RALEIGH, North Carolina, May 7, 2020 /PRNewswire/ -- The Coronavirus pandemic has led to widespread economic shutdown, affecting businesses – big and small – on an unprecedented scale, leading to fears of cash crunch.
While the economic outlook continues to worsen, financing conditions in the U.S. have been gradually improving after the Fed's historic liquidity facilities. The now combined $2.3 trillion programs have been a tremendous support for borrowers, with investment-grade corporates benefitting most, according to ratings firm S&P Global.
Overall, in this scenario, access to credit and cash flow position in a company's balance sheet becomes critical for an entity's survival.
Beroe has been receiving multiple client requests to determine the business survival chances of their suppliers. And to this effect, Beroe has been analysing a supplier's likelihood of ceasing operations or becoming inactive over the next 3 to 12 months based on level of predictive data attributes that are currently available.
Specifically, Beroe WIRE Rating predicts the likelihood that one of the following events will occur for the suppliers:
- Voluntarily or involuntarily go out of business
- Become dormant or inactive
- File for bankruptcy
Beroe WIRE Rating model simulate the supplier financials using the following parameters:
- Supplier locations and COVID incidence in these locations (Net capacity impact)
- Ability to ship product (Supply chain disruptions)
- Impact of lockdowns on the supplier's industry (Production impact)
- Impact of COVID on the supplier's customer industries (Consumption/Demand impact)
- Price changes for the category (Revenue per unit impact)
- Likelihood to receive governmental support and other external interventions
"Our model predicts the chances of a supplier's ability to survive the category market conditions prevailing in a particular region. Our clients are looking for specific information such as category-wise, region-wise supplier risk. Cash is king in these times, and we try to analyse what percentage of suppliers run the risk of running out of cash," said Praveen Dahiya, Beroe Inc's Head of Risk.
As on April 20, Beroe has analysed hundreds of suppliers of several marquee companies across the globe.
- The analysis show that 29 percent of suppliers have moved from low risk to medium risk, while 3 percent of them have zoomed to the high risk category from being in the low risk segment.
- A further 8 percent moved from medium to high risk category.
- Overall, 11 percent of suppliers have moved to high risk category over the past three months, as per Beroe data.
"Three percent may look like a small number but if you analyse it keeping in mind the Procurement Organization's context, then the seriousness of the situation would be revealed. Most, if not all, are important suppliers for the companies. And the last thing you need is your critical supplier closing shop all of a sudden," Praveen said.
An unfortunate but necessary business outcome of the current situation is that companies across the globe are trying to determine if their suppliers have enough cash to survive the pandemic. Off-the-shelf supplier financial ratings are of little help now as they don't factor in the sudden economic turmoil or the evolving dynamic conditions.
Beroe's WIRE analysis will help pinpoint financially vulnerable suppliers, with whom Procurement/Sourcing teams can then engage in a meaningful dialogue instead of having to personally ask for their financials.
To know more about WIRE, please click here: https://www.beroeinc.com/watch/covid-19-corona-virus-supply-risk/
About Beroe Inc.
Beroe is the world's leading provider of procurement intelligence and supplier compliance solutions. We provide critical market information and analysis that enables companies to make smart sourcing decisions—leading to lower costs, greater profits and reduced risk. Beroe has been providing these services for more than 13 years and currently works with more than 10,000 companies worldwide, including 400 of the Fortune 500 companies.
To learn more about Beroe Inc., please visit: http://www.beroeinc.com
SOURCE Beroe Inc.