Mitigate supplier risk to safeguard your brand

supplier risk
28 Sep 2015

Highly reputed brands attract good suppliers, valuable partners and strong customers. They enjoy a positive public image and are seen as the benchmark for other players in their respective fields.

But it isn’t only clever marketing and strategic public relations efforts that give prominent brands around the world their position at the top.

“A brand’s reputation is, first and foremost, dependent on a company’s ability to deliver on promises – and leading companies are well-respected because of their commitment, reliability, social responsibility, compliance and, quality,” said Greg Brown, Director of LexisNexis Governance, Risk & Compliance.

Reputational threats

“One particular area of focus that deserves serious attention is the relationship between business and supplier, which if weak or questionable, can significantly undermine a business’ reputation,” said Brown.

Considering that businesses rely greatly on suppliers for anything from the office coffee to I.T. or logistics support, it’s obvious that the interaction with vendors can have a substantial impact on a business’ operation.

“Strained supplier relationships or inefficiencies can threaten your company’s reputation because delivering the end product or service to clients is still your responsibility, regardless of your supplier,” Brown added.

Suppliers who do not enjoy a good reputation within their own industry can also negatively affect your business by association. “A key practice to mitigate this risk is by investigating negative and positive news on vendors,” said Brown. “That way, you can make informed decisions about your associations.”

Internal controls

Bribery, corruption and fraud within an organisation can tarnish a business’ reputation and in many instances can be linked back to suppliers. “It is important to be in control and to identify any threats of corruption by recognising potential connections between suppliers and employees,” said Brown.

“Our solution, ProcureCheck allows you to recognise conflicts of interest within your organisation and potential vendors or supply chain partners,” said Brown. “This system also offers a module that helps with combatting corruption by identifying potential connections and ownership of property, as well as highlighting any outside business interests of employees within an organisation,” he added.

Legal compliance

Additional key features of ProcureCheck that are beneficial to Supply Chain Management Officers include assistance with compliance with the Public Financial Management Act during the procurement process.

In accordance with Section 16A8.1 of the Act, which touches on “Compliance with ethical standards”, ProcureCheck ensures that supply chain officials meet all conditions as stipulated in 16A8.3 of the Act.

“Problem areas that can taint your supply chain include possible conflicts of interest that may arise during the co-ownership of property by supply chain officials; additional directorship of conflicting or tendering companies or through the acceptance of gift in the form of immovable property,” said Brown.

The reports generated by ProcureCheck may also be used by the accounting officer in the submission of information to the relevant treasury (16A11 of the Act).

“ProcureCheck forms an integral part of the supply chain management policy and promotes adherence to the code of ethical standards as outlined by the Municipal Finance Management Act No. 56 of 2003; 46, Ethical standards.

“Companies tend to focus primarily on minimising their negative ethics risks, since they understand that unethical beliefs, practices or behaviour can expose them to financial loss. The use of ProcureCheck in supply chain management can help to eliminate corruption and fraud by promoting strong ethical standards and good business practice,” said Brown, adding that this in turn promotes a strong company ethics culture in accordance with King III.

As an electronic web-based workflow tool ProcureCheck is able to:

  • Provide automated irregularity alert reports
  • Provide vendor and staff reports (useful for King III committees)
  • Allow you to create your own internal vendor list (preferred and blacklisted vendor indicators)
  • Allow clients to import vendor and staff lists
  • Facilitate vendor vetting (on an adhoc or batch basis)
  • Offer ongoing monitoring
  • Generate a detailed conflict of interest report.

For more information, visit, https://www.procurecheck.co.za/Home.aspx

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)
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