Forecasters are cautiously optimistic about the UK economy in 2016 and beyond. This is beginning to rub off on businesses, who are extending their supply chains to take advantage of new opportunities. But it is important to keep your guard up before entering into untested supply relationships.
If you plan to freshen up your supply chain throughout the year, make sure you carry out thorough financial checks before making a commitment to any new supplier, helping you to improve your supply chain financial health.
Evaluating a supplier's financial health
1) Source and examine a potential supplier’s published accounts
Examining economic performance over a number of years should give you a feel for their economic health and the direction in which the company is heading.
2) Run more holistic reports on a company’s financial health
This type of service is available from financial risk management firms, such as Company Watch.
3) Get in touch with as many of the supplier's existing customers as possible
Probe for any difficulties that may have emerged. You can also use the internet and social media to monitor potential partners and assess whether their reputation may hinder a healthy business relationship.
4) Take stock of the company’s personnel
It is sometimes tempting to switch suppliers to follow a key individual in the company who has moved. Remember, dealing with the same agent at a different company by no means guarantees the same level of service. If a trusted contact leaves one of your suppliers it could also signal financial distress in an existing supplier.
Financial risk management service
Using a financial risk management service simplifies the health check process. The Company Watch H-Score® measure, which forms part of Altius' supplier assessment process, is a very good indicator of a company’s overall financial health, and any partner with a score of 25 or lower is potentially at risk.
Company Watch has developed specialised mathematical models that differentiate financial winners from losers and has succeeded in predicting the vast majority of company failures in advance over the past 15 years.
The system is integrated into the Altius In-Touch portal, used by clients to manage and select suppliers. This enables clients to gain excellent insights into the financial status of current and potential contractors. For more information on the financial risk management service, get in touch with us today.
Mitigate financial risk from the start
Managing logistics, procurement, information security and a myriad of other requirements means compliance is often the last thing you want to be thinking about. Compliance, however, can help you achieve a comprehensive, reliable and performance-driven supply chain.
Take a look at the Altius free guide to supply chain compliance best practice and see how you can steer clear of financial supply chain problems further down the line.
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