Due Diligence and Ongoing Monitoring

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  • 1.  Financial Alternatives

    This message was posted by a user wishing to remain anonymous
    Posted 07-19-2024 06:10 AM
    This message was posted by a user wishing to remain anonymous

    We have been having issues obtaining financials from privately owned companies what do other companies do to assess this risk? 



  • 2.  RE: Financial Alternatives

    Posted 07-19-2024 07:23 AM
    We purchase them from credit bureaus like Experian. Those that do not report their financials, we request for a director's statement or unaudited financial statements. If all else fails, this is flagged as high risk and escalated, vendor needs to provide some sort of guarantee in the event if bankruptcy. We will also closely monitor the Service Levels as declining performance can be a sign of poor financials I.e. reducing resource, non-investment in technology and staff etc. 

    The business will be asked to reconsider the relationship and accept the risk if they still want to continue the relationship with the vendor. 
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  • 3.  RE: Financial Alternatives

    This message was posted by a user wishing to remain anonymous
    Posted 07-19-2024 04:43 PM
    This message was posted by a user wishing to remain anonymous

    We're a private company and likely are more attuned to the sensitivities of such companies.

    Our approach is to make our next request for the balance sheet only. It tell us if they have reserves on hand. Most private companies, in our experience, are willing to share the balance sheet.

    An attestation is all you have left after that.

    Of course, it is your company that is paying them. This isn't a credit decision...this is a survivablility decision. Meaning: How long have they been in business, how big is their customer base, how credible is their solution to the problem you face.

    All of the other key initial questions can help you assess if any particular vendor will end up leaving you in the lurch.

    Then again, 16 years ago or so - nobody saw Bear, Stearns or Lehman Brothers ending up out of business. But they are, with the whole or pieces acquired by others.

    Hope this helps. Good luck. 




  • 4.  RE: Financial Alternatives

    This message was posted by a user wishing to remain anonymous
    Posted 07-19-2024 04:44 PM
    This message was posted by a user wishing to remain anonymous

    We have been very successful in requesting a P&L statement from the vendors that do not provide financials. 




  • 5.  RE: Financial Alternatives

    This message was posted by a user wishing to remain anonymous
    Posted 07-20-2024 03:18 PM
    This message was posted by a user wishing to remain anonymous

    Hi all. I have been facing the same challenges. So far, we request to schedule a call between or credit risk team and their CFO or controller and then have our credit risk team create a statement. In other cases, we request an audited financial letter, but I do not always receive those either.