CSU Risk Management in Todays Competitive Environment Discussion

Read Example 2. Add additional information. Your document should include about 100-150 words plus credible references.

Example 2:

When seeking suppliers/vendors it is important to choose vendors from the preferred vendor/supplier list. This list consists of a variety of suppliers/vendors that have previously been approved for being reliable, offering good quality products, having cost saving options, approved pricing schedules and are willing to negotiate (Wilson, 2015). Not having reliable suppliers/vendors in place could result in project delays and wasted resources. The benefits of treating suppliers on a more transactional biases include having the option for competing bids from multiple vendors that could result in lower costs, and having a shorter, straight forward business contract in place.

In some instances when organizations treat their suppliers as business partners, they may have a contract in place or feel obligated to use that supplier even if there are better, more cost-effective options available to the organization from other suppliers. The transactional approach is also more formalized and requires more documentation.

Vendor selection is not only a business contract but is also a psychological contract. This “contract” refers to the expectations of each party. Studies have shown that the transactional approach leads to a psychological contract that is based on the exchange of economic interests, while the relational/business partner approach psychological contract is based on the exchange of emotions (Luo & Lu, 2021) such as loyalty. Making supplier decisions based on what is the best decision for the project from a business perspective is more beneficial. Involving emotions and personal decisions could result in selecting suppliers for the wrong reason and could result in higher costs.

References:

Luo, & Lu, K. (2021). Psychological Contract of Buyer-Supplier Relationships in Construction Projects: An Analysis Based on Game Theory. Complexity (New York, N.Y.), 2021. https://doi.org/10.1155/2021/9994318

Wilson, R. (2015). Mastering risk and procurement in project management: A guide to planning,
controlling, and resolving unexpected problems (1st ed.). Pearson. ISBN-13: 9780133837902

Useful resources:

• Chapter 4 in Mastering Risk and Procurement
• Part1, Chapters 12 & 13 in PMBOK® Guide
• Part II, Sections 2.2, 3.23, & 3.24 in PMBOK® Guide

• Buganova, K., & Simickova, J. (2020). Increasing the organization’s resilience through project risk management. Economic and Social Development: Book of Proceedings, 163-169.
• Žužek, T., Rihar, L., Berlec, T. & Kušar, J. (2020). Standard project risk analysis approach. Business Systems Research, 11(2), 149-158. 10.2478/bsrj-2020-0021