I am attending the IACCM Americas conference in Orlando today and tomorrow. So far, each speaker and roundtable discussion has focused in one way or another on a common theme - risk. What are the risks in today’s economic climate? How do you uncover them (think preventive medicine rather than an autopsy)? And what process changes and tools will help?

The interesting thing that we’ve heard from procurement execs and legal professionals today is a warning against going too far to reduce risk. At first, this concept sounded somewhat counter-intuitive to a room full of people doing everything in their power to alleviate risks to their business. But the point is, every action a company takes to reduce risk has consequences. In fact, sometimes those consequences actually increase risk in another area.

For example, in the opening keynote address, Bob Endres talked about balancing the risks between the buyer and supplier in a relationship. Although their risks are often very different, recognizing your counterparty’s risk and collaborating to minimize the risks that are most important to each of you can be a win-win. Bob cited a case where a buyer and supplier each compromised to achieve their primary risk reduction objectives (price containment for the buyer and flexibility in raw materials used in production for the supplier). The agreement left each party with MORE potential exposure to risk in some areas. But by choosing their battles, rather than beating each other up in negotiations over risks that didn’t really pose major threats, each was able to reach their most pressing goals.

Another example of pushing too far on risk avoidance came from Jason Anderman’s presentation on legal spend. As a lawyer and former inhouse counsel working on procurement contracts, Jason saw first hand that many overly protective contracts actually cost the company a great deal of time and money for negotiations, while focusing on exactly the wrong kind of risks - indemnity protection rather than price controls. In other words, the opportunity costs for fighting  against phantom risks was actually a risk to the company’s bottom line.

I’ll have more posts from the conference and if you’re looking for more real-time coverage, check out SupplyExcellence’s Twitter feed or the tweeets from all of the conference attendees.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.