We all have suppliers – some organisations have just a few, making supplier management quite easy, where others have thousands to keep track of. However, even when using a regimented supplier management system, how well can you know your supplier?
Judy Bonnier, corporate governance, risk and compliance solutions specialist and Business Development Manager at LexisNexis Risk Management and IOS Solutions, tells SmartProcurement that there are many things you should consider when getting to know your suppliers.
“Get a 360-degree view of organisations and individuals by digging deeper than a financial stress score.” A starting point is using Google Earth to confirm if your supplier is who they claim to be and indeed have that fancy factory or store they are telling you about. A simple search would allow you to closely view the actual satellite image (showing building size and actual location) to confirm if the organisation is truly what it presents itself to be.
The next step is to understand the complex relationships and connections that may exist between your suppliers and other entities.
Many organisations take for granted the implications of a simple connection between one of their employees and a supplier’s director, especially if the employee’s duties involve supplier take-on and purchasing. Is the financial risk really worth it? Not to mention the possible reputation risk if the company is found to be operating under such corrupt activities?
“Customise your due diligence efforts to suit each client and what they are spending with you”: using a consistent and defensible due diligence process when choosing new suppliers could enable the detection of conflicts of interest, pass-through schemes, tender fraud and shell-company schemes before they prove costly to your organisation.
Laws such as the PFMA, MFMA, King III and the UK Bribery Act require subjected organisations to comply with vendor and employee vetting, or face legal penalties, costs and reputational damages associated with unethical business partners.
Bonnier suggests some additional simple searches that will help you better understand your suppliers:
• Use a global news archive to check a supplier against licensed news sources and minimise the reputational risk of conducting business with an unethical vendor.
• Checking sanctions, watch lists, and PEPs ensures that your organisation does not work with a blacklisted supplier, which would put you at risk of costly fines.
• Company information – Verify a corporate entity and find out more about its business and management structure, financial health, and M&A activity.
• Country information – Identify high-risk issues in the supplier’s country of origin, by accessing on-the-ground media reports and in-depth country risk analysis reports.
• Legal history – Determine how litigious the supplier and its employees are, or whether they are involved in ongoing litigation that could disrupt business effectiveness.
• Public records – including names, addresses, places of employment, cellular and unpublished phone numbers, licences, property records, bankruptcies, liens or judgments, all of which could provide insight into an organisation’s past dealings.
Do not underestimate the importance of a proper due diligence process in your procurement activities. Be proactive about vendor and employee vetting before any damage can be done to your organisation’s reputation.