August 16, 2010 by Canadian Underwriter
Companies identifying their supply chain exposures should beware of financial risks caused by the collapse of banks, RBC points out in an article entitled What is available to help me manage risks through the entire supply chain?
The article identifies a number of risk exposures related to finance, markets, business, operations and internal systems, and lays out a broad strategy for when and when not to hedge risks.
In a section on financial risk, RBC notes that while companies are facing tighter credit conditions and a tougher risk environment, some may not have sufficient funds to meet their obligations because their banks are in a weaker financial position than they are.
Thus, one major risk to a supply chain is that the company’s bank – and not the company – will collapse.
“In some countries, some companies may have better credit ratings than their banks,” the article notes. “Ensure that any banks used for treasury are adequately capitalized (the position can change very quickly).
“This is not the time to consolidate banking relationships – this is occurring naturally in the industry and the company needs to ensure sufficient sources of funding.”
Have your say: