Global Best Practice - Risk Management
Managing risk is a key element in procurement, and it starts with understanding how to analyze risk. Knowing how to analyze risk factors can help procurement departments accept or mitigate exposure to risk as they compare the risk of taking an action to the potential impact that the action can have on an organization's objectives. Risk assessment involves analyzing the likelihood, impact, and effect of known risks on the achievement of established objectives. It also involves knowing what corrective action to take should a potential risk become realized. Procurement professionals should create a formal risk management plan, which can range from taking simple consideration of risks to having a comprehensive risk management plan for enterprise-wide projects. Regardless of where procurement's risk management plan falls on the spectrum, it should be an integral part of procurement functions. Managing and communicating risks to the organization is a key element of procurement's responsibilities to ensure that risks do not stand in the way of achieving organizational objectives.