Procurement and Risk Management: Stages and Key Risks

This report discusses the stages of procurement process and evaluates key risks that organizations face at different stages of procurement. It also elaborates on risk resistance and response strategies such as removing, transferring, accepting, contingency planning, and reducing risks. The report includes a risk management plan, risk register, and risk matrix for effective risk management. The subject is procurement and risk management, and the course code, name, and college/university are not mentioned.

PROCUREMENT AND
RISK MANAGEMENT
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TABLE OF CONTENTS
Executive summary..........................................................................................................................3
INTRODUCTION ..........................................................................................................................4
MAIN BODY...................................................................................................................................4
A Stages of procurement process.................................................................................................4
B Analyse key risks that company faces at different stages of the procurement........................7
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12

Executive summary
Procurement risk is potential for the failures of procurements process plan to purchase products,
resources or services. There are many procurements changes such as lack of technology, lack of
communication, poor supplier relationship etc. The report discusses the procurement process and
also evaluate key risks that the organization is actually facing at different stages of procurement.
And also, elaborate risk resistance. Moreover, report also includes risk response strategies such
as remove the risk, transfer the risk, accept the risk, contingency plan and reduce the risk.
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INTRODUCTION
Procurement risk management is a process of determine both external and internal risks
to company supply chain. The effective risk management manage and eliminate situation which
put company at unnecessary risk (Hong, Lee, and Zhang., 2018.). Risk management is
continuous and critical process, and proper risk assessments that should be reviewed, managed
and undertaken throughout the procurement process. Unilever is a multinational company,
located in London United Kingdom. Company deal in various products such as ice cream,
personal care, food, clearing agents, condiments and beauty products. Company is deal in retail
sector that is consumers goods. Unilever provides good quality services and goods at the fair
price. Company target group is households and individuals. This report will elaborate the
different stages of procurement process that help business to achieve competitive advantages by
using appropriate theory. Such stages include specialization, selection, contracting, ordering,
Expediting and evaluation and Follow up. Moreover, the report also discuss risk in relation with
two different stages of the procurement.
MAIN BODY
A Stages of procurement process
Effective procurement process includes stages are as follows:
Specification: company have good specification on their products so its give positive impact.
The first think is to identify the need. The need identification process starts when a manager
submits request to department. Here, request can be complex or relatively simple. But the request
required in to be submitted in the written and includes sufficient details. The department
determine the need of purchase. Thus, company strength is they are more specific about the
products (Khan., 2018).
Selection: After the specification that is need identification, the next step is vendor selection.
The department needs to analyse vendors, then request quotes for products or items needed, then
the company select a vendor. Selecting vendor is an important part because cost, reputation,
dependability and speed of services need to be analysed before making decision.
Contracting: the next stage is contracting with the suppliers, if company select their vendor then
they have to contract them for the further process. Here the company must submit purchase
requisition. Now, it is a time to acquire approval for purchase. After, a manager known the

