Agora
Project risk can be stated as the part of the organization or the project and should be given priority in manner to maintain the efficiency of the growth rate of the organization. Procurement management is a process that emphasis on dealing with the concepts related to the “Supply relationship Management” in which professional of procurement management provides their concern about developing a robust negotiating and supplier relationships favourable conditions and terms. As the technology is getting advanced and globalization is becoming wider, choosing the right supplier in the future will be very critical due to the complexity of the models related to the SRM. The aim of this report is to present a thorough research on the project risk and procurement management process in manner to mitigate the issues related to the resistance in the performance of the organization. This report could be helpful in understanding the facts related to the risks ion a project and how important is it to be solved at very early stages.
Agora is the first e-shop in the UK that is providing services related to the Greek drinks and foods through reaching every customer. It is a B2B and B2C supplier and do wholesale marketing in UK. They have developed a network of suppliers and producers within both UK and Greek markets and are capable of fulfilling the needs of the customers and raise a competitive market in the sector related to the foods and drinks. It is capable of providing products at the competitive price and targets the market including retailers, hotels, shops, restaurants and many more.
Risk can be defined as the part of the project that could be existed in many different ways considering, whether the risk is small or big and which is capable of impacting the project and its activity in short, long, and medium term. According to Saldgrove (2016) risk can be defined as “an uncertain event or condition that, if it occurs, has an effect on project objectives which could be a negative or positive impact.” Internal or external factor in any project or organization that could affect the proper functioning and data or information related to the organization.
Supplier Relationship Management (SRM) can be represented as the needful process for the organization to determine the categories of the supply or supplier who are responsible for managing the effective communication between the suppliers and the organization. It includes the software and the business practices those are the part of the information flow of SCM (Supply Chain Management). SRM is capable of increasing the efficiency of the output or production of the organization those are associated with the managing inventory, acquiring goods and services including the processing materials (Brindley, 2017). There are three important steps of the SRM that can be stated as firstly, Supplier segmentation that focuses on mapping the suppliers against the risk exposure and profitability. Secondly, it can be stated as supplier strategy development, which includes the distribution of internal resources and planning in manner to meet the goals and needs of the business. Thirdly, it is supplier strategy execution. A genuine SRM process should focus on encompassing stationary companies and should provide the priority as strategic partners. On the other hand, it is necessary to be notified that the strategic partner cannot be given same priority or value as the transactional vendor (Glendon, Clarke & McKenna, 2016). It is necessary that both the parties should exercise trust in each other and seek towards crossing the boundaries limited to the goals of the organization in manner to set the supplier strategy for the strategic partners.
Risk
It can be stated that the way of the execution of the strategic supplier relationships should have only one target in manner to find innovative opportunities for the products and services, either in the process improvement or within the product development. This will help the organization that is moving away from the relentless and cheap budget and it has been becoming an obsession for the procurement community.
It can be defined as the plan that has been crafted for the organization in manner to concentrate on the aim of achieving the goals that may lead to the enhancement of the performance of the organization. This could be considered as a long-term process considering the future of the organization that could take four to five years. It does not include short-term solutions for the problems that the organization is facing; rather it should focus on the strategies those will be taken in account for the long term. This is generally developed by the top level of the management or the team who is dealing with the procurement management within the organization in manner to impose the rules and innovative thoughts (Hopkin, 2017). It is capable of influencing the way of the development and implementation of the tactical procurement plans. (West et al., 2016) stated that “A strategic procurement plan is a comprehensive plan that takes into account the stated goals and needs of the procurement department and of the company as a whole and then works in a targeted manner to achieve them, over time.”
It is very crucial for the individual to consider the long-term goals those have been set for the company as a whole in manner to successfully implement strategic procurement plans. Upgrading the software can be a better option in manner to use the latest technology for the procurement. Continuous education and proper training will also be helpful in ensuring better strategic procurement.
