Merging Profit and Principles: the Role of Procurement in Mitigating Risks in Developing Countries

This work explores the risks a Multi National Enterprise (MNE) faces as it operates in a developing country. The objective of this study is to determine if it is possible to reduce these risks by taking a particular approach towards procurement. Two case-studies have been analyzed on two criteria: (1) the level of stability of the footprint-area before and during MNE investment and operation and (2) the role of procurement herein. The study concludes that there is a relation between the level of stability, the amount of risks and the use of local suppliers. First reason found is that local procurement is expected by the footprint-area. Dissapointment can lead to grievances. Grievances enforce instability and can thus create more risks. Secondly it is established that using local suppliers is also a sure fire way to aid (re) construction of the economy and of the institutes that create stability in a community. Although the research does not determine a causal relationship between stability and the procurement practices of a MNE, it has become evident that significant risk reductions can be realized by using local suppliers.