Reactive Procurement Solutions
Many legal documents insert a range of reactive strategies that purport to deal with risk and events. Unfortunately these strategies have limited effect when monetary compensation will not be sufficient, including damage to reputation/brand or where criminal prosecutions have been launched or fines levied against individuals. In the case of a significant event the counter party is unlkley to be solvent or the insurer unwilling to pay.
Reactive strategies embedded in legal documents include:
- “comply with law” – unhelpful when the counter party has not complied wit the law and not complied with the contract and has not told the client
- “insurance” – may or may not respond to the event, depending on wording, exclusions, actions of the insured. The insurance may also not be relevant to the loss suffered ( ie: reputational damage)
- “release and indemnity” – may or may not respond depending on where the assets are and the insurance
Obtaining “proof” or “assertions” of compliance have limited effect and given how they can be negated, provide little comfort to the Board and Senior Managers, that the risks are being adequately managed.
When coupled with “price only” decisions on suppliers, the likelihood increases that an incident will happen or additional resources will be required to manage the contract. Either way the “true” cost of the contract will be higher than the fees nominated for payment under the agreement.
Outsourced Procurement Solutions
In some areas there are “third party certification” systems in place. In many cases these are just upgraded “comply with law” commitments. In most cases arrangements include:
- “independent audit” assertions – in numerous instances this is not correct, as the auditors or pool of auditors can provide other services to the nominated party. They also “certify” over multiple years and so have an “ongoing” relationship that is not truly independent.
- “one audit fits all” assumptions – the items covered by the audit may not be particular to the client requirements or align with the client’s requirements
- “in favour of the client” work – the audit is for the Supplier and will be limited. In that situation the audit is a statement that the Supplier system works for the supplier. It is not a statement that the Supplier solution works for the Client
- “recovery from the auditor” for damages – will not apply given the commentary above, the limits on auditor’s insurance policy and the limited fiscal resources of the auditor to compensate the Client.
COR Assure brings procurement into the solution to ensure that across the supply chain the most effective and efficient service is obtained that reduces the exposure of the Client and ensure a strong and adaptive supply chain. COR Assure’s Procurement Management Support Tool, works with procurement,commercial and operational areas to support:
- business continuity
- pre-emptive actions to improve confidence in the supply chain
- strategies to reduce non-conformances and improve performance