For procurement departments in financial services, risk mitigation is as important as cost control. Given that tail spend—the part of a company’s budget that goes towards small, infrequent purchases— can make up about 90% of an organization’s spend by volume, which carries a large amount of risk. Because of this, procurement in financial services can only benefit from creating a tail spend management strategy.
Currently, procurement departments in financial services have a very low degree of automated processes compared to other industries. However, this may change in the near future, as procurement professionals in financial services organizations believe that automation could have increase their productivity and overall savings.
As with any team, the success of implementing an automation process in procurement can only work if it has the support of the other departments. In financial services, the perception of support for procurement from the C-suite is very low. As you’ll read in our white paper on this subject: Proxima found that only 35% of respondents believed that their initiatives were helpful to company-wide strategy, and financial services reported the lowest level of executive support among all surveyed industries.
Because procurement in financial services is such a complex subject, using a time-intensive management style has emerged as a trend. In order to maximize value and limit oversight in these areas has been to outsource procurement to third-party agencies. The downside to this is that every outside agency a company acquires can lead to higher risk for your company. While work may be outsourced, liability may not. Because of this, procurement in financial services are tasked with producing short-term value through strategic sourcing, as well as hedging against long-term losses incurred by compliance violations or haphazard supply chain management.
With new and emerging technologies becoming readily available, successful procurement departments will have to increase savings while minimizing risk, an effort that is difficult in and of itself, while also exerting less effort than their competitors.
Financial services revolve around data. It informs whether or not loans are granted, how insurance is priced and which assets are purchased and sold. If data can create a competitive advantage in a financial service company’s niche, it only makes sense that procurement data should be categorized the same way.
New technologies have automized the collection of procurement data. From Fintech disruptors to end-to-end sourcing platforms, procurement departments now have a wide range of technologies and software to assist in their processes. However, the implementation rate of digital technologies in financial services remains on the lower end.
Automation software has been proven to increase savings and productivity, while driving down risk and cost of procurement. It allows procurement professionals to focus on the large vendors, while the software manages the small, infrequent purchases that make up tail spend.
We all know that the technology industry moves quickly. As times change in the financial services industry, it is becoming clear that if your company isn’t using tail spend automation software, your competition might be. To gain a leg up in your industry, it is important to become an early-adopter before you fall behind the curve. To learn more about how Fairmarkit’s Tail Spend Management Platform can benefit you, contact email@example.com.