The Evolving Role of the CPO in 2021 and Beyond
Crises are great teachers. One business lesson from 2020 is that while global supply chains may be efficient, they are not always resilient. The COVID-19 pandemic caused so much disruption that it laid bare the inherent risks that exist in a “just in time” supply chain philosophy. This was a blaring wake-up call that supply chain risk must be better managed, and in this, procurement has an essential role.
In the past, procurement has too often been an afterthought in business strategy and planning. Value was sought in the margins, and procurement was primarily focused on transactions, supporting business requests after decisions were already made. With disparate processes and criteria that were often siloed by function or business unit, risk mitigation was more reactive than proactive, which owed in part to limited visibility into the supply chain.
Using legacy, on-premise technology and a patchwork of single-purpose solutions, many CPOs lacked an enterprise-level view of vendor risk management. These challenges persist. found that only half of CPOs enjoy high or very high visibility into tier 1 suppliers, and 90% of organisations rated their visibility into extended supply networks as moderate to very low.
Given instances of fraud, the need for regulatory compliance, and the impact disruptions have on operations and revenue, procurement requires a deeper understanding of the supply base. This includes understanding a third-party’s ownership structure, its portfolio of customers and partners, the strength of its finances, and a variety of other factors that impact resilience and reputation.
A silver lining of the challenges in 2020 is that executives increasingly appreciate that procurement is a core capability that can support enterprise growth. As a component of this, there is a growing call for procurement strategy to align with brand strategy. Consumers, customers, investors, and analysts factor corporate responsibility into their decisions. In the current social climate, aligning brand values with procurement decisions supports a healthy, differentiating view of an enterprise’s social accountability.
Heading into 2021, these themes are priorities for procurement. Yet, recognising the need does not in of itself expand a CPO’s capacity to manage risk and cost.
An Opportunity to Transform
In Deloitte’s Flash Survey, 64% of CPOs reported they are shifting from assuring supply continuity into new efforts to adapt supply chains to the post-pandemic world. In some ways, what’s old is new again. Procurement offices are striving to make better sourcing decisions, including dual sourcing. CPOs are also looking to expand their supplier base. The Flash Survey showed that 31% of CPOs rank “refining geographic supplier base” as the primary tactic for expanding, and another 24% reported their approach as a “shift to nearshore/regional.”
While these efforts move toward resilience, they also inject more potential risk into the supply chain. A risk assessment during onboarding with periodic reviews is insufficient, as CPOs require a real-time view of the supplier risk profile. Fortunately, there are third-party capabilities that permit this, allowing a company to calculate not just the risk to the enterprise (e.g., supply reliability, brand reputation), but also the risks a vendor may encounter.
Meanwhile, CPOs face the dual imperative of managing cost and price. The Flash Survey showed that the highest current priority for CPOs is cost management, receiving about eight times more day-to-day focus than other areas. With strained revenue, procurement must understand how costs and commitments impact cash flow and identify ways to reduce or defer those commitments. At the same time, CPOs must continue cost-effective category management, seizing efficiencies and savings where available.
When it comes to managing risk, spend management transparency, and aligning business strategies, conventional approaches to procurement are not up to the task. Manual spreadsheets, offline modelling, and legacy technology do not support enhanced risk, spend, and third-party management. The time to transform procurement is now.
An end-to-end transformation initiative may seem hard, particularly as enterprises focus on cost management. And yet, this is precisely what is needed to enhance management capabilities with a direct impact on the bottom line. World-class S2P processes and tools are a business imperative, not just a procurement function.
Consider a future state where KPIs allow procurement to more effectively monitor costs, contract leakage, and vendor management. Standardised processes are enabled through leading cloud-based applications, which evolve and improve over time. Procurement has a broader, deeper understanding of traceable and accurate data that guides decision making and elevates category management strategies to their full potential.
This world-class procurement is attainable. CPOs will face new challenges and identify new opportunities in the months and years ahead, and when procurement is transformed, they will be positioned to do more than survive. They will thrive.
Biden’s Supply Chain Intentions Depend on Cybersecurity
In recent years, the United States’ supply chain network has faced an onslaught of cyberattacks. The attacks have left the global superpower a shaking nation with a whole portfolio of challenges, risks, and vulnerabilities exposed to the masses. From the attack to the that breached companies like Apple, Microsoft, Uber, and Tesla, to the most recent , it’s evident that, in an increasingly digital age, cybercriminals fear no traditional governmental powers, and supply chain networks need to hunker down on cybersecurity.
Looking back at the height of the COVID-19 pandemic, western nations found themselves ill-equipped to deal with the novel Coronavirus; not due to lack of knowledge or medical inability but because supply chains were in a chokehold and supplies like personal protective equipment (PPE) for frontline workers weren’t being manufactured fast enough.
The Executive Order (EO) of US supply chains to figure out exactly where the vulnerabilities and risks are, to help institutions and organisations manage any future disruption caused by COVID-like events.
The EO focuses on six primary sectors:
- Communications and information technology
- Defence industrial base (DIB)
- Energy and power
- Public health
The listed sectors, as you might expect, are increasingly dependent on digital products and services to maintain daily operations, which increases their vulnerability to potential attacks ─ so they need cybersecurity. In fact, cybersecurity should be front-and-centre as a critical facet of the EO if the federal government truly intends to create a more robust and resilient supply chain in the face of rising criminal adversity.
