Concerns about cyber issues and how to get artificial intelligence into procurement have grown, and confidence is fluctuating over the effectiveness of compliance and procurement functions among U.S. and U.K. businesses, according to the annual Dun & Bradstreet Compliance and Procurement Sentiment report.
Cyber-risk topped the list of concerns, rising above internal regulatory training and customer and vendor due diligence priorities from the past four quarters.
A majority of compliance and procurement professionals now also agree that AI will play a part in enhancing efficiency and generating insights within their business functions.
Leveraging AI is still in early stages, however, as 37% of respondents still felt worried about the impact of AI on their function in the coming years. Notably, 45% of respondents also did not feel confident that members of their organization would have the right skills to fully leverage AI in the next year, and just 60% were confident their data was configured to benefit from AI in the same time frame.
D&B said the report’s top four anticipated areas of benefit from AI are:
- Risk and Fraud Detection (detection and monitoring of status, changing of circumstance and risks)
- Data Gathering and Validation (new account setup, campaigns and ongoing monitoring)
- Risk Screening (reducing false positives and remediation efforts)
- Account Reconciliation (identifying/merging duplicates and updating records)
Events and outlook
Recent elections in the U.K. have cemented the likelihood of Brexit even though many details need to be worked out over implementation and its fallout. In the U.S., trade deals like the USMCA and the U.S.-China tariff war have had positive developments. But the sentiment report offers a snapshot in time about longer-term concerns about cyber risks as well as technology advances like AI.
The sentiment report is developed through interviews of over 600 procurement and compliance professionals earlier this year. Compliance and procurement employees from 12 major industries were included, with 38% of respondents representing corporations with over 1,000 employees. Respondents were screened to ensure they held decision-making power within their function or participated in the decision-making process; 44% represented businesses with annual income over $10 million, and 21% represented businesses with under $1 million in annual income. Changes in sentiment scores follow from scores normalized to 100 from the 2018 C&P Sentiment report.
As U.K.-based respondents continued to feel pressure over Brexit, U.S. respondents showed a remarkable decrease in perceived risk surrounding recent and upcoming regulatory changes.
Just 35% of U.S. respondents said they were concerned about the potential negative impacts of regulatory changes, compared to 65% who felt concerned in 2018. The shift may be partly attributed to increasing confidence in existing regulations: 41% felt regulations already on the books increased the risk to their business, compared to 66% a year ago.
As businesses have absorbed and acclimated to the impact of ongoing trade disputes, uncertainty regarding the real-world impact of these changes has fallen, and confidence in a resolution has improved.
Shifts in attitudes
All told, the shifts in U.S. attitudes sent the overall U.S. sentiment score hit 112 points, up from 107 points in February 2018 and 108 late in 2018. The U.K. sentiment score remained flat at 103 points during the same period.
While overall sentiment scores and U.S. regulatory confidence improved, confidence in the effectiveness of the procurement and compliance current and future effectiveness declined in many areas. The U.S. and U.K. combined percentage of respondents who felt confident in existing and future effectiveness fell by 8 and 7 points respectively, to 85 and 84%.
The greatest drop came in expectations for future effectiveness in organizations with over 1,000 employees, where only 84% of respondents now feel good about future effectiveness. This decline was offset somewhat by medium-sized businesses (251 to 1,000 employees) where expectations of future effectiveness increased from 87 to 92%. Dun & Bradstreet attribute the ongoing decrease in confidence found in these reports to increased pressure on compliance and procurement professionals to keep pace with rapid change in their functions as technology and digital transformation increase the demand for efficiency and insights.
With a steady stream of high-profile cyber breaches being reported in the last few years, it’s not surprising that cyber security is at the top of many C&P professionals list of concerns.
Unfortunately, Dun & Bradstreet found that 48% of respondents had not implemented a cyber risk management approach for third-party suppliers. The report also noted a lack of consistent metrics to assess cyber security preparedness. A wide variety of security standards are used by different companies, and many developed their own independent set of policies to measure risk: 41% reported using standard cyber ratings. The diffuse nature of existing security standards and practices makes it easier for cyber criminals to find flaws in security systems and harder for C&P professionals to implement efficient safeguards against cyber crime.
Dun & Bradstreet report that procurement and compliance professionals are increasingly looking to automation and AI to reduce costs and increase effectiveness of cyber security and risk management programs. Risk and fraud detection is seen as beneficiary by 60% of C&P professionals in the financial services industry, while 56% of public service and government agency employees anticipated the greatest benefit from data gathering and validation like new account setup and data quality monitoring.