2024 is ending, and what a year!

Posted on December 19th, 2024

Reflecting on the year, what procurement issues should a CEO/CFO be concerned about for 2025, and how can they avoid some of the surprises?

Effective procurement is central to achieving strategic goals and ensuring organisational resilience, particularly in today’s complex regulatory and economic environment.

2025 is likely to have even more challenges, with the prospect of tariffs from the Trump administration, limiting exports of rare earth material from China, the war in Ukraine and its effect on markets, the Middle East and its various troubles, and Africa and its various wars. Not to mention domestic issues, such as those in the university sector and the NHS.

As Chief Financial Officers (CFOs) and Chief Executive Officers (CEOs), you will require a Procurement function with a plan for the various strategic threats and an ability to be nimble in understanding how to adapt to them, ideally having a plan to do so. How will they evidence this to you and give you confidence that they have matters under control?

I am afraid it is done by doing tedious paperwork and keeping registers. The registers I suggest procurement teams maintain are vital for fostering transparency, mitigating risk, and ensuring compliance.

Here’s my breakdown of the essential registers procurement should keep and why they matter to you.

1. Contracts Register

What is it? A comprehensive log of all current and historical contracts with suppliers, including contract start and end dates, renewal options, financial commitments, and performance terms.

Why it Matters:

• Risk Management: Ensures critical contracts are not missed, reducing exposure to lapses in service or legal disputes. The number of public sector contracts that have had to be extended because they missed the deadline for conducting a tender is horrific, in my experience. This always costs significantly more and could have been avoided with a simple list of when the contracts end and when the new procurement exercise should begin.
• Cost Control: Helps identify opportunities for renegotiation or consolidation of contracts to optimise spending.
• Compliance: Facilitates adherence to regulatory requirements, such as public procurement thresholds or audit trails.

What to Look For: As CFO or CEO, ensure this register is up-to-date and includes key performance indicators (KPIs) and penalties for non-compliance.

2. Supplier Register

What is it? A database of approved suppliers, including their qualifications, certifications, performance history, and contact details. This is likely to be critical in 2025, when you may be forced to find alternative suppliers quickly through the imposition of tariffs, for example.

Why it Matters:

• Supplier Relationship Management: Strengthens partnerships with high-performing suppliers and helps identify possible issues and risks.
• Resilience: Identifies alternative suppliers to mitigate risks of supply chain disruption.
• Ethical Compliance: Ensures suppliers meet standards for labour practices, sustainability, and other corporate social responsibility (CSR) goals. You do not want to be forced to source from an unknown supplier to suddenly find yourselves on the front page of a website because they use child labour.

What to Look For: A transparent vetting process for suppliers and periodic updates to reflect performance assessments or changes in eligibility.

3. Procurement Pipeline Register

What is it? A forward-looking register listing planned procurement activities, expected timelines, and estimated values.

Why it Matters:

• Strategic Planning: Aligns procurement activities with broader organisational goals and budgets.
• Cash Flow Management: Provides foresight into upcoming financial commitments.
• Market Engagement: Enhances market readiness and fosters competitive bidding by giving potential suppliers visibility into upcoming opportunities.

What to Look For: Ensure this register is reviewed regularly and aligned with your strategic priorities and budget cycles.

In 2025, I would look for a plan B for each critical supplier where tariffs could become an issue with any element of such a product.

4. Risk Register

What is it? A record of potential procurement risks, their likelihood and impact, mitigation strategies, and ownership.

Why it Matters:

• Proactive Management: Identifies and addresses risks such as supplier insolvency, delivery delays, or regulatory breaches before they materialise.
• Compliance: Demonstrates a robust approach to risk management, satisfying auditors and stakeholders.
• Continuity Planning: Supports business continuity by addressing vulnerabilities in the supply chain.

What to Look For: An emphasis on dynamic updates to the register as new risks emerge or mitigation strategies evolve. Your head of procurement/commercial should be widely read on current affairs and discuss with colleagues the potential impacts of various events on your production schedules. No one foresaw the problems that the Ever Given blocked the Suez Canal would cause back in 2021, but your Risk Register should be considering such events.

5. Savings and Benefits Realization Register

What is it? A record of cost savings, value-added benefits, and efficiency gains achieved through procurement activities.

Why it Matters:

• Performance Measurement: Demonstrates procurement’s contribution to organisational goals.
• Transparency: Provides an auditable record of realised benefits against planned objectives.
• Accountability: Encourages procurement teams to pursue measurable outcomes.

What to Look For: Ensure reported savings are categorised (e.g., cost avoidance vs. actual savings) and validated against financial reports. When negotiating a contract, looking at the totality of the savings is critical. The reduction or avoidance of a liability should be accounted for. In the past, I used to run an exercise with the team for a bottle of champagne, who could save their salary first in a year. Usually, they took between six to eight weeks to win the bottle. Thereafter, I could show the Board the true benefit the team gave the company at no cost.

6. Compliance and Audit Register

What is it? A record of procurement processes and decisions, ensuring adherence to legal, regulatory, and policy requirements.

Why it Matters:

• Legal Protection: Demonstrates compliance with procurement regulations, such as the Public Contracts Regulations 2015 (for UK entities).
• Audit Readiness: Streamlines responses to internal and external audits.
• Reputation Management: Protects the organisation from reputational damage due to non-compliance.

What to Look For: This register should include documentation of procurement thresholds, evaluation criteria, and decision-making processes. Does the team conduct audit reviews on their contracts to check they are delivering to standards, etc? Do they operate a Contract ToolkitÆ?

Key Takeaways for CFOs and CEOs

Maintaining these registers is not just an administrative function but a strategic necessity. Properly managed procurement registers provide insights into spending, reduce risks, and enhance decision-making. For leaders, they offer the assurance of compliance and the opportunity to drive value across the organisation.

I recommend they be created in a real-time database, as this enables current information and crowdsourcing of the work to the most appropriate individual.

As a CFO or CEO, championing the adoption and maintenance of these registers signals a commitment to accountability, efficiency, and organisational excellence. Regular reviews of these registers, in collaboration with procurement and audit teams, can further ensure they deliver maximum strategic value.

By prioritising these tools, you’ll manage procurement and steer your organisation toward sustainable success and increased profitability. If you wish to discuss these ideas, please feel free to contact me at [email protected]

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