Best Practices for How Companies Assess Credit Risk in Their Supply Chains
Effective credit risk assessment is a cornerstone of supply chain management for both global and local companies. With increasingly interconnected trade networks and growing reliance on cross-border suppliers, the financial stability of business partners can directly impact a company’s ability to deliver products and services. A single supplier’s default, bankruptcy, or liquidity crisis can trigger significant disruptions, resulting in delayed deliveries, reputational damage, and even financial loss.
For this reason, organizations across industries are adopting structured approaches to evaluate and monitor supplier credit risk. Below are some of the best practices that companies use to strengthen resilience across their supply chains.
Leveraging Credit Reports and Ratings
The most common practice is the use of credit reports and ratings from specialized agencies such as Dun & Bradstreet, Creditsafe, Creditinfo, Moody’s Analytics, or Experian. These reports consolidate a supplier’s financial history, payment behavior, outstanding obligations, and credit score into an accessible profile.
Such data-driven insights provide companies with an objective assessment of a supplier’s creditworthiness. For instance, Coca-Cola integrates credit data into its supplier evaluation process to ensure that new partnerships are built on reliable financial foundations. By doing so, the company reduces the likelihood of disruptions caused by financially unstable partners and maintains a consistent supply of raw materials.
Conducting Broader Due Diligence Assessments
Credit information alone does not always capture the full picture of a supplier’s risk profile. Many organizations enhance their analysis by conducting comprehensive due diligence assessments that combine financial data with operational, geopolitical, and reputational factors.
Siemens, for example, conducts detailed financial risk analyses as part of its supplier onboarding and monitoring process. The company examines suppliers’ balance sheets, liquidity ratios, and debt structures alongside qualitative factors such as compliance with regulations, corporate governance, and industry-specific risks. The banking sector follows a similar model — institutions such as APS Bank in Malta use financial and non-financial criteria to ensure they collaborate with counterparties that are not only solvent but also reputable and sustainable.
This holistic approach ensures that companies do not overlook hidden vulnerabilities that might undermine supply chain stability.
Continuous Monitoring and Real-Time Alerts
Risk assessment should not be viewed as a one-time exercise. Suppliers’ financial health can change rapidly due to market shocks, regulatory shifts, or internal mismanagement. To address this, companies increasingly adopt continuous monitoring systems that provide real-time tracking of critical credit-related events.
These systems may be embedded in credit rating agencies’ platforms, credit bureaus, or integrated directly into enterprise resource planning (ERP) solutions such as SAP Ariba. They monitor indicators such as late payment patterns, bankruptcy filings, credit downgrades, or sudden declines in liquidity.
For example, Ford Motor Company uses real-time monitoring to detect early warning signs of supplier distress. By acting proactively — whether by diversifying sourcing or negotiating alternative arrangements — Ford minimizes disruptions and protects its production schedules.
Integrating Technology and Analytics
The growing adoption of digital tools has made credit risk assessment more sophisticated. Artificial intelligence (AI), machine learning, and predictive analytics are increasingly used to forecast potential supplier distress before it becomes visible in traditional credit reports. These tools analyze not only financial statements but also alternative data sources such as trade flows, market sentiment, and macroeconomic indicators.
For multinational corporations, this level of insight enables more strategic risk management, while smaller businesses can use simplified versions of these tools to protect themselves against supplier failures. The democratization of credit risk technology is helping local and regional players build more resilient supply chains that were once only feasible for global giants.
Building Resilient Supply Chains Through Credit Risk Practices
By prioritizing structured credit risk evaluation, companies safeguard their operations and strengthen resilience against shocks. Organizations such as Coca-Cola, Siemens, and Ford demonstrate how integrating financial data, due diligence, and continuous monitoring can create supply chains that are both stable and adaptable.
Importantly, this approach is no longer limited to multinationals. Increasingly, smaller and local businesses are adopting similar practices, often supported by affordable credit bureau services, regional data providers, and ERP platforms tailored for SMEs. This shift is especially critical in regions where supply chain disruptions can have amplified effects due to concentrated supplier networks.
Conclusion
Credit risk assessment is more than a compliance exercise — it is a strategic enabler of operational continuity. By leveraging credit reports, conducting broader due diligence, adopting real-time monitoring systems, and embracing new technologies, companies can reduce vulnerabilities and build stronger supplier relationships.
In a global economy marked by volatility and uncertainty, businesses that make credit risk evaluation a core component of supply chain management position themselves to navigate challenges more effectively. Whether multinational or local, organizations that invest in these practices foster resilience, trust, and long-term stability across their supply chains.
Authored by:
Martin Coufal,
Partnership Director, Creditinfo Group.
