Leading evaluation conversations with suppliers and investment partners can be challenging. By analyzing your partner’s financial health, we equip you with the five most relevant financial questions to guide discussion in a given relationship, as well as contextual information that will support your dialogue. Learn more at Rapidratings.com/dialogue.

1. © 2020 RapidRatings 1
Supplier Dialogue
COVID-19 Crash
Course Series:
Everything you need to
start a conversation
about financial health

2. © 2020 RapidRatings 2
Introduction
With the rise in global uncertainty, meaningful conversations with
your suppliers & third parties are necessary to ensure resiliency.
To protect you and your clients, use this guide to start
communicating with your suppliers and third parties about risk
management.

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Business Continuity
With governmental shut-
down policies, it is critical to
assess your suppliers’ ability
to maintain operations in this
new environment.
Start by asking your suppliers:
1. How much of your team has
been transitioned to working
remotely?
2. How long can you sustain
working in contingency-mode?
3. What is your plan for post-
pandemic operations?

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Inventory &
Distribution
In times of crisis, a lean
inventory may lead to
shortage and disruption. Your
suppliers’ order priorities and
sustainability practices
become critical.
Start by asking your suppliers:
1. How long can you fill orders with
inventory on-hand if ceasing
operations?
2. How are you prioritizing
customer orders?
3. Will travel restrictions cause
disruption issues for your
suppliers or clients?

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Capacity
The shock to inventories and
the availability of resources
will impact capacity for many
suppliers, even if they remain
operational.
Consider sharing your
anticipated demand.
Start by asking your suppliers:
1. How do you accommodate
growing demand from
customers?
2. Do you have access to a flexible
labor source if demand suddenly
increases?
3. How much increase in demand
could you accommodate without
impacting delivery?

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Concentration Risk
Do you know what
percentage of revenues you
represent in key supplier
profiles?
Determine if their risk is
diversified.
Start by asking your suppliers:
1. What percentage of your
revenue do I represent?
2. Are your other clients diverse in
region and industry?
3. If not, is your revenue coming
from an industry and/or region
heavily impacted by COVID (e.g.
airlines, Italy)?

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Capital
A supplier’s access to and
costs of capital determine
their stability as your partner.
Start by asking your suppliers:
1. Do you plan to refinance any
short-term debt or issue long-
term debt?
2. Do you have a credit relationship
with one or more banks?
3. Do you plan on any equity
insurance or asset sales in the
next year?

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Financial Health
Businesses with poor financial health
are more vulnerable to disruptions,
like COVID-19. To manage and
protect your business, you must
have financial transparency with
suppliers and third parties.
Our advice:
• Obtain suppliers’ up-to-date
FHRs.
• Isolate those whose FHR is
below 40—most bankruptcies
and failures will happen in this
group. Engage in collaborative
discussions immediately.

9. © 2020 RapidRatings 9
Financial Health
For key suppliers experiencing
financial hardship, consider
providing temporary assistance:
• expediting payment terms or
agreeing to temporarily increase
pricing
• working capital infusions or
emergency loans
• inventory or raw materials
financing
• reverse factoring, whereby the
customer provides advances on
their accounts payable to the
supplier

10. © 2020 RapidRatings 10
Conclusion
In this era of uncertainty,
supplier collaboration and
transparency are more
important than ever.
Visit: rapidratings.com/dialogue
for an in-depth guide on
engaging with suppliers—their
Financial Health, the hardships
they face, and how to mitigate
risk together.