vendor, agreed on all details then they need to write approval from the responsible department
for approving purchase. Details should include:
 vendor's information
 Party requesting services and item
 Price
 Description and quantity of the services and items required.
Ordering: the next stage is generated purchase order. After, The purchase request approved,
then the finance department of the company will issue purchase order to selected vendor. Thus,
the purchase order communication to vendor that purchase request is approved, and they can
proceed further with the request. As organization intends on ordering from selected Vendor for
long term, then they want to create supplier on boarding process to make sure that the both the
parties understand the expectation. Payment is done after the services has completed and goods
have been accepted, then its time that the company pay to vendor. Finance sends over payment to
vendor is preferred method of the payment. They also negotiate while making order, negotiation
is the process of discussing things with the person for reach an agreement with him.
Expediting and evaluation: This is also called as invoice. This is the crucial stage in
procurement process. In this stage the vendor will submit invoice to purchaser. Invoice is request
for the payment and a detailed breakdown of cost. Here, the invoice also give a deadline for the
payment, and the department need to submit the required payment before it or else there is a
penalty (if the payment is not done on time as per the invoice). This is last chance for company
to change the request, thus it is very important to double check the invoice as well as order for
correct services and items at the correct price. So company must evaluate all factors then make a
order (Balkaran., 2020.).
Follow up: then the department follow up the supply chain, so they get to know that the process
is up to mark or match the deadline on time. They keep record, here the company managers
make record of payment for auditing and book keeping. Here, all the important documents rights
from the purchase request to the approval are stored or recorded in the centralized location.
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Proactive approach is when the actions are taken before difficulty turns into a problem or
issue. Unilever has clear approach that is to make sustainable living common place. Company
follow proactive approach (Brege, and Kindström, 2020.). The proactive is very beneficial for
company, because it permits organization to be flexible. This also enables company to better plan
for future. Here, the leader anticipates problems or issue before and has a good plan for manage
or handle them. This approach focuses on eliminating issue or problems before they arrive or
have chance to appear. Supplier management is a process of setting and defining expectations for
delivery and quality, assessing suppliers performance and also maintain good supplier
relationship. The objective of supplier management is to make sure that the suppliers excess and
meet the purchaser's expectation in the terms of delivery, cost and quality (Lechner., 2019).
When it comes to the departmental organization, there are most common theories of how
department should be organized, which includes centralized and decentralized. Centralized
procurement refers that the purchasing is handle or manage on the headquarter level or top level
of management. Decentralization procurement refers that the purchasing occur in many business
locations and units. If the company follow centralized procurement then the company have
benefits such as improved risk mitigation, better relationship with management and key
suppliers, better management, management of information and data, and many more. Whereas in
Decentralization give benefits to the company such as faster decision-making, local and
specialization requirement, short delivery time etc. Company may follow centralization
procurement because it gives more benefits as compare to decentralization such as it improve
standardized and compliance processes and many more. Unilever has good relationship with the
suppliers so it gives positive impact on the company (Khalina., and et.al., 2021).

B Analyse key risks that company faces at different stages of the procurement.
Risk management is the essential process for analysing, determining and managing the
various financial, legal, strategical risks etc. It is important for every organisation in order to
cope up with the risk so that their business functionality will not affected by such risks (Karasan
and et.al 2018). For the Unilever company as they are giant and popular in their market field
which means they need to work in order to continue their business performance by concerning
with their brand image and to deliver the best outcome in any aspect. Therefore, it is important
for them to have the better strategies at workplace in order to mitigate the risks. Following two
stages of procurement are selecting and ordering where the potential risk has been identified.
Risk management plan:
A risk management plan help in minimize the impact of the risks that could weaken company
cash flow and can damage company brand. (Hillson, and Simon., 2020.)
Identify risk: firstly identify the risks to the business for example poor vendor selection,
problem in ordering, delays in procurement, and operation risk and technical risk, political risk,
Operational risk. Risk identification is always occurring at beginning of project planning and
throughout project life cycle.
Assess the risks: then the next step is assessing risks that are identified above. Here, the
manager review quantitative and qualitative impact of risk such as risk assessment matrix. Firstly
assign risk score from low to high probability. Then, managers map out the risk impact from low
– medium- high and then assign score. This will create an idea of how the risk is impact the
success of project. To make effective risk management project stakeholders and team members
to understand risk assessment matrix, appoint overall risk score through multiplying the impact
score level with the risk probability score.
Minimize risk: There are many risks, some are preventable, so they will minimize or eliminate
where possible. Some risk which can not avoid or eliminated (Kliem, and Ludin., 2019).
Assign responsibility for the tasks: as company determine the risk then they need to occur if
the disaster or crisis happen and also identify who is more responsible for each action.
Understand triggers, if triggers not met, then it is best to come with the back up plan which help
company to take advantages.
Develop contingency plan: the contingency plans are basically plan B or backup plan.
Contingency plan contain discovering risks during the task re evaluating and milestones existing
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risks such as poor vector selection, supply chain management etc. to see the conditions for such
risks have been meet. Contingency plan is very important because if company not reduce the
risks from plan A then they have backup that is plan B. Such plan support project and minimize
or eliminate the risks. Contingency plan is depend on the style, size, and style of the business and
extent of damage.
Communicate plan and train company staff: people who are connected with the business must
be aware about the strategies that have put in place to recover or mitigate from the risk or
disaster situation. Here, company decide how they will communicate such as by email, text,
phone or other means. They have to create procedural statements and also inform relevant people
like suppliers, service providers, staff and contractors etc. Company must conduct training
session which help staff, if there is a situation of disaster occur then the process can help in take
over or guide staff.
Monitor the new risk: risk can be occurred during day to day operation, therefore its very
important to knowing the potential risks before it occur. If the company continuously monitoring
risks will help company to develop effective and realistic strategies for handling issue or risks if
they occur.
Risk register:
Risk register refer to the effective risk management tool that is utilised for collecting the
risk events and arrange them in a specific risk categories and assign team mates roles in order to
deal with the risks (Lücker, Seifert and Biçer, 2019).
Date Risk
description
Likelihood
of risk
Impact
of risk
Severity Mitigation
action
7-4-
2022
Technical
risk
High High High Use
antivirus,
spyware and
firewall
protection
and to train
the employee
to deal with

