Riportiamo la recensione del libro “A short guide to procurement risk” di Richard Russill, pubblicata sul magazine “Risk Analysis and Management. Individuare, gestire, mitigare il rischio” (Anno 4 Numero 5)
Do you like living dangerously? Then read this book: it exposes you to over seventy types of risk you can take in your business life. Want to live successfully? Then also read about the practical ways of mitigating them. This book is for all business people, not just buyers and procurement specialists. As one CEO put it ‘we buy things, we transform them and we sell, and we have to excel at all of that to be best.’
So, if you’re in business, you’re in procurement. And if that is not widely known in your company then it is exposed to serious risks over and above the ones that normally concern people
about the supply chains feeding the business. One stimulus for writing this book was the author’s concern that, although Procurement Risk Management is a hot topic there was no clear definition of what it was about. Also, the prevailing view was that the only risks to worry about were in physical supply chains and their constituent supply companies. Russill therefore asserts that procurement risks exist for an organisation ‘when supply market behaviour, and the organisation’s dealings with suppliers, create outcomes which harm company reputation, capability, operational integrity and financial viability.’ The book then defines Procurement Risk Management (PRM) as ‘the name given to the measures taken … including changes to behaviours, procedures and controls … which remove procurement risks or reduce them to what is considered to be an acceptable level.’
This book advocates a risk management equation which connects the different elements of being ‘at risk’:
Being ‘at risk’ = event x exposure x probability x no mitigation
Reducing or ‘removing’ one or more of the four elements will reduce the risk to an acceptable level. For example if a ship carrying raw material supplies is captured (it has happened!), then the customer’s production schedule is exposed to disruption. The probability of the event happening would be less if the shipping company took a safer route, and some mitigation could mean stockpiling supplies of the raw material. This simple example shows how the ‘risk equation’ works, encouraging a clinical approach to analysing the options for risk reduction.
Russill places great emphasis on how to identify all sorts of possible risk events and it is here that he looks beyond the conventional emphasis on supply chains. He encourages, and assists, the reader to search for possible ‘at risk’ situations in five different landscapes where risks may lurk:
- external dependencies (e.g. supply chain robustness, supplier viability)
- market conditions and behaviours (e.g. competitive or not, supply availability)
- procurement process
- management controls
- ability and agility to handle unexpected events
External Dependencies concerns the reliance on supply companies; their values and viability; performance, and the durability of supply chains.
Market Conditions and Behaviours concerns the competitiveness or otherwise of supply markets; supply availability; price trends and the regulatory context.
Procurement Process covers the way different people work together whilst making sourcing decisions and also the behaviours which can damage their dealings with suppliers.
Management Controls refers to the proper use of authority in the company; the framework whereby it is delegated and the principles expected to be employed. This is the DNA of the procurement process. And the Ability to Handle the Unexpected means just what it says.
The solutions in this book come with a warning. It is dangerous simply to paste remedies over a risk problem if its underlying causes remain undisturbed. When this happens, risks that we thought we’d fixed come back and bite again. The book therefore helps you see beneath the surface of commercial business life so that Procurement Risk Management is sustained and systemic, rather than superficial and temporary. The book also provides key questions to help probe things more deeply, and a self-assessment questionnaire so the reader can test the degree to which his or her company is ready to manage procurement risks successfully.
As you read, you will discover how the Procurement Risk Management approach described transcends contingency planning and becomes instead a stimulus for superior competitive advantage.
A whole chapter in the book shows how to address all components of the ‘risk equation’ in practice … and how procurement impact is transformed in the process.
This route to high performance is as relevant and necessary in the public sector as it is in corporate life. Ice-hockey star Wayne Gretsky said that ‘a good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.’ This book helps us to see where procurement risks are going to be and, just in case we miss one, improves our ability to handle the unexpected when it happens. You will enjoy this book … but don’t run the risk of not buying it!
Originally in the oil industry and now operating internationally as a speaker, mentor and writer on business and procurement issues, Dr Richard Russill is widely experienced in company leadership roles and in consulting. He is described as ‘an unconventional practitioner, wise coach and visionary who transforms business performance and profitability using procurement as the catalyst.’ Richard created the Centre-Led Action Network organisational concept ('CLAN’) and has received awards for ‘his outstanding contribution to the profession and for carrying its message into the business community at large.’
