University Project Management Report: Risk and Procurement Strategies

This report delves into the critical aspects of project management, specifically focusing on procurement and risk management. It begins by defining procurement management as it relates to supplier relationships and emphasizes the increasing complexity of supply chains. The report stresses the importance of selecting the right suppliers to mitigate risks and highlights the pressures on supplier relationships due to factors like environmental concerns, material scarcity, and economic issues. It explores strategic procurement, defining it as a long-term plan aimed at achieving organizational goals, and discusses its influence on tactical procurement. The report also evaluates project risks, classifying them as internal and external, and examines how organizations employ various management techniques to facilitate smooth operations, including procurement processes. Complex models for project risk and procurement management are also discussed, including the use of advanced analytics and machine learning to enhance performance. The report underscores the importance of identifying risks, understanding their impact, and implementing effective responses to optimize project outcomes. The report also includes real-world examples, such as the cost-saving strategies of The Boston Consulting Group and the significance of model risk management as demonstrated by JP Morgan & Chase Co. This report provides valuable insights into how to manage risks and achieve successful project outcomes.

Running head: PROJECT MANAGEMENT
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Name of the Student
Name of the University
Author Note

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Abstract
The concept of the procurement management mainly deals with the “Supplier relation
management” where the professional procurement is mainly concerned with the robust
supplier management and the concept of the negotiating the favourable conditions and terms
involved in the process. It can be estimated that the supply chain structure will become more
and more complex in the near future. The choosing of the right supplier should be
incorporated in order to reduce the overall effect of it. Increasingly stringent supplier mainly
requires routine and the demanding purchasers to demonstrate their essential competencies.
The concept of the supply chain, environmental, scarcity of the material which are termed as
raw material and the economic issue related to it will increase the pressure on these supplier
relationships. There can be different risk factors that can be associated with the risk involved
in a business scenario. The mitigation factor related to the concept play a very vital role in
every sphere of business. An organisation should always tend to focus on the concept of
gaining profit. In this profit the gaining profit is directly related to the supplier who is
involved in the supplying of the raw material. The report states different processes which are
involved in the section of the supplier.

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Table of Contents
Introduction................................................................................................................................5
Strategic Procurement................................................................................................................5
Critical evaluation......................................................................................................................6
Project risk and procurement management................................................................................6
Use of Complex Models of Project Risk and Procurement Management.................................7
Theory concept and models.......................................................................................................8
Importance of risk management.................................................................................................9
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
The procurement management mainly deals with the concept of the supplier relation
and with it its management prospective. In the near future it is can be estimated that the
concept of the supply chain management would become very much complicate and very
much expensive to account upon. There are different factors which should be taken into
consideration while the selection for the supplier is taken into consideration. The different
factors which mainly count towards the approach are the factors of supply chain
management, environmental, scarcity of the raw material, sustainable and economic factor
which lead to increase in pressure on these buyers directly (Perrenoud et al., 2017)
The main focus point of the report is to take into consideration different factors which
are related to the risk and procurement management. The factors of dangers which are related
to the economic and the other risk which are associated with the relation between the
customer are taken into consideration.
Strategic Procurement
The first thing in order to understand the concept is defining the term which is
involved in it. It can be considered as a plan which is mainly crafted with the main aim of
achieving the goals of the organisation that can be quite off the distance. It can be stated that
the plan is involved in a tenure of five to ten years in the framework (Sadgrove, 2016). The
strategic procurement does not involve coming up with the short term goals but on the other
hand coming up with strategies that mainly involve coming up with solutions that mainly
involve long term goals. The strategy is involved in the management which is a top level
involvement relating to the organisation or within the company’s department of procurement.
The strategic procurement would directly involve in the influencing factor which is related to
the plans related to tactical procurement of implementation and development. A procurement

