Banking Collapses: UK Businesses Urged to Collaborate

With recent events at Silicon Valley Bank and Credit Suisse rocking international finance systems, the experts at global supply chain risk management solution Resilinc are urging UK businesses to collaborate with suppliers to reduce uncertainty.

This instability at major international banking institutions comes on the back of an already turbulent time for businesses. Resilinc’s EventWatchAI risk monitoring platform reported a 271% year-on-year increase between 2021 and 2022 in bankruptcies, plus a 46% increase in corporate restructuring and 77% increase in leadership changes during the same time period.

Resilinc is outlining five strategies businesses can employ to mitigate financial risk across their supply chain.

1. Map it out

The first step to collaborate and work with your suppliers is to know who your suppliers are. Mapping down to the subtier level offers complete visibility into your supply chain. Start by focussing on suppliers with the most value or whose loss would impact the company most severely. Mapping needs to go beyond just a ‘tier one’ approach. A smaller supplier in size and value could be providing a vital component of your product or service, without which the financial disruption to your own business could be considerable.

2. Assess the risk

With a full multi-tier map of your supplier network, it’s crucial to carry out risk assessments. Launch risk surveys to individual suppliers to assess financial status and highlight any weaknesses. Take a collaborative approach and offer to help suppliers implement strategies to reduce risk, identifying which suppliers are most in need and prioritizing which to work with first. By undertaking a shared course of action together with suppliers, rather than instructing that improvements are needed, trust will be strengthened at the same time.

3. Be flexible

There are many progressive financial arrangements organisations can offer their suppliers including placing advance orders, paying upfront, or even loaning funds to suppliers facing cashflow challenges. Supporting a smaller supplier essential to your business creates loyalty between you and your supplier, as well as builds a transparent, open relationship which both parties benefit. Oftentimes, it can also result in preferential treatment, early notifications about looming supply chain issues, and larger discounts.

4. Size up support

For suppliers that account for a large amount of expenditure, consider placing orders now for far in advance to account for, and secure, future demand. This could even be up to a few years ahead. Placing orders ahead might also be prudent for suppliers with whom you have a medium spend, or alternatively paying them upfront or on delivery. For suppliers where there is a smaller expenditure, paying in advance may also work, or in the case of small and medium-sized enterprises, extending a loan or relaxing service-level agreements that may be expensive for the supplier to fulfil could be possibilities. Some organisations might also consider taking an equity stake in SME suppliers.

5. Monitor the situation

Mapping out your supplier network through multi-tiers and establishing actions to minimise financial risk is the first stage in building a robust supply chain. However, truly resilient supply chains also include 24/7 monitoring of potential threats. Risk monitoring provides real-time insight into potentially threatening events, enabling businesses to act immediately. Fortunately, it’s possible to access solutions which use AI and other cutting edge technologies to not only identify but predict supply chain disruptions against a number of possible risk events, including financial risks.

Commenting on the importance of supply chain collaboration, Bindiya Vakil, founder and CEO of Resilinc, explains: “After the Silicon Valley Bank announcement, which impacted 3,000 UK businesses, many of our customers began outreach to their SME suppliers offering assistance and support to head off the crisis. We saw procurement leaders offering to help innovative, start-up suppliers, which often provide valuable components, giving options such as reduced payment terms, upfront payment, and orders ahead of demands.

“Not only was this a heart-warming display of good corporate citizenship, it’s actually high class procurement leadership in action, grounded in commercial common sense. Ultimately, it’s far more cost-effective to support existing suppliers than source new ones unexpectedly. Long term supply chain resilience is built on a foundation of supplier transparency, trust and collaboration.”