Multinationals can achieve significant savings in security procurement

02 January 2019

Despite potentials of billion-dollar savings in security procurement optimization, most overseas subsidiaries choose to continue current processes based on outdated requirements. The companies act immature in this way, believes management consulting firm Deutsche Risk. “Often there is local unwillingness to retrieve savings, which can sometimes be for shady reasons,” says the firm’s CEO, Jakob Korslund.

When global companies buy goods and services worth billions every year, this is done based on outdated information and requirements, and in some cases at prices that are much higher than necessary. “The reason is most often to be found, particularly, in a practice of the individual subsidiary procurement department itself not updating the requirements and being allowed to decide which service companies are to provide services and goods”, says Jakob Korslund to

Security procurement

The consulting firm he leads, Deutsche Risk, assists medium to large companies to think strategically in relation to security procurement. Based on its track record in the field, Deutsche Risk asserts that the companies who do not manage to exploit their large purchasing power to ensure correct requirements are up-to-date and that fair market prices are achieved, miss out on huge opportunities for lower gross expenditures.

“These companies with overseas subsidiaries are, after all, some of the heaviest foreign direct investors in the local communities where they operate, but a rough diamond when we talk about modern security purchases. Most of these companies can become more advanced. This means that they achieve surprisingly large savings when they start on these projects,” highlights Korslund.Multinationals can achieve significant savings in security procurement

In particular, he points out one reason why the companies are not more effective: “Even though you have some global procurement policies and procedures, one can still say: I use company A because I like it. This means that as a consultant you have a completely different kind of burden of proof and persuasion task when presenting a fact-based decision proposal.”

Deutsche Risk has, among other things, ensured a large manufacturing company in Asia a saving of 50% on the purchase of security services, while between 10% and 17% have been harvested in savings on equipment purchase, maintenance and renovations, the company informs.

Shady incentives

The problem with reaping such financial benefits is that local procurement departments and the executive management of subsidiaries are most often not aware that things can actually be made more effective. “I'm not sure the global headquarters and their shareholders know this – there is no one telling them. And in the work we do globally, we come across examples where there are incentives for a group, or perhaps a few individuals, who operate procurement of security this way, enabling us to better understand why they do not want to change a given practice,” Korslund says without much desire to elaborate.

Directly asked, he wishes not to echo words such as lubrication and bribery, but he notes that often there are incentives present that are not fully aligned to owners’ interests of financial optimization of the individual company.

Related: Security consultancy Deutsche Risk makes moves in strategic Asian expansion.

Afghanistan Albania Algeria Andorra Angola Antigua and Barbuda Argentina Armenia Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bhutan Bolivia Bosnia and Herzegovina Botswana Brazil Brunei Bulgaria Burkina Burundi Cambodia Cameroon Canada Cape Verde Central African Republic Chad Chile China Colombia Comoros Congo Costa Rica Croatia Cuba Cyprus Czech Republic Denmark Djibouti Dominica Dominican Republic Dutch Caribbean East Timor Ecuador Egypt El Salvador Equatorial Eritrea Estonia Ethiopia Finland France Gabon Gambia Georgia Germany Ghana Greece Grenada Guatemala Guinea Guinea-Bissau Guyana Haiti Honduras Hong Kong Hungary Iceland India Indonesia Iran Iraq Ireland Israel Italy Ivory Coast Jamaica Japan Jordan Kazakhstan Kenya Kosovo Kuwait Kyrgyzstan Laos Latvia Lebanon Lesotho Liberia Libya Liechtenstein Lithuania Luxembourg Macedonia Madagascar Malawi Malaysia Maldives Mali Malta Mauritania Mauritius Mexico Moldova Monaco Mongolia Montenegro Morocco Mozambique Myanmar Namibia Nepal Netherlands Nicaragua Niger Nigeria North Korea Norway Oman Pakistan Palestine Panama Paraguay Peru Philippines Poland Portugal Qatar Romania Russia Rwanda Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines San Marino Sao Tome and Principe Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Slovakia Slovenia Somalia South Africa South Korea South Sudan Spain Sri Lanka Sudan Suriname Swaziland Sweden Switzerland Syria Taiwan Tajikistan Tanzania Thailand Togo Trinidad and Tobago Tunisia Turkey Turkmenistan Uganda Ukraine United Arab Emirates United Kingdom United States Uruguay Uzbekistan Vatican City Venezuela Vietnam Yemen Zambia Zimbabwe