L4M1 Exam Dumps - Scope and Influence of Procurement and Supply

A basic response would include:

- What a Corporate Governance Framework is - the system of rules, practices and processes which directs and controls a company. Corporate Governance refers to the way in which companies are governed and to what purpose.

- Impact this has on policies and processes – means the procurement department follows regulatory mechanisms (e.g. financial regulations, Codes of Practices), has a checks and balances system (such as auditing), uses e-procurement technologies, vets staff and suppliers, has a clear segregation of duties etc.

This is a very open question and there are so many correct answers. In fact, it’s quite hard to give a wrong answer to this question – as long as your response explains a policy or process that a procurement department can have that ensures they’re following Corporate Governance – that’s right!

A good response may mention:

- Corporate governance is in essence a ‘toolkit’ that allows an organisation to effectively manage itself, ensuring that it’s policies and procedures are compliant with legislation and are ethical. It also ensures that the company meets its objectives.

- The impact Corporate Governance has on the procurement department will be in mandating the ways in which goods and services are procured and in the general ways of working of the procurement department.

- In your response you should mention 5 (ish) different ways Corporate Governance would impact on how procurement do their job. Examples include:

- Ethical Conduct – corporate governance ensures that the company is operating in a legal and ethical way. This influences the processes Procurement will do and the type of suppliers they will engage with. This may also be in their approach to relationships and negotiations- seeking out collaborative relationships with suppliers rather than looking to exploit them. For example, an organisation that does not have a Corporate Governance structure may look to take advantage of suppliers and achieve the lowest cost possible at the expense of the supply chain and local community. An organisation that has strong Corporate Governance would work with suppliers, developing the relationships and thinking long-term about the impact on the local community. The organisation may therefore prioritisestandards such as Fair Trade over price, and this would be reflected in the way tenders are evaluated by the procurement department.

- Use of Checks and Balance system- Corporate Governance ensures strong financial controls are implemented throughout the organisation. For the procurement department this may result in purchases being made to strict budgets (rather than just spending whatever they want), and business cases being written up and approved before the organisation spends a large amount of money on a single item. Another impact may be in the use of audits. For example, peer reviewing tenders and contract awards to ensue all members of the Procurement Team are following internal processes correctly.

- Anti-fraud prevention mechanisms. An important area of Corporate Governance is ensuring the organisation is free from fraud and corruption. This impacts on Procurement’s policies and processes as it will mean scrutinising tenders and who is being awarded contracts. It may result in high levels of Due Diligence being completed on suppliers before entering into contracts and providing a whistle-blowing service for staff to report issues.

- Security measures- this will be to protect the organisation from risk. It may include the procurement department vetting new staff by completing background checks. It may also involve the segregation of procurement duties so that no individual has too much power. E.g. one person raises the requisition and another person approves the purchase. Security may also be in ways of working such as password protecting documentation and limiting access to confidential information.

- Use of a Purchasing Policy Manual – this provides operational guidance on procurement policies and procedures to all staff members. It may detail things like who has permission to order what, who the Delegated Purchasing Authority (DPA) is and the roles and responsibilities of the team.

An excellent response may also include

- Reasons why Corporate Governance Frameworks impact on procurement policies and practices. This could include reasons of accountability, reputation and risk management, procurement’s links with other departments.

- You could also look at what processes would look like with Corporate Governance compared to without it (with CG = rule driven, autocratic but organisation is protected from risk. Without CG = laissez-faire, everyone does whatever they like, very risky)

- You could also provide further examples, either real life or hypothetical. Investopedia has some great information and examples you could use: Corporate Governance Definition: How It Works (investopedia.com)

How to approach this question:

- Define stakeholder mapping – completing an analysis of the stakeholders of an organisation and dividing them into categories depending on certain characteristics. This is often represented visually on a graph or matrix.

- Describe a Stakeholder mapping tool – the most common tool is Mendelow’s Stakeholder Matrix so I would recommend using this one. It is explained in detail in the study guide. However, the question is open so you could choose to describe another tool such as Edgar’s Stakeholder Position Analysis if you so wished. You wouldn’t be wrong choosing this, but honestly, I’d just go for Mendelow. You can’t go wrong with Mendelow. Because the Matrix has 4 sections you can imagine you’d get 5 points for the definition of stakeholder mapping, and 5 points for each of the quadrants of the matrix.

