The most common risks in procurement

procurement and supply chain management

Whether its dispute, different interpretations of contractual obligations, or not able to meet the requirement included in terms and conditions, are some of the legal and contractual risks to be precise. Use or misuse of intellectual property, violation of laws and civil lawsuits can also be considered as legal risks, especially when patent infringement is a possibility.  

Poor statement of work (SOW)not only risks or threatens the timeline, but also shows cost implications. Schedule changes are often caused due to natural disaster such as hurricanes, fire, flood, or due to noncompliance issues generated by suppliers. Scope risk occureither when the initial statement of work (SOW) becomes unworkable or if there is any technological change, generated by the market. 

In the sourcing process, it is too critical to evaluate the risk to the environment created by a supplier or contractor as it includes an organization’s negative impact on water, air, and soil as a result of emissions, and other forms of waste. 

These risks can range from an unexpected change in currency exchange rates to a supplier’s bankruptcy. Some examples of financial risks include budget overruns, constructive changes, and missed milestones, requiring additional funding. It also encompasses unexpected cost overruns that are often linked to other risk factors such as changes in the scope of work required to successfully complete the activity.

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