technologies
7-4-
2022
Operation
risk
High Moderate Moderate Monitor
risks,
analyse
supporting
technology,
proper
planning
7-4-
2022
Political risk High Moderate Moderate Proper
strategies.
Compliance
with rules
and
regulations
7-4-
2022
Project risk Moderate Medium low Involve risk
management,
prioritising
risks and
proceed with
proper
planning and
strategies
and to enable
team to
accept the
risk and keep
working on
it.
Risk matrix:
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Risk matrix that is utilised during the risk assessment for describing the risk level by
concerning with the possible factors of likelihood against the elements of consequence severity.
Likelihood Impact
0
Acceptable
(little or no
effect)
1
Tolerable
(Effects are felt
but not critical)
2
Unacceptable
(Serious
impacts to
course of action
and outcome)
3
Intolerable
(Could result in
disasters)
Improbable
(Risk unlikely to
occur)
Political risk
Possible
(Risk will likely to
occur)
Technical risk
Probable
(Risk will occur)
Project risk Operational
risk
Qualitative risk analysis:
Qualitative risk management refers to the main aspect within the risk professional tool, it
allows for quick prioritisation of the potential risk. SWOT analysis comprises of the factors that
are strength, weakness, opportunity and threats (Rajarajan and et.al 2018). A fundamental tool
for the risk management plan that leads team members to easily find the risks and other blind
spots in the operational task. Therefore, this involve the internal planning and other external
factors that helps the organisation to understand their business functionality and to overcome the
risks which is identified in their working approach.
Strength: Unilever company have better and skill full workforce which is their ultimate strength,
their specific knowledge helps them to deliver the better outcome of any project. Therefore,
company have proper management and they always follow the rules and regulations thus this

