Procurement’s elevated role in risk management and sustainability

Procurement is gaining prominence in the C-suite, and it can play a critical role in driving resilience, including with environmental, social, and governance (ESG) objectives. In an Economist Impact report titled “Across the procurement-verse: Changing trends in the procurement function” and sponsored by SAP, surveyed executives share increased confidence in procurement to deliver against risk-mitigation objectives. In internal risk, which involves stakeholder management and strategic alignment, confidence levels rose to 83% this year, from 64% last year. This illustrates that procurement is becoming more aligned with key stakeholders across the organisation.

However, a “state of permanent crisis” has shaken executives’ confidence in procurement’s ability to manage external risks such as geopolitical shifts, supplier threats, and liquidity risks. Procurement’s role in business strategies is ever-growing, but it is imperative to maintain agility.

Ongoing inflation, global conflicts, and fluctuating commodity prices have placed risk management at the centre of business strategies. Procurement is pivotal in identifying high-quality alternative products and services while limiting costs.

Yet, respondents noted concerns over procurement’s ability to manage external risk factors, as only 41% of respondents said they are highly confident in its ability to control vulnerabilities. Comparatively, in 2023, 62% of business leaders expressed assurance in procurement’s handling of these factors, like supplier shortages, market fluctuations, and supply chain disruptions. Several drivers are pushing this trend, as the report notes that organisations experience four supply chain disruptions every day. Also, inflation continues to influence organisational decision-making, as monetary uncertainty was listed as the top organisational risk priority for procurement. Additional key external factors impacting organisational strategy over the next 12 to 18 months are macroeconomic (71%) and legal and regulatory risks (70%).

Businesses have looked to ease fears of shortages by moving away from sole-sourcing suppliers. According to the survey, 40% of executives aim to prioritise supply chain diversification to build trusted and long-lasting relationships. In fact, three of the top five strategies listed in the survey are focused on mitigating risk, including reshoring/nearshoring and multi-sourcing.

Visibility has also been listed as one of the highest two priorities for a second consecutive year, proof that it is an urgent need for organisations to invest in technology that increases access to supply chain metrics, develops connections with suppliers, and identifies alternative sellers. Platforms that utilise automation, AI, and advanced analytics are another way to enable procurement teams to make data-driven decisions that improve efficiency and reduce risk.

ESG ranked second on the list of priorities for the next 12 to 18 months, an increase from fifth in 2023.

“Procurement’s work at the convergence between the business and wider supply-chain ecosystem thus offers it a unique strategic opportunity to lead the sustainability agenda,” the report states. By engaging with sourcing and suppliers, two critical stakeholders in achieving sustainability KPIs, procurement can use its role to translate companies’ green ambitions into tangible results.

New regulations such as the European Sustainability Reporting Standards (ESRS) and Corporate Sustainability Reporting Directive (CSRD) have driven companies to enhance their sustainability practices.  According to the Economist Impact report, procurement has capitalised on this opportunity to gain the confidence of executives across the C-suite, with 68% of business leaders expressing belief in procurement’s abilities to deliver against ESG objectives. This is an increase from 49% in 2023, signalling that procurement’s remit has expanded beyond cost management.

Sustainability has also become a critical risk category, as 39% of respondents listed compliance as a driver to becoming greener. A failure to conform to governmental policy can lead to penalties and fines that limit growth.

 

Austrian manufacturing output falls at fastest rate in seven months

Business conditions continued to deteriorate across the Austrian manufacturing sector during August, the latest UniCredit Bank Austria Manufacturing Purchasing Managers’ Index (PMI) data showed. Production fell steeply and at the fastest rate for seven months, alongside further sharp reductions in both employment and purchasing activity. Although the decline in new orders moderated, goods producers were in fact far less optimistic about the year-ahead outlook for output than the month before.

The PMI registered 44.4 in August, remaining firmly below the neutral 50.0 threshold that separates improvement from deterioration. That said, this was up from 43.1 in July and the highest reading for three months. Four of the five components had a positive directional influence on the index.

The exception was output, which recorded a steep and accelerated decline that was the strongest since January. The rate of contraction in production has now accelerated in two of the past three months after signalling a near-stabilisation in output in May. Where a decrease was registered, firms generally linked this to lower intakes of new work.

The downturn in new orders extended to a twenty-eighth straight month in August. The rate at which sales decreased eased since July, although it remained marked by historical standards. Surveyed firms commented on various factors weighing on demand, including a lack of appetite for investment, customers' attempts to deplete stocks and weakness in the construction sector. A loss of new work from abroad, particularly Germany, was also a feature of the survey, with new export orders posting a further sharp – albeit slightly slower – decline in August.

