsible risk management. In such an environment, it is tempting to respond with increased review and greater emphasis on compliance. Yet this presumes that risks are themselves well understood and that market needs and opportunities will adjust to fit an accepted risk profile.”
During the opening panel, Conoco-Philips Chief Procurement Officer (CPO) Mark McDaniel focused on the fact that risks are analyzed by various constituents: finance and procurement, suppliers and service providers, partners, government entities and others. However, as Mark pointed out, “The trick is getting alignment of risk profiles and risk strategies between these constituents.”
An effective risk strategy cannot be built around risk transfer, as such an approach merely shifts the weak link within the chain, and does nothing to mitigate the overall supply and services chain risk. As a better approach, examples were provided of frameworks to integrate multiple risk scenarios into the negotiation process to encourage a joint mitigation approach as standard part of negotiation strategy
Pervasive challenges also remain in adoption of models that link risks on the enterprise level with those at the contract portfolio level and those within individual relationships and specific contracts.
In the case of Conoco-Philips, they have taken the approach of conducting regular meetings between the procurement organization and finance, internal economists, and legal to facilitate the formation of this common view. McDaniel also pointed out that he will ask supplier sales representatives whether they know the names of the CPOs within their companies and uses this approach to gauge whether his suppliers have implemented integrated risk strategies within their own organizations.
Those organizations that are effectively managing supply risk have implemented a formalized governance structure to institutionalize an integrated view of risk and enable efficient communication, analysis and decision making at the right organizational level. TPI’s presentation; “Global Procurement Design – An Agile Engine During Recession” provided an example of the type of framework that companies can implement to provide an integrated view of risk by leveraging both functional competencies and leadership processes. While technology is clearly helpful, implementing the appropriate communications and decisioning processes can be highly effective in the absence of any special technology. This also appears to be the consensus of many of the presenters at IACCM.