Overcoming the Obstacles of Private Company Financial ...
Transcript of Overcoming the Obstacles of Private Company Financial ...
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February 16, 2017
Brian Sica, CFADirector of Sales Operations
Overcoming the Obstacles of Private Company Financial Assessments
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Third Parties: Who and Why?
Third Party Disruptions, Risks, and Financial Health
Challenges and Solutions
Q&A
Introduction
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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
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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.
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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]
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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
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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
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Challenges and Solutions
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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
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Challenges and Solutions
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?
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Challenges and Solutions
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?
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Challenges and Solutions
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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
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Challenges and Solutions
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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.
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Conclusions
All of your third parties deserve the appropriate amount of time and attention, regardless of their
ownership structure.
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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!