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strategy can be termed as a comprehensive plan that mainly takes into consideration the goal
which are stated and the basic need of the department of the procurement and of the company
as a whole and then works accordingly to achieve the target in a predefined time frame
period.
Procurement has gathered greater importance in the part of the strategic taking into
account multinational companies in the recent times. It is considered that it would gather
more importance in the coming few years.
Example:
According to Hal Sirkin, the senior partner and the managing director at The Boston
Consulting group and the leader of the global of the BCG’s operation practice. According to
him in an interview he stated that 20% to 40% of the cost saving was done which is was
mainly dependent on the product it mainly concerned. The main aspect which should be
taken into consideration are the process, the product and the location. The issue that mainly
arise is the concept of the difficult in the process of transfer. The major things that matter in
this process are bulky, large and perishable products. Taking into account that the overall cost
is not eaten up by the saving prospective. The factor of the experience plays a very vital role
in this context. Going forward with the implementation without the proper orientation may be
considered to be a very big mistake. For a company dealing with the organisations which are
operating in a complex environment, three things mainly should come into mind. One of the
point of view is the rethinking part which is applied to what is going to be implemented. The
move to an environment with a concept of lower labour cost, the way of thinking should be
done very much in a different way. Fundamentally in the concept of business it may be
termed as labour/capital cost.

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Critical evaluation
The factor of project risk can be defined as an event which is uncertain or related to a
condition that has an adverse effect on the project objectives. The risk can have impact on
any running project in a short, medium or long term. The overall impact can be on the
positive or negative side of the project. The negative event can be classified as a risk and the
positive event can be classified as an opportunity. The project risk can be directly classified
into two factors which are internal and external. Taking into account an organisation, the
database especially taken into consideration data which are sensitive relating to contacts,
employee and financial statement can be at risk both internally and externally. The internal
risk can be considered as the disclosing of the data to external sources through the employee
with the proper authorization from the organisation which is in concern. On the other hand,
the factor of the external risk can be by the access of the data due to non-protection by the
department of the information technology of that organisation. this kind of access to the set of
data can be impacting the organisation on the higher end and can be directly affect the
operation of the organisation and its employees also. The future impact of such activity can
also impact the relation with other organisations and cause a threat on all levels of working.
Example:
Different organisation follow different strategy in order to employ various
management technique in order to implement various processes. This processes are mainly
incorporate to facilitate proper working between different departments within the
organisation. the main working which is related to the procurement management are:
 Relating to the goods and the services it is not on the mandatory part that they should be
purchased from outside. Taking this into consideration it is very much important to
weight the cons and the pros of the purchasing or the renting of these goods.

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 A good knowledge of the overall requirement related to the project should be gained and
then according to it moving towards the options with it, its alternative should be
implemented. There could be more than one supplier who supply the same type of goods.
It should be taken into consideration by means of research that which supplier would be
beneficial for the organisation.
 The next step which would be taken into consideration is the bidding phase. Here all the
supplier would have bit according to their own specification. This stage can be
consideration very much familiar to the concept of choosing of the project. In this step
consideration should be made apart from the factor of the cost to finally move towards a
decision on whom to depend upon.
 After the overall selection process is being implemented, the selection of the best supplier
can be justified. Taking into consideration different term which are related to the method
of payment and so on. This is mainly done in order to reduce the factor of confusion in
the near future.
Project risk and procurement management
The main factor which is involved in the project risk is the identification of the risk
and planning a strategy in order to reduce the overall effect of the risk. The point which
should be taken into consideration taking into account the risk is
 Reviewing of the list of factor that can be referred to as risk as well as the project team
experience and the knowledge which is involved into it.
 Brainstorm of the risks potentials.
 Brainstorm of all the opportunity which are missed if the project does the approach the
completion.
 Making a clear knowledge on who is concerned with which risk factor.

