Purchasing is particularly vulnerable to compliance violations due to unclear rules and tempting offers from suppliers.
Billions of dollars are generated in the purchasing departments of German companies. Many suppliers are under enormous pressure to sell their goods and services. The temptation to generate orders, sometimes through unfair methods, is great.
Purchasing is therefore particularly vulnerable to regulatory violations. Insecure contracts and unethical supplier behavior can encourage corruption and antitrust violations. Criminal intent on the part of purchasing is not always involved; buyers often don't know whether they are already in a legal gray area. According to a survey by the Allensbach Institute, violations of legal regulations occur most frequently in the purchasing department, ahead of the sales or finance departments.
Suppliers can pose a major risk to companies.
It is therefore of utmost importance for purchasing that suppliers operate according to ethical principles, as violations of these principles pose a significant risk to companies. If companies enter into business relationships with foreign suppliers who, for example, violate labor policies (child labor, non-compliance with occupational safety regulations) and are prosecuted, this can result in enormous reputational damage for the purchasing company. A conviction of the supplier can also lead to delivery disruptions.
Intensive scrutiny of the supply chain is essential.
Early and comprehensive information about existing or potential suppliers can prevent a company from violating compliance guidelines, especially with partners abroad or from different cultural backgrounds. The beneficial owner of a company is often not immediately identifiable. This is especially true when there is a widespread international network that inevitably requires review. In such cases, it is important for purchasing decision-makers to allow sufficient time to research the potential supplier and identify the beneficial owner.
Purchasing and compliance must work more closely together.
Company management must promote collaboration between the purchasing and compliance departments. Both sides can complement each other effectively in business transactions, for example, when it comes to defining and adhering to process specifications. The goal should always be a high level of transparency in the procurement process.
The prerequisite is always the identification of the relevant risks.
As part of a specific purchasing risk audit, the relevant risks of the purchasing department should therefore be identified and assessed. Based on a needs-based risk strategy, appropriate measures should then be derived to effectively address the identified risks.
About the author
Eckart Achauer, studied law and business administration, postgraduate Master of Business Administration (MBA). In-service training as European Quality Manager (DGQ), mediator specializing in business mediation and Certified Compliance Manager (TÜV).
He worked for around 10 years in the international insurance industry in the management of a Swiss insurance group in various functions (claims department, sales, assistance) before moving into management and business consulting in 1997.
As a consultant and managing director of various consulting companies, Mr. Achauer has specialized in organizational and process optimization as well as in the development and implementation of management systems - quality management, risk and compliance management.
At Senator Executive Search Partners, Mr. Achauer is responsible for compliance management. As part of compliance audits, he analyses their organizational "compliance fitness", raises awareness and trains management, executives and employees and supports companies in setting up and implementing individual compliance management systems. In doing so, he always takes into account the specific risk situation of the company. Thanks to his many years of experience as a manager and consultant, he is very familiar with the business challenges faced in practice.
