Building a strategic procurement function in retail banking

Retail banks globally are under increasing pressure to optimise their costs, across the entire value chain. Kenan Nouwailati, a leader at KPMG, outlines how procurement excellence can help improve performance and shares three avenues for building a strategic procurement function.

With the rise of digital banking, fintechs, and other disruptors in the financial services space, retail banks need to leverage their functions to provide the best services with reduced costs, and maintain brand image.

With ambitious thinking and a robust approach to supplier and spend management, banks can enhance the maturity of procurement functions to help weather a financial environment in flux.

Retail banks can potentially face an array of challenges to their procurement function that may be hindering their ability to cut costs and increase their reach in the market.

The first major challenge is the framing of the procurement function as an administrative one, instead of a strategic one, with no mandate and with limited alignment with other functions. With the administrative label, procurement policies emerge with few or no consequences for non-adherence.

The second challenge stems from a lack of planning due to the detachment of procurement planning from business plans and budgets. This leads to a reactive function with a high volume of low value transactions and a limited coverage of framework agreements.