The Purchasing Risk Analysis

Risk analysis is a powerful project management technique. You can use risk analysis to address the risks that make your procurement job unnecessarily difficult.


A risk analysis is "figuring out what can go wrong and how to either avoid it or fix it," said Diana Lindstrom, a former strategic sourcing manager for a huge telecommunications firm and currently the president of Los Lobos Consulting - a company specializing in project management and coaching project managers.

"By figuring out what can go wrong -identifying risks - we're one step ahead of Murphy's Law."
Great project managers see projects in a

logical sequence of systematically executed events. Developing a procurement risk analysis is no different. "Once we've identified the risk, then we assign a level to that risk," Lindstrom explains. "You can use 1 through 10, ABC, or any other ranking system."

The final piece of the procurement risk analysis is the plan. "The risk plan includes the steps necessary to avoid the risk or mitigate the fallout from the risk if it does happen," she says. "By knowing the risks, understanding how likely each one is to occur, and having a plan in place to deal with it, we're able to successfully complete projects."

Using a risk plan can help a procurement department demonstrate its value to the organization. "Most internal customers don't understand why procurement needs to follow all the steps that are laid out by the company. And they don't care," she notes.

"So, using a risk plan becomes an educational tool. It teaches folks what happens if the procurement steps are not followed.
It shows them in black and white what can happen - the risk - and how procurement professionals deal with it - the plan. It shows them that procurement wants to help them do business in a less risky way."

So, in summary, identify risks, assign levels to those risks, determine the steps to avoid or mitigate the risks, and share the plan with stakeholders.





 Articles on Materials Management.....

Management's expectations From Purchasing
Crisis in Purchasing & emergency Planning

Negotiation Questions from suppliers that can Surprise you
The Supplier Code of Conduct
Entering into a Time and Materials Contract
Supplier's bid Comparison Formula
Supplier Diversity Program
Determinants of a Modern Purchasing Department
Negotiating With Suppliers Over their Policies
Procurement Project Management Plan
The Purchasing Risk Analysis
Inventory Audit Checklist
Hazards Of Purchasing profession
Tactical vs Strategic Purchasing
Demystifying Group Purchasing Organizations
Suppliers' Secrets For Negotiating With Purchasing
Cost Savings Reporting: Dot Your I's!
Code of Ethics in Purchasing
Six Sigma to Success

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