It is not possible to prevent unexpected event related to the risks to the business as stated earlier. However, certain measures could be taken in account of predicting the threats and risks before it happens in reality in manner to minimize or eliminate the impact of disruptions to the extent level (Cagliano et al., 2017). There are five major areas those could affect the smooth flow of the supply chain that includes the price, reputation, quality, legal and delivery of the products or services.
Supplier Relationship Management
Inflation and volatility are the two major factors those could lead to the price exposure for the business. Sudden upswing in the prices could be devastating in manner to the expose in the positioning in the market. Setting long term contract could be a key aspect in manner to control such degradation in the market and could minimize the impact of the rise in price in the future. This could result in the loss of agility and could seriously affect the supply chain of the business. Volatility can be stated as the sudden and rapid movement of the markets in a pattern that cannot be predicted that results that even a small difference in the price could lead to the difficulties in forward planning.
Consequence of mundane failure can be very severe for example packaging the cardboard turns to be floppy and wet could lead to the entire assembly of the products to be distorted while transporting. A range of methodologies can be implemented within the quality risk management that includes six sigma and many more in manner to bring scientific assurance for the mass production and successful delivery of the product. Six Sigma could be helpful in assuring and providing guidance in manner to automate and enhance the output of the organization through minimizing the human errors (Perrenoud et al., 2017).
The purchasing and the logistic teams are the first who are blamed for the failure in delivery of the product or the services. There are many ways in which this could affect the business those include early deliver, late delivery, or not delivery. This latter could be a burden for the business operating just-in-time models because the aim of the suppliers is to free the warehouse from the products through delivering the shipments early. A very crucial objective should be given concern if an individual wants to take the business to the top in the competitive market.
Illegal act attempted by the supplier could also affect the supply chain of the business for example UK Bribery Act, where the supplier acted illegally and the clients had to suffer a big penalty in the business. (Warmerdam et al. (2017) stated that “Training suppliers and purchasing managers to be aware of the law and take a zero tolerance attitude to any illegal actions is the only way to ensure that prosecutions are avoided.”
Reputation of the organization is very crucial objective related to the success and increment in the productivity of any business. Behzadi et al. (2017) defined it as relation to the “practices which the general public believe that businesses should be conducting and brands are tarnished when organizations have been viewed to contravene a moral code, if not legal obligation.”
Strategic Procurement
The key objective related to the procurement professionals is to monitor and evaluate the actions of the suppliers. The customers or the consumers do not consider any difference between the supplier and the buyer in the supply chain that leads to the proper availing services and the products could result in the enhancement of the performance of the organization and increasing its productivity.
Risk management can be defined as the group of actions those could be helpful in mitigating and managing the risks and threats that could affect the supply chain or any other system within the organization (Fauzi, Tanuwijaya & Wulandari, 2017). A successful risk management follows a process cycle that includes risk identification, analysis, response, and monitoring and controlling.
This is the very first step in the risk management that is responsible for identifying the factors related to the activities within the organization that might affect the performance of the organization and stop the organization from achieving its goals. According to Jeynes (2012) there are 10 Ps that could be involved in this process that includes:
- People elements: people/procedures they follow/protection
- Physical properties: premises/product/purchasing supplies
- Management issues: policy and strategy/planning and organizing
- Actions or processes: processes/performance against targets
This is the next step after the risk identification has been completely achieved that includes the qualitative and quantitative analysis on the risks those have been already identified. Qualitative analysis could be referred to the technique that could be helpful in discovering the probability of the events related to the risks, occurring and the impact of the identified the risks if it happen during the execution of the project. It could lead an individual to prioritizing the risks those have been identified and rating them according to the priority (Horner & Wilmshurst, 2016). Risk matrix could be a better option in manner to prioritize the risks and prioritize the risk according to its severity and the impact.
