5 Reasons Why Supplier Management is Different in Financial Services
For the last three years, CASME has supported the financial services industry by including sector-specific RoundTables in its annual event programme. These impartial, facilitated meetings bring procurement professionals together to share ideas and good practice specific to the banking and insurance world, in an environment that is also free from sponsors and suppliers.
The demand for this service arose when financial services organisations identified some unique procurement challenges in comparison with other sectors. At CASME’s most recent Financial Services RoundTable, held online due to COVID-19, the reasons why procurement activities for financial services organisations are different was discussed yet again. The key reason seems to be inherent in how the supplier base is managed.
Here are the top 5 reasons for the disparity:
- Regulatory bodies require so much administrative detail that other aspects of the procurement process are often overlooked, including the time it takes to build relationships with suppliers
- Risk mitigation takes priority and dominates all supplier conversations
- Senior stakeholders often undertake their own procurement, generally in the belief they can negotiate and work effectively with their own suppliers. Procurement is only then brought in later to ‘tidy up’
- Structural divisions within organisations can result in Procurement being fragmented, and possibly less effective at overcoming challenges together
- Procurement often has limited resources and can end up being focused on dealing with regulatory requirements and mitigating risk, with less time to strive for innovation.
Procurement must embrace these differences and use techniques such as supplier relationship management (SRM) programmes to deliver value, encourage innovation and bridge the link between supplier and stakeholder. The advice is to start by establishing some common goals. Patience is required because the turnaround can be slow, and it takes time for trust to be established between all parties. Demonstrating success by using case studies and effective communication is considered best practice.
At the Online RoundTable, delegates also discussed the likely future trends when managing suppliers who provide goods and services to the financial services sector. As identified by delegates recently, the top 3 trends are:
- Developing local sources of supply; partly a reaction to COVID-19
- Focusing on building relationships and obtaining a high level of trust with strategic suppliers
- Establishing greater visibility of supply chains, at least with tier one and also tier two suppliers.
To discover more peer-to-peer intelligence from Financial Services Procurement, or how to be involved in the discussions, please contact the CASME team.