Getting the right information fast reduces risk more effectively
What’s the best way of identifying the risk level attached to taking on a new supplier?
You could ask them directly, but there’s no guarantee you’ll get anything like the honest, truthful answer you should be getting, is there? Who’s going to admit to being halfway down the pan when somebody’s dangling a nice fat juicy supply contract in front of them?
Identifying the risk is all about looking through details like the supplier’s financial background … their business background … shareholders and directors (and their outstanding debts).
The thing is, although it’s possible to gather up all these details through Companies House or by going online, it can be costly and time-consuming, and there are other matters to attend to during the working day.
The alternative, then, is to get all the information you need from a single business information resource which can provide financial data for the company in question over the past five years to include:
Profit and loss
Company debts (including CCJs and mortgage arrears)
Directors’ and shareholders’ commitments
Stakeholders’ other directorships or shareholdings
But you need more than just that snapshot you’re basing your purchasing decision on: a good business information resource should also provide you with information about changes to the company that could affect its risk profile, such as:
Changes of parent company
Product line changes
And a very good business information resource would keep you updated on trends within your potential supplier’s market – an ideal alternative to the supplier in question perhaps, or at least an effective bargaining chip when it comes to negotiations.
More details you should be looking for include:
Sanctions – against the organisation
Sanctions – against individuals within the organisation
Institutional shareholders – especially those with more than 20% share capital
If publicly listed, on which exchange?
Other related companies, if this one is part of a parent company
And, of course, it’s not just supplier risk that can be identified in this way – the same can apply to new customers, and even potential partners.