Procurement Risk Analysis

PurchTips - Edition #85 October 4, 2005

By Charles Dominick, C.P.M., SPSM

Are You Planning For Procurement Risks?

Risk analysis is a powerful project management technique. You can use risk analysis to address the risks that make your procurement job unnecessarily difficult.

A risk analysis is “figuring out what can go wrong and how to either avoid it or fix it,” said Diana Lindstrom, a former strategic sourcing manager for a huge telecommunications firm and currently the president of Los Lobos Consulting – a company specializing in project management and coaching project managers. “By figuring out what can go wrong – identifying risks – we’re one step ahead of Murphy’s Law.”

Great project managers see projects in a logical sequence of systematically executed events. Developing a procurement risk analysis is no different.

“Once we’ve identified the risk, then we assign a level to that risk,” Lindstrom explains. “You can use 1 through 10, ABC, or any other ranking system.”

The final piece of the procurement risk analysis is the plan. “The risk plan includes the steps necessary to avoid the risk or mitigate the fallout from the risk if it does happen,” she says. “By knowing the risks, understanding how likely each one is to occur, and having a plan in place to deal with it, we’re able to successfully complete projects.”

Using a risk plan can help a procurement department demonstrate its value to the organization. “Most internal customers don’t understand why procurement needs to follow all the steps that are laid out by the company. And they don’t care,” she notes. “So, using a risk plan becomes an educational tool. It teaches folks what happens if the procurement steps are not followed. It shows them in black and white what can happen – the risk – and how procurement professionals deal with it – the plan. It shows them that procurement wants to help them do business in a less risky way.”

So, in summary, identify risks, assign levels to those risks, determine the steps to avoid or mitigate the risks, and share the plan with stakeholders.

(keep reading for a FREE Offer)

Spotlight On Professional Development Opportunities

If you are tired of not getting enough opportunities, respect, and money out of your purchasing career, you now have a clear path to success and satisfaction! By enrolling in the SPSM Certification Program, you will be joining purchasing professionals from prestigious employers from throughout North America, South America, the Caribbean, Europe, Asia, Africa, and Australia who have decided that earning the SPSM Certification is the best way to get where they want to be in the purchasing field.

Learn how to earn your SPSM Certification at:

www.NextLevelPurchasing.com

The Latest Purchasing News!

Since the last edition of PurchTips, at least 1 new job preferring the SPSM Certification has been posted at www.NextLevelPurchasing.com/jobs

FREE Offer!

Do you want to learn more project management principles that will help you avoid career-threatening mistakes? There is great news!

Much of the content in this article was derived from an enlightening and educational phone interview with Diana Lindstrom. We delved deeper into applying project management principles towards procurement success.

As our gift to you, you can listen to the entire 30-minute interview for FREE!