By now, you may have read all or a few articles of our five-part “Compliance Management Checklist” series here at CPO Rising (if you missed any, click here to check those out). The team at CPO Rising wanted to comprise a few final thoughts to effectively wrap-up this critical content series and provide some context as to how to leverage the series in any procurement compliance management initiative.
Why is compliance so important in today’s business world?
Any focus on compliance exists for two main reasons: avoid legal ramifications and ensure that spend management efforts aren’t negated. Any lapse in compliance, such as federal audits due to co-employment / contractor reclassification, can result in long legal battles that drain the time of multiple functions…including procurement. With enterprises seeking every competitive advantage they can to stay ahead of their peers, it is important to focus on strategic, value-add initiatives and not be bogged down in the courtroom.
On the spend management front, every Chief Procurement Officer realizes that their efforts are wasted if the greater organization doesn’t follow preferred supplier lists and follow the guidance of the procurement unit as to how to purchase direct and indirect materials. In fact, as we noted in the first article of the “Compliance Management Checklist” series, most organizations think of “traditional” ramifications, such as savings leakage, when discussing the world of compliance.
How can my company leverage the checklist in an effective manner?
The twelve items listed on CPO Rising’s procurement compliance checklist are meant as starting points in a general manner (we are assuming that the average company actively manages complex spend categories, has a typical procurement team, etc.). While those dozen attributes can be effective at any organization, the truth is that each enterprise will have to assess their own active compliance risks and build the checklist from there…using, of course, CPO Rising’s suggestions.
A company may not heavily-leverage independent contractors, thus the few compliance checklist items in that arena will not be significant additions to the checklist. Similarly, the marketing-focused aspects (such as meeting budget adherence and corporate brand consistency) may also float a bit beyond the core procurement focal areas. It is important to note that even though category-specific checklist items may not seem crucial at this current stage, every enterprise should keep those areas on a “backup list” in the event organizational strategies shift (i.e., more ICs coming into the company).
As for taking a completed checklist and actually making use of it, an enterprise must ensure that communication is occurring between key stakeholders in regards to compliance threats (internal and external). Regular meetings focused on how the company can mitigate compliance risks can be founded on the compliance management checklist, helping to better strategize as to which risks exist and the proper plan-of-attack for each.
What’s the best way to develop this checklist?
A collaborative approach is the best possible way to develop an efficient and effective procurement compliance checklist. Each key stakeholder and function across the organization, from finance to procurement to HR to IT, will have specific expertise regarding various compliance areas. It is imperative that enterprises that are seeking to build a procurement compliance checklist balance each function’s top threats (finance = over budget spending, procurement = supply disruptions, etc.) when building a custom checklist.
In time, as new threats emerge and compliance regulations change, this same collaborative process must be leveraged to amend the compliance management checklist.