Quantitative analysis can be referred to the prioritization of the risks based on the numerical value of the severity of the risks. A quantitative analysis includes the following:
- Providing a quantitative approach ion manner to make decisions during the time of uncertainty
- It could Quantifies the outcomes those have the possibility for the project and assessing the probability that could be helpful in assuring the achievement of the goals of the organization
- Creating achievable and realistic scope, schedule, or cost targets
Risk response is an action plan that should be made after identifying and prioritizing the risks that could be helpful for the individual in responding to assessing the risks. There should be a proper strategy in manner to respond the risk that includes starting with the risks of high impact and leading to the assessment of the risks with less impact. This could be divided into two groups including the positive and negative threats (McGregor & Smit, 2017). Risk response includes the following objectives concerning the risks:
- Risk Share
- Risk Avoidance
- Risk Reduce (mitigate)
- Fallback (contingent action)
- Risk Acceptance
- Risk Transference
Supply Chain Risk
This is the last step in the risk management process that states about monitoring the process in the growth of the risk assessment and control the objectives and stakeholders related to these risks. Risk register is a better monitoring and controlling tool that enables the individual in successfully monitoring and controlling the risks that might affect the growth of the business.
There are various models those have been proposed in manner to lead to the successful risk identification and procurement management systems within the organization. This could have been possible through the incorporation of analytics and advanced techniques. Machine learning and other innovative technologies are being implemented in manner to mitigate the risks those might affect the smooth functioning of the organization. Stress testing and capital provisioning are some of the regulatory requirements those have been incorporated within some of the models. Irrespective of such models, there are very new models those have been introduced and are complex in nature and are playing their vital role in fulfilling the needs related to the business (Wook et al., 2016). These models are much complex in nature and are capable of providing facilities like strategic planning, asset-liquidity management, and pricing management that could lead to the enhancement in the performance and productivity of the organization. As the world is getting digitalized and big data and data mining are playing their role in enhancing the way of living that resulting in the more complex nature for the models including the fraud detection and anti-money laundering in addition to the customer relationship management. This could let the individual in perform the business and enhance the performance of the organization with much efficient and effective manner. For example JP Morgan Chase & Co., One of the greatest financial corporation in London that has been using the risk model in manner to mitigate the risks and lead to the smooth functioning of the organization.
Example:
Even having a risk model and measurement for the risks, JP did neglect the consequences and change the VaR metric in the early of the 2012. Because of small errors in the spreadsheet, those were represented had been estimated the rate of the risk to be 50%. Warmerdam et al. (2017) that “the result presented in the spreadsheet allows the organization’s portfolio in manner of growing rather than that the JP Morgan was hit by the crisis of sovereign debts reported it. Due to less precise model of the project risks and procurement management the bank had to suffer a loss of 7 billion pounds since that time.”
Price Risk
The objectives related to the decision making should be based on all the facts those have the capability to influence the decision-making of the individual who are responsible for the enhancement in the performance of the organization. These decisions also include the objectives related to the choices made during the uncertainty and risks. Uncertainty and risks are the parts of the organization or the project and could lead the organization towards other path and resist it from achieving its goals. For example, Toyota had once faced an external risk that includes the earthquake and had affected the organization in many ways. This had affected the production, output and reputation of the organization. Sandgrove (2016) stated that “if the decision-maker, who is responsible for the strict decisions in the organization, would be able to assess intuitively or rationally, the decisions could be made under certain risks”.
Example:
Models of subjective utility can be helpful in understanding the facts those were related to the decision point that two individuals might not meet at the same decision point on the utility curve. Behzadi et al. (2017) concluded, “Same normative axiom those seems to be striving to the maximum subjective utility defined by each individuals separately.” (Cagliano et al., 2017) stated, “Prospect theory is a theory of decision-making under conditions of risk.” According to the theory, the decisions made during the execution of any project within the organization will be involving the value trade-offs under internal conflicts. These theories are capable of explaining, predicting, and describing related to the measures that could mitigate the issues and risks related to the organization or the project. “The theory can be helpful in describing the choices that could be used as frames and evaluation of the choices while making decisions related to mitigating the risks in the project life cycle” (Hopkin, 2017).