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 The next thing which should be taken into consideration is the factor of understanding the
overall impact of the risk factor.
 Traditional problem solving often move from the identification of the problem to the
solution that can be implemented to the problem. However, it should be taken into
consideration that the determination factor on how to manage the risk and the project
team must identify the root cause of the identified risk.
The risk can occur on different levels. If the knowledge of the risk is to be identified,
then the effect and the impact has to be taken into consideration.
The information which is gathered from the process will be providing valuable insight
on the projects activity and the necessary input to majorly find the effective response in order
to optimize the risk factors.
The process of the procurement management would directly help an organisation to
purchase service and goods from the external sources. The process mainly focuses on giving
a complete procurement process which is explained on a step by step basis how to purchase
from the suppliers.
The procurement process will help in.
 Identify the service and the goods to procure
 Complete the order related to the purchase and the issue to supplier.
 Agree on delivering the methods and the time frame
 Receiving the good and the services for the supplier
 Review and the accept part from the items procured
 Approve payment from supplier.

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Use of Complex Models of Project Risk and Procurement Management
Regarding the needs of the project various numbers of models are being introduced
for the risk identification and procurement management and are being incorporated with
much advance and analytics techniques. These upgrades include machine learning and many
other latest technologies in manner to enhance the performance by reducing the risks related
to the project. Among these types of models, which are proliferating have been designed for
meeting the regulatory requirements that includes stress testing and capital provisioning.
Despite of these models, there are several new models being introduced in the market those
have been designed in manner to fulfil the needs related to the business. These new models
are being introduced for the strategic planning, asset-liquidity management, and pricing
management that will alternatively impact on the performance of the organization in positive
manner. Considering this digital world advanced analytics and Big Data are also playing their
vital role in improving the much sophisticated models that includes fraud detection and anti-
money laundering or customer relationship management. It could be represented as the
subject for the much efficient and effective model risk management frameworks for the
effective working of the business or any other project. JP Morgan & Chase co., one of the
greatest banks in London that can be a perfect example of the importance of model risk and
how much severe could be the consequences.
Example:
Despite of measuring back the risk, JP Morgan intended to change the VaR metric in
the very early of 2012. However, there were certain errors in the presented spreadsheet that
was being used for the purpose and the estimated risk was reported to be 50%. 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. Due to less precise model of
the project risks and procurement management the bank had to suffer a loss of 7 billion

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pounds since that time. Another example can be stated as the LTCM, which has faced the loss
of 4.4 billion dollars because of such disruptive model that could have been saved through
proper model of risk procurement management. It was reported that “Arbitrage margins are
small and the fund took on leveraged positions to maintain or increase profits”. On the
particular time, LTCM’s notional value was reported to be $ 1.2 trillion value of the
derivative position. And later on it was reported by (West et al., 2016) that “When the
Russian crisis kicked off in 1998, European and US markets fell drastically and LTCM was
badly hit through market losses and fire sales”. The lifecycle of model of risk and
procurement management should be managed in manner that it works as a savage for the
company and protect the organization from going into the flood of the crisis.
Theory concept and models
Basically the decision making should be based on considering all the facts related to
the factors that might have capability to influence the decision-making methods those have
been contributed to the outcomes or results related to the output of the project or business. In
addition to this decision-making these decisions could be taken or made under the situations
related to the uncertainty and risks. Most of the projects do not move according to the plan
and uncertainty and risks are always covered up during the execution of the whole project.
For example, Toyota that was affected by the natural calamity, earthquake that affected the
whole intellectual property and basic capital of the organization (Behzadi et al., 2017) 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. Another
condition related to this decision making is that the decision maker will have to be taken with
a degree of uncertainty and risk matrix could be drawn on the basis of impact, probability,
and priority of the identified risk. These findings could be based on past experiences of
evidences in the past that might have affected the successful; deployment of the project. The

