overcoming the obstacles of private company financial

©Rapid Ratings International – Not for distribution

February 16, 2017

Brian Sica, CFADirector of Sales Operations

Overcoming the Obstacles of Private Company Financial Assessments

©Rapid Ratings International – Not for distribution2

Third Parties: Who and Why?

Third Party Disruptions, Risks, and Financial Health

Challenges and Solutions

Q&A

Introduction


About Rapid Ratings• Rapid Ratings rates public & private

companies on the same basis, globally

• Our quantitative Financial Health Rating (FHR) is known for early warning of companies’ financial deterioration or improvement

• Hundreds of leading companies across industries rely on the FHR for a well-rounded risk management program

• Learn more at www.rapidratings.com

• Follow us in LinkedIn & Twitter

Introduction

http://www.rapidratings.com/

https://www.linkedin.com/company/rapid-ratings-international

https://twitter.com/rapidratings


Third Parties: Who and Why?

Who are our third parties?

They are public & private companiesThey span across all industries, globally

Suppliers, Vendors, Service Providers, Distributors, Resellers, Contracts, Agents, Partners, Captives, Affiliates

70-80% of third parties within our client base are privately held.


Third Parties: Impact of Disruption

[1] Hiperos. What Boards of Directors and C-Suite Executives Need to Know.

[2] BCI (Business Continuity Institute). Supply Chain Resilience Report 2016.

87% of companies experienced a disruptive incident related to third parties over the last 2-3 years. [1]

37% reported a loss of revenue[2]

41% of those disruptions came from Tier 1 suppliers [2]

70% of firms experienced a supply chain disruption in the past year [2]


Risk Management Drivers

What are the different types of risk?

Social and Environmental Responsibility

Geographic/Disaster RiskPolitical RiskManagement RiskSecurity Risk

Financial Risk touches all of these.

The number of regulatory MRAs is growing and they

come at a price.

Regulatory Compliance

Your bottom line and brand reputation depends on your

third parties.

Operational Best

Practices

Disruptions are not a matter of if, but when …

Supply Chain

Resilience


Understanding Financial ViabilityIt means…

Understanding your third party’s short-term survivability (resiliency), long-term health & viability

Using financials to see deeply into a company

Evaluating public and private companies on the same basis

Sourcing

On-boarding

Continuous Reviewing

Building the Relationship

Off-boarding / Resourcing

Examining financial risk throughout the business relationship lifecycle



8

Challenges of Evaluating Private Companies

#1 Financial statement disclosure from private third parties

#2 Consistent and scalable information

#3 Understanding financial data

Operationalizing the results#4



9

Getting the Necessary Information

Private companies are private for a reason. Suppliers become confrontational when asking for sensitive information.

How will you handle it?

Who will be interacting with this information?

Are there safeguards in place?

How will you demonstrate the commercial value in transparency?



10

Consistent and Scalable Information

Relationship Managers are focused on other things.

How can you get the most out of your resources?

How do you ensure year after year that:

Everyone is collecting this information?

The information passes QA?

Publics & privates are evaluated uniformly?

It’s being appropriately used?



11

Understanding Financial Data

You don’t have to be an expert in financial statement analysis

to understand financial risk.

Rapid Ratings Financial Dialogue

Getting financials is half the battle. You need to be able to:

Recognize underlying strengths

Identify potential issues

Determine a proper course of action



12

How will you operationalize the results?

A typical large organization has 2000 critical suppliers.

300 of them will be in high risk.

What can you do? What actions will you take?

Use the information to positively affect the relationship and organization.

Educate your commodity managers on the necessary next steps.


Conclusions

All of your third parties deserve the appropriate amount of time and attention, regardless of their

ownership structure.


Q&AWe hope you found this webinar useful. If you have any follow-up questions, please reach out to us.

Brian SicaDirector of Sales [email protected]

There will be a survey after you exit,

we would love the feedback!

mailto:[email protected]

overcoming the obstacles of private company financial

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