Best Practices for Effective Supplier Risk Management with SAP Ariba Supplier Risk

[NanditaGhosh]

As supply chains become more complex and intricate,  managing supplier risks is critical for ensuring business continuity, financial stability, regulatory compliance, and overall operational efficiency. Ariba Supplier Risk empowers procurement teams to proactively identify, assess, and mitigate potential risks associated with suppliers. Here are some best practices to leverage Ariba Supplier Risk for optimal results:

1. Data Collection & Integration:

• Consolidate Data: Strive for a single source of truth by consolidating supplier information from various sources (contracts, internal systems, spend information) into Ariba Supplier Risk using the Risk Category Information API for Supplier Risk Exposure as well as the 300 custom fields.
• Leverage Third-Party Data: Consider integrating data from third-party data providers to gain insights into a supplier's financial health, sustainability practices, and regulatory compliance. Buy licenses directly with the data provider of your choice and utilize the API mentioned above to integrated data with Ariba Supplier Risk.

Adding third-party data providers

• Maintain Data Accuracy: Ensure validity and accuracy of the data related to the suppliers through data enrichment process.  

2. Risk Assessment and Prioritization:

• Define weightage of risk categories & mapping to the input fields: Use the Risk exposure admin page to map input fields (Standard, licensed or custom) based on the type of data available, assign the fields to the risk categories relevant as well as assign weights of the fields towards the risk category calculation as well as towards the overall risk exposure. More details can be found in this page.

• Identifying critical suppliers to focus risk assessments: Perform abstract risk analysis based on country, commodity, or other criteria to identify the suppliers for whom the risk identification, analysis and mitigation activities need to be performed.

• Conduct Risk Assessments: Engagement Request process can be used to perform qualitative and quantitative assessment of the suppliers. This Engagement Assessment process can also be used to send questionnaires for assessments related to regulations like LksG (German Supply Chain Law) , EUDR (European Deforestation Laws ) , etc. to all critical suppliers based on the initial risk analysis.

These assessments can be sent to either single supplier or multiple suppliers.

• Prioritized Risk Mitigation activities: Based on the identified risks and criticality of the risks based on the weightage defined, identify the mitigation actions that are required to address the risk.

If collaboration is required for the risk mitigation, Findings and Event Collaboration which is a BTP (Business Technology Platform) service, that is part of SAP Ariba Supplier Risk can be used for creating findings, creating response plan and collaborating with the suppliers for closing the actions as per the response plan. More information related to the provisioning of Findings and Event Collaboration can be found here.

For the identified Risk controls for the Engagement Assessments done, it should be possible to review the effectiveness of the risk controls and the insights will help to determine the next line of action.

Configuring Control effectiveness

3. Regular monitoring and periodic reviews:

Use the periodic review and monitoring option for Engagements to schedule periodic reviews based on the risk levels.

Configuring Periodic Reviews in Engagement Requests

Additional Tips:

• Establish a clear risk policy statement that defines the process how you will manage your supplier risks, what would be your risk tolerance levels and outline the risk mitigation protocols.
• Use news alerts and actionable insights to monitor supplier performance and risk indicators to identify any changes or red flags that may require further investigation.

Monitoring of risk exposure

• Maintain open communication channels with your suppliers to address any concerns and foster a collaborative risk management approach.

By following these best practices and leveraging the comprehensive features of Ariba Supplier Risk, you can effectively manage supplier risk, improve supply chain resilience, and achieve greater operational efficiency within your procurement processes.

References:

Setting up SAP Ariba Supplier Risk:

Setting Up SAP Ariba Supplier Risk | SAP Help Portal

Monitoring Supplier Risk

Monitoring Supplier Risk | SAP Help Portal