Digitisation Dangers The Nation
When it comes to a globally interconnected supply chain, the ambitions of Biden’s administration are potentially a little far-fetched and off-the-mark, in reality. I say that because an overwhelming number of industry-leading organisations ─ even in the tech realm ─ still do not feel confident in their ability to deal with the vulnerabilities in their supply chain. Most of which come not from internal operations but from externals ones in the form of third parties and suppliers that they collaborate with.
According to the dated but increasingly relevant Marsh Microsoft introduction, “cyber risk has moved beyond data breaches and privacy concerns to sophisticated schemes that can disrupt entire businesses, industries, supply chains, and nations, costing the economy billions of dollars and affecting companies in every sector. The hard truth organisations must face is that cyber risk can be mitigated, managed, and recovered from, but it cannot be eliminated.”
Taking a look at the survey results reveals a telling tale: that third-party providers and supply chain operations external to an organisation are most likely to be the victim of cyberattacks and potential infiltration.
The survey found a wide discrepancy in many organisations’ view of the cyber risk faced by supply chain partners, compared to the level of perceived risk they themselves pose:
This variance is consistent across industry sectors and geographic regions, and the largest organisations exhibited the largest dissonance: 61% of companies with revenues of US$5bn or more suggested that their supply chain partners pose a risk, whereas only 19% say they themselves pose a risk to the third-parties involved:
Low Confidence in 3rd-Party Risk Mitigation Capabilities
The above paints a pretty poor picture of the overall supply chain security ─ a disconnect between large organisations and their suppliers, which could be driven by companies’ low confidence in their ability to mitigate cyber risks posed by their commercial partners. The number of companies that considered themselves “highly confident” in that area is few and far between, with only 5-15% of respondents feeling prepared to deal with the cyber risks caused by certain types of third-party providers.
So due to the very obvious lack of knowledge, it’s clear that supply chain professionals and organisations, as well as the Biden administration, should call upon their cybersecurity industry peers ─ ─ to take the fight to black hat cybercriminals.
How Cybersecurity Professionals Can Help
According to Padraic O’Reilly, CPO and Co-Founder of CyberSaint, the success of Biden’s Executive Order is heavily dependent on its stakeholders taking note of lessons from cybersecurity’s supply chain risk management initiatives, including:
- Identifying the main weaknesses along the chain of production before determining which ones can be fixed cost-effectively. Then, compare that with the cost of the potential impact ─ discover where the holes are and what’s worth prioritising.
- Thinking about the supply chain as a cybersecurity practitioner does. Cyber-risk is all about making sense of multiple data sources, and supply chain risk is the same. Don’t think about the supply chain as a single entity; rather, consider it as many entities that produce data ripe for deep risk analysis.
- Standardisation across the globally interconnected supply chain is hard, and communication is key. Cyber experts are hot on the topic, as managing risk is exactly what they do. Vulnerabilities and risk is the language that they speak in. They’ve been dealing with supply chain security for years before disruptions at the scale of COVID-19 came about.
Cross-sector collaboration with a strong focus on communication across hierarchical levels is at the very core of the cybersecurity function. If Biden hopes to see his supply chain initiative reign triumphant, his administration must ensure that efforts are coordinated across agencies, public entities, and the private sector industry. The administration must also carefully consider the potential impact of increased regulation that should be put in place following the year-long project ─ it could make or break the initiative across various sectors.
According to O’Reilly:
“The best choice is to rely on standards, measurement, and cross-industry collaboration to make this happen. Other supply chain standards, such as the (CMMC), can serve as models for a data-driven approach.
Without these considerations, we risk a lot of duplicative time, effort, and analysis, only to fail to mitigate cyber-risks and possibly result in yet another supply chain attack. We hope stakeholders will engage the information security community to bolster this project. Leveraging existing analysis by the information security community will matter to its success.”
Adapting To The Unknown
The fact of the matter is, when it comes to the US supply chain, we mostly haven’t got a clue. It’s a massively interconnected network that represents an ecosystem ─ one with risks coming from all angles and multiple points of failure. It’d be almost impossible to figure out all of the potential risks, as Biden’s initiative intends, so, according to O’Reilly, it’d be beneficial to focus not on sniffing out every single supply chain vulnerability but on advanced persistent threat (APT) incentives:
- What are the low-hanging targets?
- What do criminals want?
- What are they capable of?
“Doing some scenario modelling and talking in probabilities could lead to more informed decisions regarding mitigating risk. NIST 800-30 and the are examples of risk-quantification methods that aim to translate cybersecurity risk into dollars and cents. Understanding supply chain risk requires measurement, strong governance, input from security experts, information sharing, and advances in cyber and IT risk-management software. Instead of logging an APT's activity, start getting a fact pattern about where they may be going”, O’Reilly adds.
So the final point to the Biden administration and organisations that are working on is clear: cybersecurity professionals have an advantage over their peers because they already live to standardise data; they view risk through a lense of complexity and costliness of failure, and if the two parties can collaborate effectively, there’s a chance that security professionals can finally understand the full extent of the supply chain ecosystem and, with any luck, secure it from future attacks.