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In: Accounting

The objectives of Sargon Products’ purchasing process are to obtain the right goods, at the right...

The objectives of Sargon Products’ purchasing process are to obtain the right goods, at the right price, at the right time. What are the significant risks to achievement of these objectives?

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Expert Solution

As per the above scenario, any risk associated with purchasing process is terrmed as procurement Risks. This risk helps in analyzing what you need, wehn you need, who will deliver it and what is the best price. Some of the most common types of procurement risks are as under;

Insufficient Analysis on Requirements

Without making proper analysis of what you need, when you need etc, one may face the problem of purchasing extra, insufficient purchases or purchase of wrong goods or services, purchasing at sub optimal prices, discounts and benefits may not be availed at its best. This could affect the profitability and ability to acheive competitive advanatge on an organization.

Poor Supply Chain Management

It is an integral part of poor analysis on requirements. A proper evaluation is to made on centralized, transparent and easy-to-handle vendor. Also, a method is also to be adopted for requests, approvals purchases, paymenets and management of supply. Artificial intelligence and cloud based software solution helps in mitigating such risks.

Improper Contract Management

In the modern time, simple agreement to buy does not work. Modern procurement practitioners relies on contracts , which specifies mutual benefits.

Fraud or Corruption

Apart from the above unintentional risks, there are also several risks which are done intentionally and maliciously. This type of risks involve fraud, embezzlement, theft through falso or misleading records. Clear and transparent functions to compelte transactions with document cross-checking can help mitigate this type of procurement risk.


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