Essay Plan:

Introduction - The reason why stakeholder mapping is important is because interests and expectations of stakeholder groups will be different and possibly conflicting. Mapping this allows an organisation to see the variety and decide on an appropriate management style for each stakeholder group.

Paragraph 1 - Mendelow’s Power / Interest Matrix maps stakeholders based on their influencing power and the strength of their motivation to use that power. It uses a 2x2 grid and defines power as high or low and interest and high or low. It then provides four strategies for managing the stakeholders based on which quadrant of the grid the stakeholder falls into. These 4 categories are:

Paragraph 2 - Keep satisfied – high power but low interest. If the stakeholder becomes dissatisfied or concerned their interest may peak. Examples include regulatory bodies, shareholders, senior management. The best approach is to keep them up to date so they are informed of what is going on, but do not burden them with information they do not need.

Paragraph 3 - Manage Closely – AKA Key players – includes major customers, key suppliers, partners, senior management. These stakeholders need to know everything that is going on and approve of what is going on. The recommended strategy is early involvement and participation, and integrating their goals with yours. This group requires regular communication and meetings. You should take their opinions on board.

Paragraph 4- Monitor – minimum effort required – this is the low priority group as they have low power and low interest. Includes small volume suppliers and other organisational functions with no direct interest in your activities. This group does not need to receive regular communication.

Paragraph 5 - Keep informed - high interest, but low power. If they’re not kept in the loop and understand the need for decisions, they may lobby together to protect their interest if they feel threatened. Employee groups, suppliers and community groups may be in this category. This group should receive regular communication.

Conclusion - Mendelow created the matrix in 1991 and it is still used today. It is a popular management tool due to its simplicity. It’s important to notes that stakeholders can move through the matrix- it isn’t stagnant. For example, at the beginning of a project a manager in another department may be classed as ‘low priority’ because they are seen to have no interest and no power in the project. However, as the project progresses the manager may become interested. They will then transfer into the keep informed category. Therefore, the matrix should be redone regularly throughout the lifetime of a project to capture any movements. The matrix should also be redone for each individual project – it cannot be assumed that a stakeholder who had interest in one project would be interested in another.

Tutor Notes

- The above essay plan is basically the entire essay, I got carried away. The only thing you’d need to add into that is an example of a stakeholder for each of the sections! (e.g. the CEO is high power, but low interest stakeholder for the procurement department. He/ She doesn’t care about the day to day operations but should be kept informed of any big news). For your examples you could use your own place of work.

- At level 4 you don’t have to analyse the model, you just have to be able to memorise it and repeat it. Mendelow comes up again at Level 5 and 6 in a bit more detail. If you want to score super bonus points you could mention in your conclusion that the main disadvantage of Mendelow’s Matrix is that it doesn’t take into consideration the stakeholder’s position on the project – whether they’re for it or against it. Therefore, it doesn’t provide the full picture or provide much help on how to manage stakeholders. E.g. two stakeholders might both be in ‘manage closely’ section, but one is for the project and the other against – they’d need to be handled very differently!

- Study guide p. 65

How to approach this question

- You do need to know some legislation for public sector here. This may be difficult if you don’t work in the Public Sector. If you’re struggling with this, you could also talk about general legislation that governs all types of organisations such as the Equalities Act and Modern Slavery Act.

- This is also a tough question if you’re not British. CIPS is a UK based organisation and the syllabus therefore only talks about British legislation. If you’re in a different country you could talk about the legislation in your own country, providing the question doesn’t specifically mention UK Law.

- Either way I would recommend knowing a couple of pieces of British Legislation. You don't need to be an expert but just state what they are and what the purpose is should be enough to get you a pass.

Example essay

The public sector, which encompasses various governmental and state-owned enterprises, plays a pivotal role in the governance and provision of essential services. This sector operates under a strict framework of regulations and policies, ensuring that its operations are fair, transparent, and accountable. Among the most critical aspects of these operations is procurement, the process through which the public sector acquires goods, services, and works. This essay will explain key regulations governing the public sector, focusing on the Public Contracts Regulations (PCR) 2015, Late Payment Regulations 2016, Equalities Act2010, and Public Services (Social Value) Act 2012, and explores how these regulations impact procurement activities.

