The “Post-Pandemic dawn” for Financial Services Procurement

In the immediate post-pandemic world, Procurement leaders in the Financial Services sector have resorted to a well-trodden path, managing suppliers and achieving compliance. However, there are two other strategic priorities which Procurement teams must consider as we transition beyond the Covid pandemic; the digital transformation of Procurement and, a new laser focus on managing the cost base.

In recent years, procurement in financial services has been much more about meeting Financial Conduct Authority (FCA) requirements regarding data security, operational resiliency and risk management rather than delivering business-wide value. As such, the procurement operating model in Financial Services has evolved to just manage compliance risk and suppliers, rather than value for customers and the wider business.

Cost Optimisation must be the new strategic initiative

A recent survey of over 400 business and procurement leaders across 30 countries has highlighted the strategic priorities for purchasing departments in the year ahead.

Strategic Priorities for Procurement

Service-Sector-Chart Banking-Sector-Chart

Source: PWC Procurement Survey 2021

 The results are interesting when contrasted against the wider Service Sector cohort. A focus on cost reduction and optimisation has become the number one priority for all businesses in the service sector as well as in Financial Services. This should be no surprise given rip-roaring inflation fuelled in part, and most recently, by the war in Ukraine. The current macroeconomic situation will continue to present a challenge for procurement individuals as well as for functions in the years ahead. Many procurement professionals have not faced such challenging cost conditions in their careers so tenacious, motivated and skilled teams are a must. Equally, in the Financial Services sector there is unlikely to have been such a business imperative in the past to drive cost reductions, so a new cost optimisation focus may be culturally alien for some. The key to success will be a well thought through workplan for the year ahead, with a dogged focus of addressing indirect spend at its core.

Risk management still essential – but the risks have changed

Not surprisingly, there is still a significant focus on the management of risk, which placed second in terms of priority. In Financial Services, the risks are not the physical ones we see in the Manufacturing and Industrials sector, where shortages of raw materials and logistical problems have created significant challenges in the last couple of years. The risks are much more linked to technology, data, cyber-security and business continuity and in this regard, procurement will still need to be a key player in managing and mitigating these risks. This will need to be done in concert with a well-structured and digitally enabled Supplier Relationship Management (SRM) programme (which happens to link with strategic priorities number 3 and 4 for the procurement function).

Transformation through digitisation

Digital transformation within procurement is the third strategic priority. “Digital procurement” has long been a buzzword, but uptake of digital solutions has tended to fall short of their billing and this also applies in the Financial Services sector. Larger Financial Institutions have made investments in managing the supply base through some sort of Vendor Management or Contract Lifecycle Management tools but most mid-sized players and fintech start-ups have not even arrived at the starting post. It should, therefore, be no surprise to see this becoming an ever-increasing priority for businesses as they seek to realise efficiencies and free up procurement resources time for other strategic priorities. The primary challenge here often lies on the return-on-investment case for such digital transformations and a clear assessment of the cost-benefit must be made and articulated at Executive level to facilitate key investments in this area.

Excellent Supply Base Management remains fundamental

Finally, the management of the supply base remains a strategic priority in the sector. Compliance to FCA guidance and rules remains and procurement will still be expected to play an important part in management of suppliers. Most Financial Institutions will have an outline process and segmentation of suppliers from which to meet their regulatory obligations. However, the businesses who have set the most appropriate governance framework for managing their suppliers, supported by technology, will deliver best results. Digitally enabling the management of suppliers by a wider stakeholder group will free up time. Equally, collection of key information and data from suppliers and stakeholders can be made more efficient through digitisation, so linking this priority to procurement’s wider digital strategy is critical to success.

The “Post-Pandemic dawn” for Financial Services procurement presents both challenges and opportunities for procurement teams in the sector, where genuine change and transformation can be delivered in a short space of time. However, to make that happen, procurement must first deliver against the strategic priorities identified by their businesses.

Points to consider:

  1. Procurement teams will need a comprehensive workplan designed to address the maximum indirect spend to meet cost optimisation objectives. Executive level sponsorship and governance will be a must.
  2. SRM processes and approach so be digitally enabled to drive efficiencies in the supplier management process.
  3. A wider digital procurement strategy should be created and rolled out, with vendor and contract management the priority.

 

For further information or to discuss how Procura could help your organisation – please get in touch:

Email us: info@procuraconsulting.com

Call us: +44 (0)203 693 7275

Or subscribe for regular updates:

Subscribe below for regular Insights

* indicates required

Please select all the ways you would like to hear from Procura Consulting:

You can unsubscribe at any time by clicking the link in the footer of our emails. For information about our privacy practices, please visit our website.

We use Mailchimp as our marketing platform. By clicking below to subscribe, you acknowledge that your information will be transferred to Mailchimp for processing. Learn more about Mailchimp's privacy practices here.