The state of procurement in the UAE banking sector

12 September 2023 3 min. read

In its ‘Banking Procurement Study’, experts from Grant Thornton’s management consulting business outline the state of procurement practices within large UAE-based banks, shedding light on best practices and areas of improvement for the sector as a whole.

In order to assess the procurement practices of banks, Grant Thornton’s researchers took a holistic view, asking leaders to assess their practices for each of the seven key pillars that ensure the smooth running of the procurement function: organisation, people, governance, performance indicators, process, risk management, and technology.

The insights from surveys, interviews and desk research were brought together into a concise number of findings and recommendations across five dimensions.

The state of procurement in the UAE banking sector

Kabir Dhawan, Partner and Head of Business Consulting at Grant Thornton in the UAE, walks through the highlights:

Target Operating Model

The survey results show that 50% of the participating banks follow a category-based operating model or a matrix operating model. The main categories being split between IT and non-IT or direct and indirect.

Banks are focusing on driving efficiencies and cost savings in their procurement operations. Categorising items and suppliers can help banks identify opportunities for consolidation and better negotiation leverage, which can lead to cost savings. Additionally, the visibility provided by a category-based model can help banks identify areas where purchasing efficiencies can be gained.

People & Skills

Banks assessed emphasised the importance of SMEs contributing technical expertise to category management. Leaders also pointed out that there is a skill gap in ESG initiatives, which SMEs need to address, and another skill gap is the need for a data analytics expertise.

To address the growing needs for re-skilling and up-skilling, a growing number of banks are training their procurement staff, including in a more innovative cross-category manner.

Overall, the procurement department has a highly qualified workforce, with 37% of employees holding professional procurement certifications.

Efficiency Levers

The procurement function has evolved from a largely decentralised model to further centralisation and usage of shared services. The most common shared services include information management, analytics, operations, and contracting. As a result, banks are looking for further efficiency and performance improvement through automation, strategic sourcing, and category management.

Some of the challenges faced by procurement leaders include inefficient technology, use of manual invoices, utilisation, and inadequate service provided by centralised procurement function model.

Procurement Priorities

The majority of banks have risk management and adding value to the business as their top procurement priorities, alongside optimising procurement spend. This demonstrates the role that the procurement departments play in the strategic objectives of the banks. Examples of risk management mechanisms include blocked payment for expired KYC vendors and No purchase number, No Pay.

Notably, leading banks in the sector are enhancing their risk management mechanisms by automation, tech-driven proactive compliance, and third-party risk management.

Systems & Automation

The majority of banks in the UAE are using fully integrated ERPs and procurement systems for their source-to-contract process, with Temenos (T24), Oracle Fusion, SAP Ariba, Coupa, Archer and AMS the most used sytems.

Of the leaders surveyed, most appear to underestimate their current automation level considering their usage of fully integrated systems, AI enabled procurement systems and automated risk management procedures. This demonstrates a “not enough” perception and a continuous aspiration to unlock further automation opportunities.