Risk management can be helpful in maintaining the sustainability of the organization in the competitive market. This could also be helpful in assuring that the performance and growth of the organization will not face any difficulties due to some unwanted entities. Risk is an integral part of any development as stated earlier and it cannot be eliminated from the system however, it can be reduced to the minimum level (Wook et al., 2016). Risk management ensures the prioritization for the risks that could be helpful in adhering the most impacted risks and issues and protect the organization from falling down. This will help in boosting the productivity and growth of the organization.
Quality Risk
Conclusion
Based on the above report it can be concluded that the organization might be able to achieve the highest efficiency in the rate of the growth through proper risk mitigation process. This report presents an idea about how an organization can chose the proper supplier for the enhancement and smooth flow of the organization. Prioritizing the risk because of qualitative analysis and preparing the risk matrix can be recommended as the best approach for leading any project to its success. Followed by this, the risk response should be made according to this priority or severity matrix in manner to mitigate the threats at the very early stage and lead the growth of the organization unaffected by such threats. Various examples have been proposed in this report in manner to relate the theory with the real world and put emphasis on the effectiveness of the risk management process ion manner to ensure the growth of the organization. This report presents a critical evaluation on the articles those have been posted by reputed authors and based on that it can be concluded that risk will always be there in any project and can influence the organization in both positive and negative manner.
References
Behzadi, G., O’Sullivan, M. J., Olsen, T. L., & Zhang, A. (2017). Agribusiness supply chain risk management: a review of quantitative decision models. Omega.
Brindley, Clare, ed. Supply chain risk. Taylor & Francis, 2017.
Cagliano, A. C., Grimaldi, S., Mangano, G., & Rafele, C. (2017). Risk Management in Hospital Wards: The Case of Blood Procurement and Handling.
Fauzi, D. B., Tanuwijaya, H., & Wulandari, S. H. E. (2017). RISK MANAGEMENT PLANNING PROCUREMENT PROJECT IT USE ISO 31000 IN PT. PELABUHAN INDONESIA III. Jurnal JSIKA, 5(7).
Glendon, A. I., Clarke, S., & McKenna, E. (2016). Human safety and risk management. Crc Press.
Hopkin, P. (2017). Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.
Horner, C. A., & Wilmshurst, T. D. (2016). STAKEHOLDER ENGAGEMENT AND THE GRI: IMPLICATIONS FOR EFFECTIVE RISK MANAGEMENT. CORPORATE OWNERSHIP & CONTROL, 210.
Jeynes, J. (2012). Risk Management: 10 Principles. Woburn: Butterworth-Heinemann
McGregor, A., & Smit, J. (2017). Risk management: Human rights due diligence in corporate global supply chains. Governance Directions, 69(1), 16.
Perrenoud, A., Lines, B. C., Savicky, J., & Sullivan, K. T. (2017). Using Best-Value Procurement to Measure the Impact of Initial Risk-Management Capability on Qualitative Construction Performance. Journal of Management in Engineering, 33(5), 04017019.
Sadgrove, K. (2016). The complete guide to business risk management. Routledge.
Warmerdam, A., Newnam, S., Sheppard, D., Griffin, M., & Stevenson, M. (2017). Workplace road safety risk management: an investigation into Australian practices. Accident Analysis & Prevention, 98, 64-73.
West, G. H., Lippy, B. E., Cooper, M. R., Marsick, D., Burrelli, L. G., Griffin, K. N., & Segrave, A. M. (2016). Toward responsible development and effective risk management of nano-enabled products in the US construction industry. Journal of nanoparticle research, 18(2), 49.
Wook, K., Beresford, A. K. C., Pettit, S. J., Mason, R. J., & Sanchez Rodrigues, V. (2016). The roles of corporate culture in the selection of effective risk management strategies.
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