Supply chain risk remains prominent for Australian firms despite evidence that a global economic recovery is underway.
Research conducted by Dun & Bradstreet (D&B) reveals a somewhat gloomy risk outlook for major suppliers, with a large number of them exposed to the fortunes of related parties based in some of the economies hit hardest by the global credit crisis.
The research – which was conducted on more than 24,000 of Australia’s leading suppliers – reveals that nearly 7,000 of the organisations examined were part of a broader group of companies and of the 5,700 ultimate parents around 2,000 were domiciled in another country. Nearly 1,500 of those 2,000 foreign domiciled companies are based in economies that have experienced some of the greatest distress from the global economic slowdown.
The United States, which featured heavily among parent companies, has been at the centre of the global crisis and as a result, its country rating has been downgraded multiple times over the past two years. Further highlighting the extent of the credit crisis’ impact around the globe, 45 of the 132 countries assessed had their rating downgraded during this period, with 16 countries having their rating downgraded more than once or by more than one quartile. D&B’s country ratings are based on an assessment of economic, commercial, external and political risk.
Of the ultimate parent companies examined in the study, three per cent are classified as being in financial distress and a further eight per cent are categorised as a high risk of experiencing financial distress or failure in the months ahead.
According to Christine Christian, D&B’s CEO, the varying impacts of the global financial crisis on countries around the world demonstrate the importance of procurement teams developing a complete understanding of local and global risk and of the need to stay on top of a constantly changing environment.
“Too often risk analysis is conducted at the stage of appointing a supplier but ongoing monitoring is ignored,” said Ms Christian. “This means that purchasers aren’t always aware of how changing economic circumstances are affecting their suppliers and ultimately their own risk exposure. Risk doesn’t just derive from the status of the individual supplier but may be affected by their relationships with aff... Next Page
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