The Public Contracts Regulations (PCR) 2015

The PCR 2015 plays a foundational role in public sector procurement in the UK. It sets out the procedures for procuring contracts, aiming to ensure fairness and transparency in the process. The regulations mandate that all procurement processes must be conducted in a manner that prevents discrimination and allows equal access to potential contractors, regardless of their size or location. For example, the open tendering process under PCR 2015 has enabled a more diverse range of companies, including small and medium-sized enterprises, to participate in government contracts, enhancing competition and innovation. The four ‘pillars’ of the PCR are derived from EU Procurement Directives and are: non-discrimination, free movement of goods, equality of treatment and transparency.

Late Payment Regulations 2013

The Late Payment Regulations 2013 address a critical aspect of procurement: the timely payment for goods and services. This regulation ensures that public sector organizations pay their suppliers within a stipulated time frame, significantly impacting the financial stability of these suppliers. For instance, the regulation has been particularly beneficial for small businesses that rely on prompt payments to maintain cash flow. The introduction of these regulations has improved the trust between public sector entities and their suppliers, leading to more efficient procurement processes.

Equalities Act 2010

The Equalities Act 2010 is another crucial piece of legislation impacting public sector procurement. This Act prohibits discrimination in the workplace and in the provision of services, extending its influence to the procurement process. Public sector entities must ensure that their procurement decisions do not discriminate against any group and that they promote equality. For instance, when a public sector organization issues a tender, it must ensure that the selection criteria do not unfairly disadvantage any potential supplier based on irrelevant characteristics. This approach not only fosters a more inclusive procurement environment but also helps to tap into a wider talent and supplier pool, enhancing the quality and effectiveness of public services.

Public Services (Social Value) Act 2012

The Public Services (Social Value) Act 2012 marks a significant shift in how procurement is approached in the public sector. This Act requires public sector organizations to consider how the services they procure can improve the economic, social, and environmental well-being of their area. This means that when a public sector entity procures goods or services, it must consider factors beyond just the price and quality. For example, a local government might prioritize suppliers who can demonstrate a commitment to environmental sustainability or who offer employment opportunities to local residents. This approach to procurement encourages a more holistic view of value for money, factoring in the wider impact of procurement decisions on society.

Public Accountability and Freedom of Information Requests

In addition to these specific regulations, the concept of public accountability and the mechanism of Freedom of Information requests play a crucial role in the public sector, especially in procurement activities. Public accountability ensures that entities are answerable to the public and their actions are transparent. Freedom of Information requests enable individuals and organizations to access information held by public authorities, which includes details of procurement decisions and contracts. This transparency is critical in ensuring that procurement activities are conducted ethically and responsibly, deterring corruption and mismanagement.

In conclusion, the regulation of the public sector, particularly in the realm of procurement, are complex. Regulations such as the PCR 2015, Late Payment Regulations 2016, Equalities Act 2010, and the Public Services (Social Value) Act 2012, along with the principles of public accountability and transparency, ensure that procurement activities are conducted in a fair, transparent, and socially responsible manner. These regulations not only safeguard the interests of suppliers, especially smaller businesses, but also ensure that the public sector remains a model of integrity and efficiency and that taxpayers’ money is well spent.

Tutor Notes

- Okay this is important: The PCR 2015 regulations are being rescinded in 2024. They’re based on EU Law and the UK has left the EU. I know we left a while ago now but it’s taken us a long time to address the issue and figure out what we want to do about it. There was also a pandemic that got in the way of people making any decisions in parliament that weren’t to do with Covid. The PCR 2015 will be replaced in late 2024 with new ‘British’ rather than European rules.

- At the time of writing this (December 2023) we don’t 100% know what the new rules are going to look like and if you’re taking this exam from November 2024 onwards, I recommend doing a bit of research into the new regulations.

- Now the complicated bit- the CIPS syllabus is valid from 2024-2028 and doesn’t address that legislation is changing. I therefore don’t really know what they’re going to expect when students are taking this exam and the study guide information is out of date. If you’re not working in the Public Sector, how are you to know the legislation has changed?

- My advice is this- briefly learn PCR 2015- the four pillars in particular, and when the new legislation comes out, have a quick google and see if these pillars are still the same. The regs aren’t going to change THAT much – things like transparency and equal treatment are still going to be really important, but there may be some slight language changes. Plus, if you’re able to mention in an essay that there’s new legislation, it’s going to make you sound super clever.

- LO 4.2 p.211

How to approach this question:

- This is the type of question you either know or you don’t. You can’t really guess it. So do memorise it. There’s not really a shortcut here.

