Measuring the Financial Health of Suppliers and Ongoing Monitoring - - PowerPoint PPT Presentation

▶

Nov 13, 2022 250 likes •522 views

Measuring the Financial Health of Suppliers and Ongoing Monitoring Presentation for CIPS, Yorkshire Branch, Leeds 24 September 2013 by John A. Smith Client Relationship Director Company Watch Hindsight in Advance Confidential to Apple

SLIDE 1

Confidential to Apple Inc Company Watch Ltd

Measuring the Financial Health of Suppliers and Ongoing Monitoring Presentation for CIPS, Yorkshire Branch, Leeds 24 September 2013 by John A. Smith – Client Relationship Director Company Watch “Hindsight in Advance”

SLIDE 2

Confidential to Apple Inc Company Watch Ltd

Pain in the Supply Chain – The Collapse

f High Street Retailers

Unsecured Creditors such as Suppliers, Landlords and Customers were left being owed £2 Billion £499 Million recovered in assets from the 19 biggest retail failures since 2012 Banks and other secured lenders got at least £365 Million Only £14 Million went to Unsecured Creditors

SLIDE 3

Confidential to Apple Inc Company Watch Ltd

Pain in the Supply Chain – The Collapse

f Construction

5,500 Construction and Architectural Insolvencies in the two-year period since Q2 2011 But how many Zombie companies are there? Low profit margins? Under-capitalisation? Suicidal pricing imposed? Late payments?

SLIDE 4

Confidential to Apple Inc Company Watch Ltd

Pain in the Supply Chain – The Collapse

f Construction

Procurement could become a creditor if a builder fails Due diligence for Performance Bonds? Costs of replacing a builder

SLIDE 5

Confidential to Apple Inc Company Watch Ltd

Construction – Some Optimism?

Construction Industry output rose by 1.4% between Q1 and Q2 this year – (The Office for National Statistics, August 2013) New projects beginning to rise in almost every part of the country – (The Royal Institution of Chartered Surveyors, July 2013)

SLIDE 6

Confidential to Apple Inc Company Watch Ltd

Real Estate

(Office for National Statistics, September 2013) 562,000 people employed in Real Estate – mainly estate agents A growth of 77,000 over the past year Up 100,000 on 2008, pre-crisis boom

SLIDE 7

Confidential to Apple Inc Company Watch Ltd

Costly welfare systems Ageing population Large deficit High debt Poor competitiveness internationally

Structural Problems

SLIDE 8

Confidential to Apple Inc Company Watch Ltd

Hyman Minsky (1919-96)

Professor of Economics at Washington University

“…..economic stability encourages risk taking and credit expansion until instability appears and ultimately generates a contraction of credit and deflation…..”

SLIDE 9

Confidential to Apple Inc Company Watch Ltd

“Tentative signs of a balanced, broad- based and sustainable recovery…”

George Osborne, a speech in London, 9th September 2013

SLIDE 10

Confidential to Apple Inc Company Watch Ltd

Recession Recovery

One “R” word for another

SLIDE 11

Confidential to Apple Inc Company Watch Ltd

Businesses are now leaner, meaner and hardened, BUT They are more at risk emerging from a recession

Recovery Kills!

SLIDE 12

Confidential to Apple Inc Company Watch Ltd

Working capital to fund growth – sources? Resources required to meet increased demand – cost and availability?

Businesses Need to Consider

SLIDE 13

Confidential to Apple Inc Company Watch Ltd

Overtrading……. Pressure on finances, staff and systems Supply Chain/Procurement Teams should be reviewing their key suppliers NOW

The Major Risk is:

SLIDE 14

Confidential to Apple Inc Company Watch Ltd

Increased need for reliable & current information Your Supplier sees you as a Customer! What is your Credit Limit? The number of ‘Zombie’ companies Potential for increase in fraud & corporate crime The banking system Insolvencies can breed insolvencies

Caution

SLIDE 15

Confidential to Apple Inc Company Watch Ltd

High Risk Medium Risk Low Risk

THE RISK PYRAMID

SLIDE 16

Confidential to Apple Inc Company Watch Ltd

CONTRACT CHAIN

YOUR COMPANY COMPANY A £ 100 M COMPANY B £ 150 M COMPANY C £200 M COMPANY D £ 250 M Company m £25 M Company n £25 M Company X £20 M

. . .

Company p £40 M Company q £40 M Company X £25 M

. . .

Company r £70 M Company s £60 M Company X £30 M

. . .

Company t £80 M Company u £80 M Company X £35 M

. . .

SLIDE 17

Confidential to Apple Inc Company Watch Ltd

Forward looking Flexible Stress-testing & forecasting Reliable

How good are your analytical tools?

SLIDE 18

Confidential to Apple Inc Company Watch Ltd

Early Warnings

2E2 HOLDINGS LIMITED

SLIDE 19

Confidential to Apple Inc Company Watch Ltd

Early Warnings

W.T. BURDEN LIMITED

SLIDE 20

Confidential to Apple Inc Company Watch Ltd

Looking Forward: Stress testing & forecasting

SLIDE 21

Confidential to Apple Inc Company Watch Ltd

Looking Forward: Stress testing & forecasting

SLIDE 22

Confidential to Apple Inc Company Watch Ltd

Introducing a monitoring process

The companies you need to focus your key resources on

Risk 69% Suppliers 5%

Weak Strong Low exposure High exposure

Search engine Portfolio management system Diagnostic power

Suppliers

SLIDE 23

Confidential to Apple Inc Company Watch Ltd

Introducing a monitoring process

Get an early warning of potential problems. Identify the companies you do NOT need to review. More time to monitor the companies in depth that you DO DO need to review. Significantly reduce the time spent on a high proportion of your suppliers each year. September is a busy month for filing company accounts.

SLIDE 24

Confidential to Apple Inc Company Watch Ltd

“Ours is not to reason why… Ours is but to flog and buy” ………………………..….Arthur Daley

The Way Forward

SLIDE 25

Confidential to Apple Inc Company Watch Ltd

Contact us: John A. Smith – Client Relationship Director

info@companywatch.net www.companywatch.net