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very first theory, model and concepts give suggestion about expected values of decision-
making under certain identified risks. On the other hand, the model of the expected value
seems to be apart from the consideration of the fact about the value that is accountable for the
particular payoff, which has been particularly stated for a particular person was not directly
related to its precise monetary worth. (Behzadi et al., 2017) introduced the concepts those
have been related to the systematic biasing in decision making for the activities those might
be affected by the risks and issues. It was assumed by them that people involved in a project
does not tend to maximize their expected value rather they are more focused on maximizing
the utility.
Example:
In the models of subjective utility presented by Von Neumann and Morgenstern, two
persons might not be able to come at a same decision point on the utility curves but same
normative axiom those seems to be striving to the maximum subjective utility defined by
each individuals separately. (Cagliano et al., 2017) stated that “Prospect theory is a theory of
decision-making under conditions of risk”. The decisions involved about the project
considering this theory involves value trade-offs under internal conflicts. This theory could
be helpful in better describing, explaining, and predicting the decision and choices that could
be helpful typically adhering the related risks or issues. 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.
Importance of risk management
Positive approach of this theory is that it can advance the notion related to the utility
curves, and defines that it could differs in sector of gain related to the sectors related to the
loss prospect theory designing in manner to explain the patterns those could be common

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choices. Another theory presented by (Hopkin, 2017). states that “Prospect Theory looks at
two parts of decision making: the editing, or framing, phase and the evaluation phase”.
Framing could be referred to the sectors or areas in which the decisions, or chosen choices
could be affected by the manner or order representing the decision makers involved in the
project. Talking about the evaluation brings to a certain point that it has been encompasses
two parts that includes the weighting function, and the value function. The value function has
been defined in manner of losses and gains those are considered to be relative to the reference
point regardless of the facts related to the absolute wealth. Risk management within a project
includes planning for the risk identification and mitigation of the risks that are about to be
identified at the early stage, followed by the identification of the risks, thereafter factors that
could be helpful in mitigating the risks and finally controlling and monitoring the progress
related to the progress of the risk mitigation processes. It can be described as the sound
project management as the risks are the entities that are capable of affecting the success and
growth of the project and could even bring it to the situation of a closure.
Example:
As defined by (McGregor & Smit, 2017). “the risk management process is linear and
consists of risk identification, risk analysis and risk response”. These could itself be the
source of new threats and risks to the project and linear process might have possibility that it
is incapable of managing most of the threats and risks associated to the deployment of the
project. Most of the researchers have promoted the risk management as a cyclical process via
considering the various facts related to the phases that are involved in the completion of the
risk management lifecycle. The contingency plan is also same important as that of other
objectives involved in the risks management system of the organization (Hopkin, 2017).
Relationship between a UK based company and its suppliers based in Greece

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The term which is related to the danger is very much associated with the relation
between the UK based company and the supplier which are based in Greece. The main term
which is associated with the concept is the lack of communication between them. In some of
the cases it can be seen that the match between the requirement and the delivery do not
match, in such situation a huge confusion occurs between the misconception. If the delivery
does not match the requirement then it would directly affect the overall working of company.
Conclusion
The report can be concluded on a point that there are different types of risk which can
be associated with any project. The risk factors can directly affect the working condition of
the organisation and hamper the overall working of the organisation. the procurement factor
mainly be directly related to the concept of the supplier and the how the selection of the
process can be implemented in order to choose a proper supplier. The selection of the
supplier is very much important due to the factor of it can be highly beneficial for the
organisation and on the other hand it can be of great loss if the decision is taken wrong.

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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.
Horner, C. A., & Wilmshurst, T. D. (2016). STAKEHOLDER ENGAGEMENT AND THE
GRI: IMPLICATIONS FOR EFFECTIVE RISK MANAGEMENT. CORPORATE
OWNERSHIP & CONTROL, 210.
McGregor, A., & Smit, J. (2017). Risk management: Human rights due diligence in corporate
global supply chains. Governance Directions, 69(1), 16.

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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.
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Segrave, A. M. (2016). Toward responsible development and effective risk
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The roles of corporate culture in the selection of effective risk management strategies.