In a recent webinar co-hosted with the Healthcare Financial Management Association (HFMA), who represent finance managers working in public and private hospitals, Pitcher Partners shared how its clients are navigating the current environment.
The insights were cross-industry, focusing primarily on how they are coping with changes to their procurement processes brought about by COVID-19.
The healthcare sector’s initial experiences with responding to COVID-19
Throughout the webinar, attendees were polled and asked to rate the challenges faced in their organisation as a result of COVID-19. Based on the poll, three-quarters of respondents considered that their organisations experienced some challenges but had generally coped well with the rapidly changing environment. These responses while not surprising, given the preparedness of the healthcare sector for such events, differs from other industries. Our experience with the government, education and small business sectors has highlighted issues for organisations transitioning employees to working from home, or with their business continuity planning being inadequate. For these organisations, it took much longer to understand the full impact on their operations and respond accordingly.
Amongst the audience who tuned into the HFMA webinar, over two-thirds of attendees identified challenges associated with business continuity and supply chain issues as their most pertinent issues. Specifically, the changes in their operations and sourcing personal protective equipment as demand skyrocketed were the two most common challenges. Surprisingly, financial security wasn’t one of the audience’s top three challenges, even for those healthcare organisations that were forced to curtail operations due to the government’s ban on elective surgery. This differs from other sectors and small and medium-sized businesses where cash flow is always critical, but heightened in periods of increased economic uncertainty
Procurement governance challenges for healthcare organisations throughout COVID-19
The precautions to flatten the curve of COVID-19 cases in Australia escalated quickly resulting in organisations having to rapidly adapt to new ways of working. One of the biggest challenges for healthcare administrators was ensuring systems and processes around procurement governance were still efficient and effective. As a workforce that typically works onsite, the prospect of remote working presented many obstacles, particularly regarding supply chain management, business productivity and risk management.
Steps to manage supply chains effectively for healthcare organisations
For healthcare organisations, ensuring the right governance processes and systems are in place is critical. The lockdown and safety measures have disrupted business operations and supply chain networks. There are key factors for organisations to assist strengthening their financial security and ensure business continuity now and over the coming months. These factors include:
- Reassessing your products and services to determine what’s been impacted and what costs can be deferred until a later date.
- Reviewing supply chains to check that your suppliers are still financially sound. Check if they are still producing and distributing products and services and if impacts on their business will affect the provision of healthcare.
- Revisiting contracts with non-critical suppliers, identify which contracts can be cancelled and if any contracts have force majeure available.
- Considering long-term strategic partnership opportunities that may be available to help your organisation deliver its products and services more effectively.
Steps to ensure business productivity for healthcare organisations
For the administrative functions of healthcare organisations, moving to an at-home working environment was a significant adjustment for most organisations. In terms of procurement governance, organisations need to embrace innovative solutions to ensure the same robust governance processes. To maintain productivity, healthcare organisations should:
- Ensure managers are upholding communications with their staff to identify those who are not coping and those who may be exploiting the lack of visibility.
- Consider infrastructure, technology and process changes that might be needed for staff to work efficiently and processes to continue effectively.
Steps to ensure risk management for healthcare organisations
Procurement carries more risk in uncertain environments, especially when organisations may not have the usual levels of governance and oversight that are typical of an onsite working environment. Organisations have had to manage challenges such as an increase in contract variations, contract negotiations and exemptions, and greater reliance on credit cards for online payments. To ensure procurement governance is effective, and the risk of fraud is minimised, organisations should:
- increase monitoring over transactions
- consider amending delegations to ensure all payments are critical to business operations
- check access controls to ensure segregation of duties can be maintained
- increase reporting over changes to the supplier Masterfile
- check that security patches and updates are being applied to your IT systems
- remind staff about the potential for increases in cyber-attacks and scams
- ensure staff remain vigilant about managing conflicts of interest
- check whether purchase orders have been created for all invoices.
While the COVID-19 pandemic has been exceptionally challenging across all sectors, steps towards normalcy are being implemented and consumer confidence is slowly returning. A few observations have been made from businesses across a range of sectors who are thriving in the current environment. These observations include:
- use the crisis to drive a range of innovations and creativity– ‘don’t waste a crisis’
- communicate with staff frequently and with purpose
- document where standard governance processes are not able to be relied upon or where there is difficulty with implementation.
As businesses begin to return to some normality and restrictions are eased, organisations will need to look ahead at how their operations will perform over coming months and what further organisational changes they may need to make as a result. In addition, what learnings they can take from COVID-19 and apply to their organisation once restrictions are completely lifted.
Contact one of Pitcher Partners’ specialists to discuss your procurement governance practices and how to identify and minimise your organisational risks.