will help them to overcome the political risks. Although they pay their taxes on time and also
follow the employment policies that helps in retaining their potential workforce.
Weakness: It is important for the firms to invest on technologies for the better outcome, as for the
Unilever it is found that they are lacking in technologies (Willumsen and et.al 2019). therefore, it
is creating challenges for the organisation to introduce software and technologies in their better
procurement process.
Opportunity: To invest in new software for procurement process, AI driven technologies, process
automation, SAP software can also be used in procurement stages.
Threats: Increment in production costs, loss of farm income, labour cost, changing political and
economical environment.
Quantitative risk analysis:
Quantitative risk management refers to the process for changing the risk impact on
project in a figure or numerical terms. Numerical data can easily use to identify the cost and total
timing of project.
Breakeven analysis: It is risk management strategy that helps in evaluating the risk that are
linked to investment. It is the financial calculation which weighs the cost of the new service and
product against its selling price for analysing the specific point where it will be break even.
Regarding procurement process, it will help in ordering process as company can easily analyse
their stocks and inventories so that they will made order for only those raw materials which is
required, it helps in saving money resource.
Risk response Strategies:
Risk response strategies that are used in order to manage the project risks. It is one of the
major areas within the project management which is updated by the PMI (Shojaei and Haeri,
2019). It consists of the strategies that are as follows:
Remove the risk: It is the initial and best wat to remove the risk. For an instance it is important
for the Unilever to develop the suitable strategies that helps them to remove the risk, means they
need to strengthen their risk management approach, for an instance in order to deal with political
risk they can proceed to make sure better follow of legislation and other regulatory.
Reduce risk: To proceed with the proper strategies in order to decrease the impacts of potential
risk, for an instance Unilever company needs to train their employees about technologies and to
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deal with different software. Thus it will help in deal with the technologies that helps in reducing
the possible impact of this risk.
Transfer the risk: When managing the risk is out of control then it is better to transfer the
responsibility for the risk to others. Therefore, operational risks are those which is hard to
overcome, therefore in order to deal with this Unilever organisation can also proceed to hire the
team that helps in overcoming the operational risk.
Contingency plan: It is the backup plan which is executed after the failure of main plan, that also
consider as the plan B and recovery plan (Suroso and Fakhrozi, 2018). Therefore, for dealing
with risks in procurement stages it is important for the Unilever to always proceed with backup
plan for the immediate and suitable actions.
Accept the risk: It is the passive decision which generally not required any action, it is the best
approach to make team to accept the risk. It helps in forming the better strategies to deal with
risk also reduces the likelihood of other risk.
Therefore, it is important for the organisation to develop understanding regarding risk
and to proceed with proper risk management strategies to reduce the vulnerable consequences of
the potential risks.
CONCLUSION
From the above report it is concluded that procurement process for the organisation is
important in order to convert their raw input into deliverable output. It consists of the different
stages that has been discussed above. Following have illustrated the Van weele’s procurement
process where it highlighted the significant stages of procurement process. Further report has
illustrated the risk assessment for the risks that have been identified in the two stages of the
procurement process, where it discusses the sort of risks that are technical, operational, political
and project risks which is occurred in the ordering and selection stage of procurement process.
Furthermore, report have discussed the risk register and risk matrix where it shows the risk
probability and their possible impact, it also included the mitigation process against the potential
risks that are identified. It also covers the qualitative and quantitative analysis of risk
management where it discussed about SWOT analysis and breakeven point tool, and report lastly
concluded with the risk response strategies.

REFERENCES
Books and journals
Balkaran, L., 2020. The Value Internal Audit Brings to an Organization.
Brege, H. and Kindström, D., 2020. Exploring proactive market strategies. Industrial Marketing
Management. 84. pp.75-88.
Hillson, D. and Simon, P., 2020. Practical project risk management: The ATOM methodology.
Berrett-Koehler Publishers.
Hong, Z., Lee, C.K. and Zhang, L., 2018. Procurement risk management under uncertainty: a
review. Industrial Management & Data Systems.
Karasan, A. and et.al 2018. A new risk assessment approach: Safety and Critical Effect Analysis
(SCEA) and its extension with Pythagorean fuzzy sets. Safety science, 108, pp.173-187.
Khalina, V., and et.al., 2021. Analytical tools in the sphere of public procurement. Sciences of
Europe. (62-3). pp.40-44.
Khan, N., 2018. What is public procurement: Introduction. In Public Procurement
Fundamentals. Emerald Publishing Limited.
Kliem, R.L. and Ludin, I.S., 2019. Reducing project risk. Routledge.
Lechner, G., 2019. Contribution of supplier management to company value
development. Eurasian Journal of Business and Management. 7(2). pp.38-48.
Lücker, F., Seifert, R.W. and Biçer, I., 2019. Roles of inventory and reserve capacity in
mitigating supply chain disruption risk. International Journal of Production
Research, 57(4), pp.1238-1249.
Rajarajan, P. and et.al 2018. Neuron-specific signatures in the chromosomal connectome
associated with schizophrenia risk. Science, 362(6420), p.eaat4311.
Shojaei, P. and Haeri, S.A.S., 2019. Development of supply chain risk management approaches
for construction projects: A grounded theory approach. Computers & Industrial
Engineering, 128, pp.837-850.
Suroso, J.S. and Fakhrozi, M.A., 2018. Assessment of information system risk management with
octave allegro at education institution. Procedia Computer Science, 135, pp.202-213.
Willumsen, P. and et.al 2019. Value creation through project risk management. International
Journal of Project Management, 37(5), pp.731-749.
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