The 3 Huge Procurement Risks You Can’t Afford to Ignore in 2022

If we’ve learned anything in 2021, it’s that we can’t take anything for granted. It’s time to prepare for 2022 by understanding the biggest risks facing procurement.

Remember back to early 2020 when you thought that the pandemic might be a temporary blip on the radar? And when you thought that by Christmas that COVID would be a distant memory? How wrong we all were!

If the pandemic taught us anything, it’s that we can’t afford to be blasé about risks, lest they turn into a new, and considerably more concerning, reality for us. But the thing about risks is that they are a lot less terrifying when we’re prepared for them. And that’s exactly what our upcoming webcast, “Early Warning: What Needs to Be on Your Risk Radar for 2022” intends to do – help procurement get prepared.

So, while you might not be able to predict the future, you can certainly get prepared for everything it might throw at you. Here are three key risks for procurement that we cannot afford to ignore in 2022.

1. Geopolitical Risks 

From a procurement operations perspective, the world as it is now is an increasingly complex and fractured place. It seems like every day there is a new risk or threat that appears in the global environment. New strains of COVID are emerging that may or may not pose a critical threat, but certainly aren’t helping supply chains with shortages and border closures.

Brexit continues to be a source of instability and delay in the UK and Europe, impacting trade policies and international relations. One of China’s biggest property developers, Evergrande, appears on the verge of collapse, an event that experts believe may trigger another global financial crisis, which could in turn wreak havoc on resource and commodity prices. 

Climate change and environmental impacts pose an ever-present threat. Scientists have discovered bushfires are burning 800% more area annually than they were three decades ago. Navigating one of these risks feels like a mountain to climb. Combine all of them and you have something that looks truly insurmountable.

The key message for everyone in procurement is that, with so much geopolitical and macroeconomic instability, procurement cannot take anything for granted. This is a critical area for procurement as these risks tend to be far less controllable, and at the same time, have the greatest impact on operations.

However, by understanding the macro environment better, planning ahead and preparing to mitigate risks, Procurement at least gives itself a foundation to work from.

2. ESG (Environmental, Social and Governance) 

ESG is not a new risk for procurement, but as time marches on, it is becoming more and more important. Recently, an investor alliance accused more than 700 companies (including Amazon, Tesco and ExxonMobil) of failing to reveal the full extent of their impact on the climate crisis. The alliance argued that omissions by these companies were deliberate and that none were transparent in the way that they claimed to be.

Companies were urged to use standardised data in order to help with performance comparison, as well as using the CPD disclosure platform to reveal their data, rather than using their own reporting.

The accusations, although shocking, reveal that the world is quickly turning on polluters. Stakeholders, including those consumers and members of the public, expect more and better from procurement when it comes to their supply chains. This isn’t just on which suppliers are being used, but how they are monitored on an on-going basis.

Procurement needs to start monitoring suppliers at all levels of the supply chain, and they need to start now. By creating strategies for driving sustainability initiatives down through the supply base, they can have a positive impact on their own environment, but also reduce the environmental impact of the entire supply chain. 

3. Cyber crime 

When we think of cyber crime, we think of poorly-spelled phishing emails, or hacks that we hear about second- or third-hand in the news. Individually, we like to think we have a handle on it, but the risks, both personally and organisationally, are only getting bigger. Cyber crime is increasing in their intelligence and impact. In 2021 alone, the bill for cyber crime came in at a cool $6 trillion, with certain types of attacks, including phishing and cyber attacks, up more than 600% on previous years.

For organisations, there are three main drivers for cyber attacks that they need to be better prepared for, as well as monitoring better with suppliers. These include: criminals using your personal data (for example your social security number) to access your company’s data; ransomware attacks (where criminals hold data hostage); and social engineering attacks (where criminals make employees believe certain websites are real, when in fact they’re used for phishing or other malicious activities). 

And while it may seem like it just takes some common sense to mitigate this risk, employees are continuing to make mistakes that are opening up their employers to increased risks of attacks. The weakest link in any security chain is human involvement, but it’s also the one that is impossible to remove completely. Organisations need to prepare themselves by providing better training for employees to help tighten up cyber security, mitigating both financial and reputational risk in the process. 

We might not be able to wait to get out of 2021 now, but looking ahead, people may be wary about the continued instability and risks that are posed. However, a bit of preparation on key risks, knowing more and sharing that information, can help mitigate them and avert major issues further down the line.

Want to get prepared for 2022 and do your part to help mitigate risks? Then you need to join us for our next webcast, “Early Warning: What needs to be on your 2022 Risk Radar”, on Wednesday 15th December. Register here now!