De-risking procurement by digitalizing spend monitoring
Access the licensed copy of this article published in the Journal of Supply Chain Management : A peer review journal published by Henry Stewart Publications
Managing procurement risk through a conventional adoption of the three lines of defense model does not work effectively as it allows sub-optimal purchases, non-compliance, process abuse and fraud to slip through undetected and cause irreversible damage. A novel way forward would be to digitalize spend monitoring and create a second line of defense against such issues. Digitalizing spend monitoring would entail several actions for it to make a significant dent in reducing procurement risk.
The paper discusses how:
- An enterprise needs to study its past behavior and identify what is abnormal and worth monitoring.
- The enterprise needs to build an ability to correlate information from both within and outside its boundary to take the right decisions.
- The enterprise needs to digitize a catalogue of controls that can be configured to continuously monitor, and flag live transactions based on past and current observations.
- The enterprise needs to build an ability to get actionable recommendations on anomalous transactions and intercept them immediately.
- The enterprise needs to ensure that this spend monitoring setup is continuously learning from its users’ actions and tuning itself to improve its accuracy.