- The CIPS Code of Conduct is an ethical standard and framework which is used profession-wise. The purpose is to standardise ethics across the profession.

- There are 5 aspects to the Code of Conduct: enhance and protect the standing of the profession, promote the eradication of unethical business practices, maintain integrity in all business relationships, enhance proficiency and stature of the profession and ensure full compliance with law and regulations.

Example Essay:

The Chartered Institute of Procurement & Supply (CIPS) Code of Conduct is a comprehensive set of principles and standards that guide the ethical conduct of procurement and supply professionals. Adhering to this code is crucial for maintaining integrity, transparency, and responsible behaviour within the procurement profession. Here's an overview of the CIPS Code of Conduct along with examples of how organizations can ensure compliance with these standards:

1 - Enhance and protect the standing of the profession.

This means don’t bring the profession into disrepute by your actions, don’t accept gifts or offers of hospitality and to be aware that behaviour outside work reflects one’s reputation as a professional. An organisation can implement training programs to educate procurement professionals about the importance of maintaining high standards of professionalism and integrity in their interactions with suppliers and stakeholders.

2 - Promote the eradication of unethical business practices.

This means fostering awareness of human rights, fraud and corruption issues in business relationships, responsibly managing business relationships if unethical practices come to light, undertaking due diligence (in respect to forced labour, fraud, corruption) and continually develop one's own personal knowledge of ethical issues. Promoting the eradication of unethical business practices requires a comprehensive and proactive approach from organizations. This involves having a strong CSR policy, having whistleblowing protection and reporting mechanisms, and conducting due diligence on the supply chain.

3 - Maintain integrity in all business relationships.

An organisation can show compliance with this by; rejecting improper business practices, never using authority for personal gain, declaring conflicts of interest, giving accurate information, not breaching confidentiality, striving for genuine, fair and transparent competition and being truthful about skills and experience. An example of this is for an organisation to sever ties with unethical businesses. One notable example of a retailer terminating a relationship with a supplier due to ethical reasons is the case of H&M and its decision to cut ties with a Chinese yarn producer in Xinjiang province. H&M, a global fashion retailer, announced in early 2021 that it would no longer source cotton from Xinjiang due to concerns over forced labour and human rights abuses associated with cotton production in the region.

4 - Enhance proficiency and stature of the profession.

Activities which would demonstrate compliance with this includes: Continual development of knowledge and skills, fostering the highest standards of competence in staff members at the organisation and optimising the responsible use of resources. For procurement staff, this could involve becoming MCIPS qualified, and even once qualified, completing routine CPD (Continued Professional Development) to ensure their knowledge and skills remain updated and relevant. They should also strive to share their knowledge with the wider organisation.

5 - Ensure full compliance with law and regulations.

An organisation can demonstrate compliance with the standard by proving they: follow the law in all countries they do business in, fulfilling all contractual obligations and following the CIPS guidance on professional practice. Compliance can include aspects of fiduciary responsibility such as paying the correct level of tax and filing returns on time, as well as compliance to legislation such as the Health and Safety at Work Act 1974 and the Equalities Act 2000.

In conclusion, the CIPS Code of Conduct is a voluntary standard for organisations to follow but it sets a high standard for the industry. By following the CIPS Code of Conduct organisations can enhance their reputation and levels of trust among stakeholders, as well as being reassured that following these clear ethical guidelines contribute to a positive workplace culture, boosting employee morale and commitment by fostering a sense of shared values.

Tutor Notes:

- Under the previous syllabus CIPS asked this question a lot. If you memorise one thing from the study guide I’d recommend it be this. Even if it doesn’t come up as a stand-alone question, you can work it into more general essays about ethics- so it is useful to know.

- For a top score, try to give deep examples. So where you have said ‘responsibly managing business relationships’ you could explain what this means in practice– by ensuring fair contract terms are put in place, holding suppliers to account when they do something wrong and not exploiting smaller suppliers. Where you have said ‘complete Due Diligence’ you could mention that this would be completed before awarding a contract to a supplier and would involve looking at a supplier’s history and supply chain to ensure that they have not been involved in any crimes (fraud etc) or unethical behaviour (such as polluting the environment). The more in depth you go, the more you show the examiner your understanding, and the higher you’ll score.

- p. 137 or here: Cips Code of Conduct | CIPS Note the study guide talks on p. 132 about the CIPS Code of Ethics, which is slightly different. The Code of Conduct is the main one to learn.