We’ve been doing a lot of vendor financial due diligence reviews lately and are getting ready to do a lot more very soon as 2013 financials are released.
Many contract owners believe that just because they have known a company for many years, the vendor is stable and doesn’t represent much of a risk. Often, our financial due diligence reveals changes in a vendor’s financial condition that turn that notion upside down. Vendors experience ups and downs and have lapses in their discipline which can negatively impact their customers. It might not always be something dramatic like bankruptcy or insolvency risk, but it could mean the vendor cuts back on investments being made to improve their product or service, delays a product upgrade, or reduces its resources allocated to customer support. While no analysis is omniscient, monitoring the financial health of your vendors is a basic step to ensure you don’t experience any unpleasant surprises.