What Goes Into Assessing Financial Risk in a Supply Chain?

Financial risk is a top risk factor for companies in the global marketplace. Not only is financial duress a key leading indicator for governance, cyber, and operational risks, but the financial collapse of a critical vendor can shatter supply chains. Insolvency, bankruptcy, or financial hardships that cripple crucial nodes in the network of modern business dependencies can create cascading failures throughout a system, as the world witnessed during COVID-19.

In fact, 42% of global risk managers rate business interruption from financial failure as the most prevalent risk in their supply chains. This concern is not misplaced: according to the U.S. Small Business Association, 50% of small businesses fail within the first five years, and corporate credit risk has increased steadily since 2017.

Financial risk is one of seven dimensions of risk in Exiger’s risk-scoring model for third-party relationship management (TPRM) and supply chain risk management (SCRM).

To defend against this risk and empower companies to create resilient supply chains, Exiger has developed a multidisciplinary solution that brings together best-in-class financial solvency data providers, region-specific analytic insights, definitive corporate credit score reporting, and limitless unstructured business news and financial analysis.

Our proprietary algorithms leverage standards from investment banking such as the Rule of 40, prior investment reputational scoring, inherent industry risk rating, and company age and founder presence to accurately assess real-time financial risk at entities ranging from global mega-corporations and localized private startups. Where data is available, our AI-empowered model leverages profitability and liquidity ratios, valuation metrics, and debt management ratios to gauge the ongoing viability of companies throughout a supply chain, unlocking immediate, actionable intelligence for buyers and risk managers.

Exiger’s financial risk model leverages over 40 financial indicators, including: