Mitigating Bankruptcy Risk Related to Vendors

Topics: Procurement, Administration and Finance, Vendor Negotiation, Diverse and Local Suppliers, Debt Management, Budgeting, Risk Management, Third Party Partnerships

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Summary

This research brief addresses how institutions mitigate bankruptcy risk related to vendors. It includes information on international risk. Additionally, the brief outlines how financial staff assess risk.

  • Key observations from our research:


    1. All profiled institutions have informal practices to mitigate and monitor risk related to vendors to address each contract on a case-by-case basis.

    2. Profiled institutions enter international contracts for different reasons (e.g., research, scientific equipment, library texts) that each require a different method of payment based on the country or need for ongoing funding.

    3. Contacts at profiled institutions rely upon internal risk assessments (e.g., through review of documents such as tax returns, credit reports, historical financial statements) in lieu of credit reporting companies.

    4. No profiled institutions employ a higher education credit group to monitor major suppliers; contacts expressed hesitation in the usefulness and effectiveness of the resource compared to the expense.

    5. Profiled institutions do not indicate special policies around Software as a Service (SaaS) vendors.