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Risks associated with procurements

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Describe the risks associated with procurements

Risks that face organizations are different, and firms need to learn ways of addressing them. The following are some of the risks that the procurement process is likely to face. Low need analysis risk. Sometimes the procurement team does not know what it requires and when to be delivered. This may make the team purchase too much, what is not needed or even purchase the wrong products

Project complexity can also create risk in procurement. The complexity of the project can create difficulties in specifying the requirements because it makes the conditions not to be fully understood. If the project is subject to fluctuate due to political or other reasons, it may make it challenging to offer the description to the requirements well, which will lead to too much or less procurement of products.

There is the risk created by external factors such as political, natural, and economic, among others. These risks are usually out of control of the organization (Tanaka & Hayashi, 2016). They sometimes create risks of late supplies, and as such, it becomes difficult to access the supplies on time.

The other risk is vendor management and selection.  Sometimes firms select the vendors who are not dependable, and as a result, they bring out unfulfilled projects and more delays in the procurement process.

What steps can be taken to address these risks?

Some of these risks can be managed through avoidance and appropriate planning. Project complexity can be addressed by involving the officers of procurement early with the team that deals with the project. Besides, the group requires to conduct continuous reviewing of the project.

The risks of external factors can be addressed by beginning the procurement process within the appropriate time.

The risk of inadequate need analysis can be addressed by the use of big data and the significance of information technology in the procurement process. A robust software will offer the tools that are required to collect and evaluate the transactions. The use of such tools helps in smarter purchasing activities.

In dealing with the vendor selection, the businesses need to select the appropriate suppliers and ensure that they build a strong relationship with them (Tanaka & Hayashi, 2016). This will create a long-lasting and collaborative relationship with the vendors. It will also help to avoid unnecessary shortages and lower the supply chain disruptions.

Finally, the above procurement risks can be mitigated through ensuring open communication. This will help obtain the exact requirement, improve the procurement process, and establish the timelines that are realistic and practical.

 

 

 

 

 

 

 

Reference

Tanaka, S. 1., & Hayashi, S. 2. (2016). Collusion between public procurers and suppliers in the context of japan’s public procurement: The role of the risks of “unsuccessful procurement”. Journal of Public Procurement;, 16(3), 291-311. doi:http://dx.doi.org/10.1108/JOPP-16-03-2016-B003

 

 

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