> ... > Intelligence hub Risk management Risk mitigation

How to mitigate procurement and supply risks

Procurement and supply won’t experience the same risks, but it’s important to identify ways to mitigate them 

How do you mitigate risks in procurement?

Risk mitigation in procurement and supply will vary in every organisation, as some organisations may not experience the same risks as others. It’s important that risk mitigation is part of your overall strategy, as without it, it can affect the whole supply chain. Take a look at some common risks within procurement and supply and how to mitigate.

Hide this title

Choosing your supplier:

It’s important that your supplier is both reliable, cost effective and brings value to your organisation. Poor quality products and late delivery times will have a negative impact on your customers, meaning a decline in profits and brand reliability. Go through a rigorous selection and evaluation when choosing who you want to work with, researching their level of compliance, success stories and financial documents.

Supplier relationships:

Having a strong supplier relationship is the key to help mitigate risks in procurement and supply. Take a detailed look at your order and supplier relationship management process and use technology to help automate and smooth the process out. This helps prevent delays within the procurement process and help to avoid manual processes. Offer feedback to suppliers regularly, so any challenges can be addressed quickly.

Legal requirements:

Particularly in public procurement, adhering to rules and regulations is critical to avoid fines and compliance risks. Check on your supplier contracts to make sure they’re correct and legal and regularly keep up to date with changing legislations. A good contract management process will help mitigate these risks.

Inaccurate data:

Over or underestimating the products or services required can cause huge risks throughout the whole supply chain. Incorrect forecasting will result in wasted time and money, which causes a ripple effect of incorrect decisions down the line. Digital technology can help mitigate these risks. By supplying good quality data, quickly to all parties, enabling them to take positive steps to mitigate the risk.

 

What are the four types of risk mitigation?

It’s important to choose a risk mitigation strategy that works for your organisation. There are four types of risk mitigation which include:

  • Treat: This involves acting on high risk activities and looking to resolve likelihood or the limit the consequences.
  • Tolerate: Tolerating a risk, means you’re accepting that there is little that can be done to change the risk. This often happens if the likelihood and impact of the risk is low.
  • Terminate: If the risk is too high and will have a severe impact on your organisation, it’s best to terminate the contract or withdraw a product or service from the market.
  • Transfer: You can transfer your risk activities to a third party; however, you’ll still be liable if things go wrong. Consider the use of insurances to mitigate the risk exposure certain activities bring.
 

Risk management key themes

Risk management Commodity Risk Management SCOR Model Supply chain
Supply chain strategy Ethical risk Vendor risk Vendor risk assessment
Procurement fraud Deloitte/CIPS Resilience report Risk assessment

Listen on demand and get the latest practical insights from our panel of procurement and supply experts.

Become a CIPS member

Achieve your potential by becoming a member today. Whether you want to become a studying member or want to upgrade your membership to MCIPS, you’ll receive support and guidance whatever career level you’re at.
A smiling woman in a dark top stands with her arms crossed, looking away and slightly up. She is framed by two large blue concentric circles and a vibrant blue background with radiating orange-dotted lines.

Access the latest research, whitepapers and tools across a range of key procurement and supply topics.

Strategic procurement in risk management guide

Procurement’s profile in organisations is on the increase. We now have a wider spend remit and many internal barriers are coming down. This document will provide you with a greater understanding of strategic procurement and risk management.

An introduction to risk management guide

This paper explores procurement risk management and will give you a better understanding of the risks and opportunities your organisation may be exposed to. It also examines procurement strategies, practices and processes that you can develop and implement to ensure those risk are managed effectively.

Supply chain risk management guide

This document will provide you with a greater understanding of Supply Chain Risk Management (SCRM) by exploring types of risks that can occur and how best to mitigate them.

Expand your risk management skills

Icon of a web browser window with a warning triangle, representing risk or alert, on a blue circular background with abstract overlapping circles

Procurement Skills Training

Accelerate your learning and keep your knowledge and expertise up to date with our Risk Management training courses.

RISK MANAGEMENT TRAINING

On this page