Major businesses in the UK need to switch on their supplier distress radar following the Brexit vote, according to one of country’s leading restructuring and insolvency firms.
Paul Zalkin, a director at Quantuma, said: “The failure of a key supplier could cause its customers to suffer direct and indirect financial loss, operational disruption and even reputational damage.”
He cautioned that macro-economic volatility during the UK’s exit negotiations from the EU, as well as broader uncertainty over the UK’s position in the global economy, will negatively affect business in the short and medium term.
“Nowadays, more than ever, a strong argument exists to put in place robust supplier monitoring and reporting tools with a view to identifying potential problems before they become critical,” he said.
“And businesses need to develop contingency plans to mitigate the risks,” he cautioned.
He said Quantuma had identified a number of key risks that could threaten the financial viability and pricing models of domestic and overseas suppliers to any UK business.
These included the downgrading of the UK’s credit rating leading to restrictions in the availability of trade finance.
An increase in the cost of funding, exchange rate volatility and a weak pound increasing the price of imports were also factors that should cause concern.
He warned that restrictions in credit insurance could limit the availability of trade credit.
“It is too early to say whether we will see restrictions on free trade, whether changes to the labour market will increase the price of unskilled labour, or whether we will see reduced foreign direct investment in the UK and withdrawal of parent company support.
“But these are all factors, where they apply, that should be on the boardroom agenda,” he said.
He said that Quantuma, one of the UK’s fastest growing corporate restructuring and insolvency firms, was well placed to help businesses monitor their supply chain.
“We have access to tools that monitor supplier credit and distress levels which can be tailored to our clients’ needs.
“We can offer direct liaison with suppliers to discuss problems and identify solutions and we can provide an easy-to-understand analysis of a supplier’s finances, tailored to our clients’ requirements,” he said.
Where necessary, Quantuma can also advise on supplier insolvency processes and also provides training and support for buyers, account managers and in-house legal teams.
“It is vital that you secure professional help to monitor and mitigate the risk of supplier failure,” he said.