Dive Brief:

• Strategies to quantify and mitigate risk were among the top topics of discussion at a meeting of more than 60 companies in Hoboken, New Jersey, which gathered this week for RapidRatings' first client conference.
• CEO James Gellert told Supply Chain Dive various panels sought to clarify how to tie supply chain risk with financial indicators, how to garner support for data analytics initiatives and strategies for building stronger relationships with suppliers.
• Gellert said RapidRatings clients have an approximately 80-90% success rate of demanding some financial data disclosure from their private suppliers. One unnamed client has a 95% success rate, and refuses to work with suppliers who do not disclose financial data.

Dive Insight:

For companies doing business with private suppliers in the supply chain, managing supply chain and financial risk is all the more difficult. Because private companies are not required to publicly disclose their financial data, many companies struggle to accurately gauge the condition of their supply chain and how unstable it could be.

As Gellert put it, the relationship between financial risk and supply chain risk is very close, as Toys R Us bankruptcy and the Carillion liquidation show, and not developing resiliency programs can cripple a company's finances if a client or supplier goes under.

"There's such a tight connection between financial risk and delivery and quality, and logistics," Gellert said.

But if there isn't internal company support for financial risk initiatives, those initiatives are likely to fail. Company leaders interested in measuring the financial risk of their suppliers need to have a clear plan and a clear goal to get stakeholder support, because without, a company can easily fall into the trap of gleaning much data and then not doing anything with it.

"A supply chain or risk professional who wants to get a budget but also get the internal support to be investing both time and money and data and analytics needs to have internal support to engage in those programs but also to use the output in productive ways," Gellert said. "So if they aren't operationalizing the results of the analysis, then it's just done for the sake of checking a box."

Ultimately, some communication between companies and suppliers is better than no communication at all. The more two parties share, the better their relationship will be and the more prepared they will be for a crisis. More and more of RapidRatings' clients are realizing this, and Gellert said he's seeing more companies require suppliers to disclose certain data.

"There's a lot of talk about what companies can get suppliers to disclose, and what's the value of that disclosure, that was a common theme," Gellert said. "The more the company can understand that supplier, the stronger the partnership can be. The net it's a very big positive."