SUPPLIER RISK MANAGEMENT

Supplier risk management

At Fullstep we help you to take a step further in managing supplier risk.

Introduction: The importance and value of suppliers in a Company

Suppliers are an essential element for the correct functioning of our company in terms of production, finance, reputation, regulations and safety. For this reason, being aware of their situation under these headings will allow us to detect potential risks to our relationship and therefore implement measures to avoid and above all overcome any potential problems in this regard.

What problems might we face without effective control of our suppliers' risk

When we think of supplier risk we mean potential supply problems that could paralyze our operations and, more seriously, make us fail to meet our obligations due to a lack of immediate solutions.

We could face conflictive situations related to:

  • The quality of the contracted goods and services and therefore of our products.
  • Legal or regulatory problems due to failure to comply with current legislation or with our corporate policy.
  • Loss of trust from our clients and shareholders due to bad practice in the supplier’s operations or disclosure of confidential information. Reputational damage.
  • Interruption of the supply chain and its repercussion on the company’s P/L.
  • Inherent risk of the country where the supplier is based.
  • Monopoly status of the supplier..

For certain, information, service quality, flexibility, monopoly status and the financial statements of our suppliers, directly affect the management and functioning of our company and the lack of knowledge of their situation prevents us from foreseeing and controlling potential risks.

¿Estamos preparados para afrontar dichas situaciones y resolverlas?

New regulations for Financial Institutions (Rule 43)

Although numerous financial institutions have models for accrediting their suppliers, Rule 43 represents a “leap forward” in the control and management of risk associated to the contracting of goods and services.

Institutions will have to evolve their models to cover current shortcomings with regards to the control and information requirements that Rule 43 demands of suppliers..

As regards article 31 bis of the penal code, legal entities will be exempt from liability if they fulfill the following conditions and requirements:

1.º Identify the activities in the context of which crimes to be prevented might be committed.

2.º Establish the protocols or procedures that reflect the process of formation of the legal entity’s will, the making of decisions and execution of the latter on the basis of the former.

3.º Have models for management of the financial resources appropriate for preventing the crimes that must be prevented.

4.º Impose the obligation to report potential risks and violations to the body responsible for overseeing and enforcing the prevention model.

5.º Establish a disciplinary system which penalizes appropriately violation of the measures established in the model.

6.º Periodically revise the model and any modifications when significant violations of its terms become evident, or when changes occur in the organization, control structure or activity conducted, which make it necessary.

How Fullstep can help

With its services, Fullstep helps you to monitor risks, avoiding undesirable effects in the relationship with your suppliers.

Firstly, it is important to know the risks and to put in place a management model that controls the causes that trigger them and to act accordingly, in this sense we propose a clear and objective management model and method of operation, supported by systems that help to automate the processes.

“Our management goes far beyond mere accreditation and the contractual framework.”

1. Designing the model for supplier risk management that your company needs.

In it, we define: :

  • The procurement categories with a risk that needs to be controlled.
  • Each procurement category must have its list of both common and specific associated risks..
  • Criticality of same depending on the likelihood of occurrence and their impact.
  • Areas affected and measures in place to control risks.

At the same time, it is necessary to establish preventive actions and corrective actions, to which end we must establish the “sources of information” and define alerts with systems that allow us to automate supplier “ranking”, and risk monitoring and control.

2. Operational management. Risk management support tools and processes

We implement a comprehensive risk management system, which allows you to automate processes, especially prevention and the action plan. At the same time, we also prepare the organization ,to respond to potential incidents. Our objective is to guarantee compliance with contracted obligations (quality, service level, prices…).

Benefits of an optimal risk management system
  • Strengthens the relationship with suppliers..
  • Improves competitiveness, efficiency, the company image.
  • Globally rates the supply.
  • Allowssupply management to be optimized..
  • Assesses the process of supply.
  • Offers solutions to incidents with suppliers.
  • Increases collaboration and aligns the objectives of procurement with the objectives of the company.
  • Improvesthe headings of quality, service and supply.
Fullstep's solution to enhance supplier management

It is necessary to define key aspects of the risk model in the full cycle of the relationship with the supplier: from award and execution through to supply of the contracted good or service:

  • Accreditation and evaluation of suppliers.
  • Risk monitoring and control of critical suppliers.

We follow three major lines of action

  1. Improve the basic processes of accreditation and evaluation.
  2. Develop a comprehensive risk model.
  3. Optimize risk management.

Que completaremos con un Cuadro de Mando, Reporting de las diferentes unidades receptoras del servicio.

Procurement’s mission is to guarantee supplier risk in all stages of the relationship, and not only in evaluation and accreditation.

At Fullstep we help you to take a step further in managing supplier risk. Call us.

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Tel.: +34 91 296 20 27 – pla@fullstep.com

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