Procurement’s Role in Investor Relations: Part 2

In Part 1, I introduced Procurement’s role in investor relationships. Click here to read Part 1.

Today we will dive deeper in investor relationships and what it means for the CEO and CFO.  The problems with many IR departments are not dissimilar to that of many procurement functions 15 years or so ago. They are focused on transactional and compliance task rather than value creation. I would argue there is a case for investors to be regarded as strategic suppliers, suppliers of capital, and managed upon proven supplier relationship management principals to become the “customer of choice.” Procurement has made great strides in becoming both efficient and effective in recent years and is skilled and accustomed to managing relationships. Whilst this may seem a little ambitious for many, there is a growing trend for more involvement with capital markets by procurement.

So, what does this mean for the CEO and CFO?

Well, if your organisations purchases represent more than 50% of your total cost base then you can be certain that the investment community will regard procurement as a core competency in your organisation. In recent years the capability to effectively manage input cost volatility, extended more complex supply chains, supply shortages and risk of supply chain disruption have proved to be key performance differentiators between companies competing in the same sector. Further, the ability to capture innovation from external suppliers has also proved to be a key differentiator.

For the CEO and CFO, they must ask themselves if their organisation has world class capabilities to manage these performance differentiators and how do they compare against competitors in these areas?

For investors, procurement is likely to be regarded as a key business process, fundamental to operational  excellence. Those organisations that demonstrate committed resources, equipped with the required skills, capable of executing well planned strategies in procurement and supply chain are likely to appear more attractive investment propositions than those whose resources are fragmented and lack decisive strategies. The existence of a CPO with clear responsibility to drive procurement and supply chain strategy is a clear performance outcome indicator.

Stay tuned for Part 3 when I will discuss how the CPO can achieve procurement objectives that are aligned with the corporate strategy by understanding five key issues.

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