Burden or Opportunity for the CPO?
Managing supplier risk is one of the most critical activities of any organization because it prevents or mitigates risk incidents that could cause irreparable damage. For the vast majority of companies (78%), the weight of this responsibility falls on the CPO (the next closest is the 9% of companies in which the CFO has responsibility).
Ownership of such a critical activity has played a pivotal role in securing a seat at the table for the CPO — and transforming the function from tactical purchasing activity to strategic supply management. With such visibility in the organization, does your CPO take advantage of the opportunity to communicate how the supply management group is protecting the enterprise by managing supplier risk? Stakeholders are listening, you’re in the spotlight…are you telling the best story you can about the value you deliver?
Criteria for Selecting Contracts to Audit
The numbers above show the percentage of organizations that use the listed criteria to determine which supplier contracts will be audited, regardless of whether the contract auditing activity is conducted internally or outsourced. Amount of contract spend comes in first at 62 percent, while determination by the business unit/division is at the bottom with 18 percent.
Managing Signature Authority = Managing Cost and Risk
Survey participants were asked which employees have the authority to sign supplier contracts in their company. The respondents represent companies with a formal supplier risk program in place. While 44 percent of companies limit supplier contract signings to only the supply management department, others give such authority to other parts of the organization. The more people with authority to sign supplier contracts throughout a company — especially those outside supply management and who haven’t received contract education — the greater the chance of exposure to increased costs and potential risk.