One of the most important responsibilities an organization’s finance leader has is to mitigate procurement risks. Without conducting regular risk assessments, a finance leader may not realize that procurement is an area bristling with potential risks.
Can they trust that others in their organization are looking after those risks, or is this a blind spot?
In this blog post, we’ll take a look at the most common procurement risks in the public sector and why finance leaders need to keep risk management, when it comes to procurement, on their radar. Finally, we’ll show that managing risks in procurement isn’t all doom and gloom by outlining some steps public sector finance leaders can take to assess and minimize procurement risks.
Eight Risks Intrinsic to Public Sector Procurement Processes
The risks inherent in public sector procurement are wide-ranging. Whether it be human error from manual data entry or poor supplier relationships, agencies must address potential risks to ensure business operations are safe and efficient. Here are a few of the most common procurement risks we’ve seen in recent years:
Procurement requests are frequently delayed or forgotten entirely.
When there’s no formal system to receive and track procurement requests, it’s easy for requests to sit unaddressed by the procurement team for a long time–wasting time right from the outset that can’t be recovered.
The right suppliers don’t see your solicitations.
You can’t get the best services, goods, and value for your stakeholders if your solicitations don’t land in the right hands. Procurement strategies that involve supplier databases are much more likely to succeed than those using manual procurement processes to find suppliers.
Unqualified suppliers are allowed to bid.
If there isn’t a system in place to screen bidders for necessary qualifications and certifications, you’ll likely receive bids from unqualified suppliers. That means you waste time sorting through bids that can’t be considered or, worse, you get all the way through the evaluation stage before realizing not all bidders meet the qualifications.
Evaluations are unintentionally corrupted.
For someone trying to mitigate procurement risk, evaluations are one of the most challenging areas to focus on because evaluations are often qualitative and subjective. An evaluator’s failure to understand the evaluation criteria, a hasty reading of the bid details, or unconscious cognitive bias can all lead to suspect evaluations that can’t withstand scrutiny.
Approvals create bottlenecks that disrupt procurement process timelines.
Procurement is often the last thing on approvers’ minds, so without a system to keep approvals moving, they languish. At best, time is needlessly wasted; at worst, critical services and supplies aren’t procured as promptly as they’re needed.
Poor record-keeping exposes the agency to regulatory and PR risks.
To avoid an uncomfortable spotlight, public agencies must operate in a way that’s fully compliant with standards and regulations and be ready to respond to questions and disputes with credible records and facts. Many procurement professionals are turning to automation and technology to help them stay audit-ready.
Important knowledge doesn’t become institutionalized.
In many organizations, people know how to do their jobs well, but nothing’s written down or systematized. This leaves an agency vulnerable to losing key people and finding itself unable to function. Defining a clear procurement process and outlining expectations from the start gives agencies a leg-up to manage procurement risks.
Poor supplier performance goes unnoticed or unaddressed.
This risk is one of the most dangerous because it quietly drains value from a community, year after year, while remaining just under everyone’s radar. Unfortunately, an inefficient contract management process can lead to this outcome. Supplier performance should be regularly monitored–which sounds daunting, we know–but that’s where procurement solutions can step in to help.
Performing Procurement Risk Management
While the list of procurement risks can be daunting, there are software solutions available to manage them. And before you worry about costs associated with technology –which we know is on your mind– it’s important to note that many agencies have implemented end-to-end procurement solutions and discovered high returns on their investment.
Procurement software offers a range of benefits, including streamlined procurement requests, supplier qualifications, and minimized confusion in the evaluation process. It can also speed up approvals, reduce bottlenecks, and maintain reliable records to avoid regulatory and PR risks.
Moreover, procurement software can encourage cooperation with the procurement department, institutionalize critical knowledge, and ensure poor supplier performance isn’t overlooked. By using benchmarks and community data, the most capable software solutions can identify and solve common procurement problems.
It’s important to note that not every agency needs cutting-edge functionality in every area, and the most expensive solution is not necessarily the best. The key is to find software that addresses your agency’s specific needs. The best way to know what your needs are is usually through an internal risk assessment that compares the current state to the desired state and identifies the gaps between them.
Enhance Your Procurement Process with Euna Procurement
The public sector simply has too many moving parts for people to keep track of and manage procurements without some help from technology, which is why procurement software is an essential tool for public sector agencies. By identifying and investing in software that meets your agency’s specific needs, you can achieve significant improvements in your procurement processes while reducing risk at the same time.
Request a demo of Euna Procurement today to learn how you can control risk management in your agency.
