How AI is helping supplier risk managers move beyond traditional scorecards

The volume, velocity and variety of supplier-related risks that organizations are exposed to have all surged in recent years. Traditional scorecards, scheduled questionnaires and snapshot views of risk can’t keep pace with continuous disruption and are no longer fit for purpose.

To maintain a clear view of emerging vulnerabilities across their supply chains, procurement teams must evolve their approach to supplier risk management. But what exactly does that need to involve, and which digital capabilities should procurement leaders prioritize?

As part of The Chartered Institute of Procurement & Supply (CIPS) AI Webinar Week, WNS Procurement’s Sayan Debroy joined CIPS Download Editor James Moore to explore the role of AI in transforming supplier risk visibility. And to discuss how it is helping leading procurement organizations move beyond the surveys and scorecards of the past.

The webinar is now available to view on-demand. But here’s a quick recap of the key takeaways from their discussion.

One of the biggest reasons why traditional scorecard-based approaches to supplier risk management can’t keep pace with today’s constant disruption is that in most cases, the risk indicators they score organizations on are backwards-looking, rather than forwards-looking.

Using financial stability assessment as an example scenario, indicators such as revenue decline, net loss, and credit rating downgrades are useful for understanding the position a supplier is in today. But they only confirm risk after it’s happened, rather than alerting you to potential risks proactively.

To get ahead of today’s pace of disruption, organizations must shift their focus towards leading risk indicators that point towards issues which will only become completely clear in the future. These include factors like employee layoffs, product launch delays, regulator scrutiny and senior management departures.

The issue for many organizations is, tracking leading indicators requires them to pull a huge amount of data from diverse sources, combine it with lagging indicator data, and analyze it in real-time to uncover timely and actionable risk insight.

That’s where AI comes in. AI-powered assessment can help procurement teams:

• Continuously monitor leading risk signals

• Filter out noise and irrelevant signals

• Assess the materiality and projected impact of risk

• Revise risk score and outlook projections

• Generate clear and concise summaries that anyone can interpret confidently

An integrated, AI-powered intelligence platform is among the most valuable assets a procurement team can have today. By establishing a single source of truth for risk that everyone can access and utilize however and whenever they need to, it removes a huge amount of the manual work associated with risk management, while reducing opportunities for human error to creep into the process.

But risk intelligence is just the beginning of the journey. What’s crucial is what happens after a risk is identified. For many organizations, this is where their supplier risk management efforts currently fall short. They can identify risks, but it takes them a significant amount of time to translate them into the right responsive actions.

AI capabilities deployed alongside or as part of integrated intelligence platforms are actively closing that gap for organizations, by:

• Delivering automated, contextualized and role-based alerts that go directly to the people responsible for managing the impacted supplier(s).

• Generating recommended next steps for common risk scenarios after automated risk triage with a layer of human validation for governance purposes.

• Helping teams understand exactly when to escalate an issue with internal stakeholders or suppliers and then putting it into action.

Those are just a few of the ways that AI is already transforming supplier risk management as we know it. At WNS Procurement, we are guiding the diffusion of AI and automation across three key stages; sense, decide and act - to ensure a balanced and effective transformation. As this evolves, AI will increasingly operate across all three, enabling faster, more streamlined and intelligent procurement processes.

At the sense stage, AI will help procurement teams:

• Capture and process a wider range of risk signals from increasingly complex and diverse sources

• Conduct holistic risk assessments by combining public, third-party, client and supplier disclosure data and enriching it with deeper context

• Detect and cross-link risks across domains, supplier ecosystems and geographies

• Validate risks quickly, and make triage recommendations for rapid resolution

As they decide on what actions to take in response to detected risks, AI will help teams:

• Model “what if” scenarios identify exactly how risks and different responsive actions could impact business continuity, supply stability and their bottom line

• Conduct dynamic impact assessments that continuously evolve as risk factors and events develop

• Bring factors like risk appetite, supplier criticality and contractual levers into recommendations, and suggest responsive actions that are tightly aligned to the specific context and control frameworks

As teams act on those recommendations, AI will help them:

• Build and maintain self-adjusting risk mitigation playbooks that keep everyone’s remediating actions aligned across procurement, risk and finance

• Conduct dynamic contract and SLA analysis

• Begin corrective action implementation autonomously, to get plans in motion as quickly as possible

• Engage with suppliers autonomously

• Review and validate remediation and escalation plans to ensure they’ll have the right impact on all parties involved

AI has already proven its ability to augment and accelerate this process significantly, cutting the manual effort required at every stage, and freeing human experts to focus on the tasks they do best. AI-augmented supplier risk management teams will no longer be the exception, they’ll become the norm. And all organizations that want to achieve exceptional risk management performance will need to find the best way to augment their teams with AI-powered capabilities.

To learn more and explore the conversation in greater detail, you can register to watch the CIPS Download webinar on-demand here.