Hi everyone, financial health related questions were asked during the Third Party Risk Management Bootcamp that Venminder hosted last week. Check out what they were and see if you have any further questions or comments! The team thought it would be helpful to share them along with answers. The event was three days, 6 sessions and 11 presentations long, covered by nine experts. Needless to say, a lot of great information was shared. And, if you're interested in viewing the recordings, you'll find the link on the Program Improvement library page.
Q: What other documents can be used/requested to assess financial health if a private company refuses to provide financial statements?
A: First of all, realize you will always have imperfect data; often you will not receive the entire financial statement or the footnotes or it will be outdated. If the company refuses to supply their financial statement my suggestion is to request a copy of their tax return. If that fails, request a letter from them outlining their financial health. And if that fails, use a D&B report. Obstinacy to provide required financial information on the part of a vendor is an indicator of potential problems. It should increase your risk rating.
Q: How often do you re-review a vendor's financial health specifically if they originally were found adequate?
A: We typically suggest an annual review for those vendors who are rated adequate.
Q: Do you place any reliance on Dun & Bradstreet reports on vendors?
A: A D&B report is better than nothing at all. The positive significance of a D&B report is that it is actual payment history supplied by real creditors and unfiltered by the vendor. It is one more piece of the puzzle and can be helpful.
Q: Do you typically see Finance or the Vendor Risk Management function perform the financial assessment?
A: It varies from company to company depending upon which department has a qualified subject matter expert to perform the analysis. If the analysis is done by the Finance side of the company, it is typically handed off to the Risk Management area for final assessment of financial health and risk.
Q: What is a 10-K?
A: The Securities and Exchange Commission (SEC) regulate all publicly traded companies. One of the many reporting requirements established by the SEC is that every company must file a financial report detailing all aspects of the reporting companies' finances. The reporting is done both quarterly and at the completion of the company's year-end. The year-end report is labeled a 10-K and the quarterly report is labeled a 10-Q.
Brittany Padgett
Community Manager
Third Party ThinkTank