Each business unit owns the risks associated with the contracts they decide to enter into. This is a fundamental principle built into third-party risk management (TRPM) programs. In large organizations, the program's success is highly dependent upon each Business Unit fulfilling their responsibilities.
The Business Unit Structure for Risk Management Success
The business unit needs to ensure they have a suitable organizational structure and resources to fulfill their third-party risk management program responsibilities. This includes having team members trained in specific competencies and adequate capacity based on the level of risk associated with the business unit's third parties and sufficient capacity based on the level of risk associated with the business unit's third parties.
Once the contract is set, the business unit is responsible for the activities and tasks related to owning the relationship ( “relationship management”), including communication, contract, performance, and risk management. Team Members who reside within a business unit who perform relationship management activities comprise the largest internal population of team members who should manage risk due diligence activities with third parties.
As we head into the fall of 2021, we prepare for procurement 3.0 with a host of exciting resources, industry research and webinars to elevate you in your role.
September CPO & Executive Virtual Series
SIG's CPO & Executive Virtual Series is an opportunity for the most senior procurement executives to gather with their peers in an interactive virtual environment to discuss their most pressing issues. On September 15, Nitin Khorana, Vice President from Icertis, will explore maximizing supply chain potential with contract intelligence, followed by topic-based discussions on digitalization within procurement and sourcing.
Join us for this executive-level conversation with actionable takeaways.
How to Align Procurement with Third-Party Risk for Successful Vendor Management
One of the biggest challenges that procurement teams face is aligning risk objectives with the rest of the organization. In fact, most companies struggle with ensuring that their risk management processes aren’t perceived internally as a roadblock, slowing down procurement and innovation.
In this webinar, Bryan Littlefair, CEO of Cambridge Cyber Advisers and past Global CISO of Vodafone Group and Aviva, will share his experience designing third-party risk management programs that align with procurement.
Recently, SIG had the pleasure of hosting a panel of Everest Group experts for the July CPO & Executive Virtual Series. The panel included Vice President, Sourcing and Vendor Management, Amy Fong, Chief Research Officer, Michel Janssen, Everest Group Partner, Jimit Arora and Pricing Assurance Partner, Rahul Gehani. It was a very engaging discussion that lasted nearly two hours with tons of excellent takeaways. Let’s get into it!
Trends of the 2020 & 2021 Service Provider Wages
The focus of the meeting was BPO and IT services and the industry trends related to the supply market and successful buy-side organizations. Jimit Arora kicked the roundtable off with the findings from 2020 and early 2021 regarding the rates of IT and BPO services. One of the major points of emphasis was the renegotiating of rates after the dust settled from 2020.
Many of the suppliers realized that the previous rate discounts that were granted during the work-from-home scramble weren’t sustainable. As Jimit stated from Everest Group’s findings, “we are seeing situations where suppliers are going back to their clients saying, Hey, we need to re-up these rates, right?”
A major reason for this change is due to the inflation of the labor market. The question many companies are asking themselves is “how do you get your resources for what you need to accomplish at the correct pay rate, while still making it feasible to where people want to work versus just going on unemployment”. This issue is causing a constraint in general on the market and the talent pool that's available right now. And this remains true whether you view this from a United States perspective or an offshore international perspective.
For many US companies, understanding the total cost of IT talent services has always been challenging, and is even more concerning now as budgets and resources have tightened in a post-COVID-19 world. But as the need for change and innovation continues to grow, companies are rapidly shifting focus towards outsourcing as a solution to assisting in digital innovation.
Procurement commonly compares hourly rates because it’s an easy comparison. Well, not exactly. But the issue is that the invoice at the end of the month for a committed amount of work is what matters, not what the hourly rate states. Overtime, 45-hour billing weeks, etc. are ways offshore vendors distort billings and make your hourly rate look lower to win deals. So, how can you avoid additional costs associated with services provided by your outsourcing partner?
At SMC2 we find that many Global Insourcing Center RFPs ask for hourly rates as a selection criterion to support cost control or optimization. Hourly rates themselves are easy to compare but do not accurately reflect the actual costs to deliver services or projects. Fixed bids make an attempt at solving this issue, but are often laced with caveats and take a significant effort to understand scope.
Also, many people believe that although the rates in India are lower, it takes more resources to deliver the same value as a US resource. Ratios such as 3:1 or 2:1 are often cited, demonstrating a lack of understanding of India’s technical capabilities and, more so, the opportunity to optimize under a global team structure.
SMC2 has solved this issue by focusing on value generation instead of billable hours. Our teams are measured at the same level as their US counterparts in terms of productivity. This is expressed as 1:1 productivity. We provide the necessary time each week to guarantee a US-full time equivalent of contribution.
Steven Stephan, SVP of Global Services and Co-Founder, SMC Squared
As demand continues to rock supply chains, we prepare for the future of procurement and risk mitigation with a host of exciting resources, industry research and webinars to elevate you in your role.
August Microlearning by SIG University: Contracting and A Holistic Approach to Risk Management
On August 4, University of Tennessee Faculty, Graduate and Executive Professor Kate Vitasek, and CEO of Commercial Officers Group, Jim Bergman, will explore key concepts around contracting in the new economy. That session will be followed by SIG Hall of Famer and Faculty Member, Lawrence Kane who will join negotiation expert and commercial contracting coach, Jeanette Nyden for a deep-dive discussion on a holistic approach to risk management.
Join your sourcing, procurement, and risk management colleagues in this two-hour interactive virtual environment to be challenged with topics related to our industries!
Demystifying eAuctions – How to Source Smarter, Faster and Better
eAuctions are a great method for helping firms maintain speed to market in an economic environment riddled with scarcity, increased sourcing risk and complexity. The problem? Despite the many benefits that eAuctions offer, they are a grossly misunderstood and underutilized strategy.
In this webinar moderated by SIG, GEP’s Director, Marin Aravind and Senior Associate, Lavanya Krishnan, will demystify eAuctions and share best practices that enable procurement to function as a profit center by improving cost visibility, driving incremental savings, enhancing compliance and optimizing efficiency.
If you’re a procurement technology provider familiar with SIG and the Global Executive Summit this fall, we hope you’ve also heard of us at Spend Matters.
If not, we won’t fault you.
Spend Matters is the leading global procurement technology media, analyst and research firm. Combining daily news coverage with subscription research, deep technology analysis, and one-to-one advisory services, Spend Matters provides meaningful insight and tailored solutions for procurement buying organizations, consultants, investors and solution providers.
Each year, Spend Matters releases the annual ‘50 Procurement Providers to Know’ and ‘50 Procurement Providers to Watch’ lists. The lists are made up of — you guessed it — 100 vendors determined by the entire Spend Matters analyst team to represent the best of the commercial providers that serve enterprise-level procurement organizations. Plus, the ‘Future 5’ list — 5 outstanding procurement technology startups with innovative technology prowess, momentum and staying power.
This year marks the sixth annual release of the ‘50 to Know’ and ‘50 to Watch’, and we are beyond thrilled to be doing it LIVE in conjunction with the SIG Global Executive Summit. The lists will be published on Tuesday, October 12. Any vendor present at the Summit who is also on one of the lists will receive their award plaque (in person!) from Spend Matters. We’re excited to pose for photos with those vendors present and share the good news all over Spend Matters social accounts.
Morgan Zombolas, Marketing Engagement Manager, Spend Matters
Whether your company’s focus is to build smart applications or update mobile apps for end-users, to increase intelligence using advanced algorithms, or to look at opportunities to automate internal operations to drive high-value outcomes, there’s no denying that digital plays an increasing role in everyday operations of companies across all verticals and sizes.
As companies worldwide push to drive digital transformation, procurement leaders are being challenged to strategically influence spending, amidst a global climate full of talent scarcity and the need for immediate cost optimization.
Through a strategic partnership with Fossil, we helped the executive leadership team to increase quality, productivity and utilization as they moved from working with a 300-person offshore team to a 180 person Global Insourcing Center “GIC” team through our unique offshore model.
A US-based, vertically integrated global retail and manufacturing company that specializes in a diverse portfolio of lifestyle accessories. This industry powerhouse operates an extensive brand portfolio and a wholesale distribution network across 150 countries and 500 retail locations.
