Procurement in Financial Services – Effective and Flexible S2P Solutions Key to Driving Value

di Vishal Patel

As a highly regulated industry, the financial services sector has many complexities to overcome when trying to drive business value through their procurement function.

Particularly in recent years, organizations have had to deal with heightened scrutiny in areas such as compliance and risk, as well as data security, while being tasked with maintaining business agility and driving steep levels of profitability in an increasingly competitive sector.

The industry’s focus on digitization and rise of Fintech companies means that banks and other financial institutions retain and control incredible amounts of their customers’ personal information. In response to this trend, new regulations such as Basel III and the General Data Protection Regulation (GDPR) are being put in place.

Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. The measures aim to strengthen the regulation, supervision and risk management of banks.

The EU enacted The General Data Protection Regulation (GDPR) to protect the privacy rights of people living in the EU. The GDPR is set to go into effect on May 25th 2018 and many firms are still scrambling to meet its requirements in order to avoid potentially large fines.

With ongoing regulatory changes in standards such as GDPR and Basel III, but also in terms of stricter requirements on controls over compliance and risk, procurement teams need to be highly agile and responsive in this sector.

An effective and flexible Source-to-Pay solution can play a key role in ensuring procurement teams continue to deliver ongoing business value and impact both top-line revenue as well as bottom-line profitability while keeping up with ever changing requirements.

In a series of interviews conducted recently by Ardent Partners with CPOs of the financial services sector, procurement executives shared their views on value drivers for Best-in-Class performance.

Here are some areas that can be positively impacted when choosing the correct spend management solution:

Flexibility:

A Source-to-Pay solution that is flexible enough to be adjusted and customized as new requirements arise is key for procurement teams in industries where there is a lot of change such as the financial services sector. For example, flexibility in workflow helps ensure that teams are adhering to approval and compliance requirements at all times. Another example is flexible reporting capability. Allowing the teams to add and change metrics that they report upon at the click of a button. Leaders should not have to compromise between rapid time to value and flexibility to meet unique or evolving requirements.

Transparency of suppliers and spend:

An integrated suite with a unified data model across source-to-pay helps procurement teams maintain 360 degree visibility and control. By having sourcing and contracts data linked, for example, there is immediate control around supplier selection and contract language which is so key in adhering to compliance regulations.

Supplier risk:

The performance of suppliers can have a more significant and direct impact on both the top-line revenue and bottom-line profitability. Having clear visibility into supplier performance, not just reactively but pro-actively through alerts, for example, helps procurement practitioners minimize supplier risk as well as work with their supply chain on ongoing innovation. The ability to also update suppliers in new requirements helps companies be proactive and support their supply chain. Fannie Mae’s proactive supplier notification of cyber security risks is a great example. Suites that provide visibility across both source-to-pay activity and 3rd party data are critical to an effective rick management program.

Regulatory compliance:

Procurement teams can ensure compliance with insurance and regulatory requirements by implementing a solution that can prevent orders until specific requirements are met. These will also provide an effective audit trail and provide the ability to enforce rules to support compliance with requirements such as: government audits, financial audits, Sarbanes-Oxley and Small Business Administration (SBA). As new regulations arise, solutions that allow the simple launch of supplier questionnaires and ability to build and monitor progress against improvement plans are key to not only ensuring compliance of one’s supply chain, but also auditability of efforts to address any issues.

Stepping up the approach to data security:

With regulations like GDPR and Basel III, not only is data security a concern, but so is hardware security. Banks and Financial Services organizations should look to their Source-to-Pay solution provider not only to ensure end-to-end data encryption, but also to ensure data hosting requirements are adhered to, often required to be hosted on domestic soil to ensure regulatory compliance.

In addition, it is advised that procurement teams in the financial services sector look to their solution provider to have their hardware encrypted as well through HSM (Hardware Security Model).

So even though procurement teams in the financial services sector may be juggling added complexity when striving to deliver maximum value to their organizations, when honing in on the key value drivers outlined in the Ardent Partners report, procurement practitioners will be well armed to rise to the challenge.

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Credit Suisse on Increased Spend Control and Compliance:

Credit Suisse Case Study