On the supply side, August's survey showed a further shortening of purchase delivery times – the twentieth in as many months. The latest improvement was only relatively modest, however, with some firms reporting delays in goods arriving from Asia.

Higher transport costs were a factor behind a third straight monthly rise in input prices in August. The rate of cost inflation quickened, although it remained muted by historical standards. Average factory gate charges, meanwhile, fell modestly, at a rate that was among the weakest seen over the current sequence of discounting going back to April 2023.

Lastly, latest data showed a notable deterioration in growth expectations across the manufacturing sector. Sentiment was in fact barely positive and the lowest since January. Panellists noted challenging market conditions and competition from lower-cost economies.

 

EBA updates data used to identify global systemically important institutions

The European Banking Authority (EBA) has updated the 13 systemic importance indicators and underlying data for the 33 largest institutions in the EU whose leverage ratio exposure measure exceeds €200bn. This publication includes updated numbers and data items specific to the recognition of the Banking Union and of institutions that are part of the Single Resolution Mechanism. Acting as a central data hub in the disclosure process, the EBA updates this data yearly and provides user-friendly tools to aggregate it across the EU.

This end-2023 data will assist competent authorities to identify a subset of banks as global systemically important institutions (G-SIIs), following the final decision by the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB). 

A stable sample of 27 institutions shows that the sum of those banks’ total exposures increased by 1.3% at the end of 2023. The indicators for Securities Outstanding and Level 3 Assets increased by 14.9% and 12.6%, respectively, both achieving the highest aggregate value since 2013. Assets under custody also observed a noticeable increase by 11.2%. The indicator for payments activity was the only one showing a decreasing trend (-3.7%) from 2022 to the end of 2023. 

 

Financial wellness needs across most generationally diverse US workforce revealed

Perhaps unsurprising in the current turbulent macroeconomic environment, US employers are continuing to feel the squeeze financially due to the increased costs of benefits, worker retention, and recruiting, according to the PNC Bank report ‘The Evolving Needs of the Multigenerational American Workforce’. 

Employers also recognise that their workforce - now spanning four generations - has increased challenges and stress about their personal finances. In 2023, 78% of US employers said their workers were financially stressed, compared to 71% in 2023. The survey findings also demonstrate that worker stressors vary greatly from generation to generation, especially for sought-out employee benefits and personal financial goals.

Gen Z is the most stressed about personal finances (76%), followed by Millennials (72%), Gen X (72%), and then Boomers (59%). Top financial goals also vary by generation. Gen Z's top priority is strengthening their credit rating, while Millennials, Gen X and Boomers all prioritise saving for retirement.

Benefits play a larger role in retaining Gen Z and Millennial workers. The likelihood of staying with an employer that offers more financial wellness benefits was highest among Gen Z (92%), followed by Millennials (85%), Gen X (72%) and Boomers (64%). Gen X workers surveyed were the least likely generation to have worked with a financial planner, with the majority sharing that they do not have enough money to justify using one.

“The varying financial goals and priorities across America's generationally diverse workforce shows how important it is to offer a mix of benefits that can appeal to a wide range of employee needs,” said Kaley Keeley Buchanan, senior vice president and head of PNC Organizational Financial Wellness. “In order to hire and retain great people across generations, which is critical to bringing diverse thinking and experience to your workforce, you must understand their needs and appeal to them.”

 

Galileo enhances B2B expense management offering with Mastercard

Galileo Financial Technologies is now offering its fintech clients the ability to connect their business customers to Mastercard Smart Data, an expense reporting and analytics suite. Fintech Rho was the first to launch the service. By integrating detailed transactional data directly from Mastercard, businesses should be able to reduce the time and complexity of managing corporate expenses.

Most businesses endure time-consuming, cumbersome manual processes that increase errors, fraud and delay reimbursements. Mastercard Smart Data is a service that offers businesses enriched transaction data to monitor costs and spending better.

Rho, a platform businesses use to manage cash and spend, has already helped clients realise benefits with the service. “We decided to integrate Mastercard Smart Data via Galileo into our platform to unlock even more spend control and value for world-class organisations who trust Rho to manage how money moves in and out of their organisations,” said Everett Cook, co-founder & CEO at Rho. 

For Galileo fintech clients, leveraging the Mastercard tool can allow their business customers to automatically ingest detailed purchase information into their existing enterprise resource planning (ERP) or expense management systems, accelerating the process. For example, when an employee uses a company card to pay for a hotel room, Mastercard provides up-to-date data about the type of room, room rates and incidental purchases directly from the hotel.