The company had an extensive outsourcing presence in India for years but recently had been adversely affected by cost overruns, under-performing contractors, and poor resource management processes. All were creating a significant drag on productivity and profitability and distracting from the core focus of being a fashion trendsetter and market innovator.
The objectives established for the outsourcing operation were not in dispute. The culprit was the deteriorating execution. The company wanted to regain control in its approach to outsourcing.
After extensive evaluation, the company partnered with SMC Squared to strategically “right-source” the execution.
Patricia Connolly, CEO and Co-Founder, SMC Squared
Haggling is not negotiating. I repeat, haggling is not negotiating. You are just “meeting in the middle.”
I remember watching an episode of the BBC’s “The Apprentice” in which the task was to buy a list of items in London. The would-be apprentice, Jim, went to a butcher to buy a steak. It was a classic haggle. The butcher started high and Jim started low. They ultimately met in the middle.
This back and forth is haggling, which is a valid method of resolving a conflict. But other ways to resolve a conflict exist, including negotiation. The difference is that haggling is just about the price, and largely the outcome depends on who starts the highest or lowest. But negotiation is about trading variables and takes more skill, which makes it an art rather than a blunt instrument.
Learning the art of negotiation can be done with a few simple, yet effective tools.
Tool 1: The Up-and-Over
As a child, my family lived in a modest three-bedroom house in Laindon, Essex. It had one of those garages at the front of the house but you couldn’t get to the garage through the house even though it was integrated into the building. You could only get to it through the big up-and-over door.
“Up and over” is also a negotiating tool to use when you want to counter propose, which means to reject an offer and replace it with one that suits you better.
Let’s say you are selling your car. After looking the car up and down and kicking the tires, the buyer says, “Would you take $4,500 instead?” Typically, you’d haggle and say, “No, but I would accept $5,000,” and on the haggle goes until you meet in the middle. In a negotiation, you might say, “If you can buy the other car I am selling too, I could move on the price.” “Another car?” the buyer replies. “I don’t want another car. That’s silly.”
Darren Smith, Founder and Chief Meaning Officer Making Business Matter
SIG University’s Certified Intelligent Automation Professional (CIAP) program is an online certification program for working professionals who seek to become more efficient and free up team resources by automating repetitive, rules-based activities. An investment in the CIAP designation will provide your team with a holistic understanding of Intelligent Process Automation technologies so they can focus on more strategic business objectives.
Outlined here is more information on the benefits of a CIAP designation, as well as a profile of who would benefit from the program.
What is Intelligent Process Automation?
Intelligent Process Automation (IPA) is an evolving set of software technologies that can be used singly or in combination to automate repetitive, rules-based routine tasks. The Intelligent Process Automation technologies are broadly categorized as:
Robotic Process Automation – Handles repeatable, routine and predictable tasks
Cognitive technologies – Have the ability to be trained to read variable inputs and determine what actions to take under different circumstances.
Workflow orchestration – Manages work between different IPA technologies, legacy systems and human workers.
Virtual agents – Use voice or text chat for direct interaction with users.
The key to true Intelligent Process Automation is how to combine the above-mentioned tools to solve end-to-end business problems.
SIG University Certified Supplier Management Professional (CSMP) program graduate Adrienne Westerfield outlines how supplier governance programs and relationships are extremely beneficial to all stakeholders involved and can help drive business success.
What is a governance program? During the SIG University Certified Supplier Management Professional (CSMP) program, while learning unfamiliar governance terminology, I realized I had been involved with creating and establishing various types of governance throughout my career. Supplier governance is a relationship or framework that is mutually agreed upon. Both the company and the supplier benefit from this relationship. The framework can be at a corporate, business unit or contract level depending on the needs and value sought by both parties.
If it is an established relationship that has never been formalized, adding governance will ensure contract compliance. It will mitigate risks for both parties while making sure the objectives of the relationship are met. Over time, the goals for each company may change so that the structure can be re-evaluated accordingly and adjustments made to align with a new direction or specific initiatives. A more structured governance framework will also define the roles and responsibilities for teams, departments and individuals at each company, which will mitigate the risk of any tasks remaining incomplete or done incorrectly.
Adrienne Westerfield, Contract Administrator, Louisville Gas & Electric Company (LG&E)