What is Know Your Supplier (KYS)?

 

In an era of rapid globalisation and increasing complexity, supply chains have become the lifeblood of modern businesses. However, managing the risks associated with these intricate networks can be challenging. That's where supply chain risk management comes into play.

By proactively identifying and mitigating potential threats, businesses can enhance their resilience, protect their bottom line, and ensure uninterrupted operations. A crucial component of supply chain risk management is "Know Your Supplier" (KYS). 

At Company Watch, we're committed to empowering organisations to overcome the challenges of the modern supply chain through effective KYS practices and robust supply chain risk management strategies.

In this blogpost, we take a deep dive into KYS and how it can protect your business against supply chain disruptions. We cover:

 

What is “Know Your Supplier” (KYS)?

“Know Your Supplier” or KYS involves gaining a comprehensive understanding of your suppliers' operations, financial stability, and potential risks. It is a critical component of supply chain risk management

By conducting thorough due diligence on your suppliers, you can identify potential vulnerabilities and take proactive steps to mitigate them.

 

Why is KYS essential for businesses?

 

Mitigating financial risk

A report by Anvyl revealed that 60% of businesses have suffered significant financial losses due to supplier failures. Through supply chain risk management and KYS, you can identify suppliers with financial instability and take proactive measures to protect your business from potential financial risks.

 

Preventing supply chain disruptions

More often than not, supply chain disruptions are directly linked to supplier-related issues, such as operational failures, quality control problems, or ethical violations. KYS enables you to assess a supplier's capabilities and identify potential operational issues, allowing you to find alternative suppliers if needed. 

 

Protecting your brand reputation

Brand reputation is a major point to consider during supply chain risk management. Studies show that consumers are more likely to boycott a brand if they learn about unethical practices in their supply chain. KYS helps ensure that your suppliers adhere to ethical standards set by relevant regulatory authorities. This way, you’re able to protect your brand's reputation and earn customer loyalty.

 

Two people managing supply chain

 

How to conduct diligent KYS checks

 

1. Identify critical suppliers

The first step in conducting KYS checks is to identify your critical suppliers. These are the suppliers that have a significant impact on your business operations. Their performance and operations can significantly affect your bottom line. Once you've identified your critical suppliers, you can prioritise KYS checks accordingly and begin your supply chain risk management.

 

Supply chain management

 

2. Gather relevant information

Once you've identified your critical suppliers, you'll need to gather information about them for efficient supply chain risk management. You can do this through a variety of methods, including:

  • Searching public records for financial information, legal disputes, and environmental violations.
  • Requesting suppliers to complete a self-assessment questionnaire that covers key areas such as financial stability, operational capabilities, and ethical practices.
  • Using a comprehensive KYS platform like Company Watch. Company Watch offers a wide range of data and tools to help businesses conduct thorough KYS checks, including easily accessible financial information, news alerts, and risk assessments.

 

3. Conduct financial due diligence

Financial due diligence is a crucial part of supply chain risk management. It involves assessing a supplier's financial health to ensure that they are financially stable and able to meet their obligations. 

Key areas to focus on include:

  • Reviewing a supplier's financial statements, including balance sheets, income statements, and cash flow statements.
  • Assessing a supplier's creditworthiness using credit reports and references.
  • Evaluating a supplier's debt-to-equity ratio and other financial metrics.

 

4. Conduct a thorough risk assessment

Once you’ve gathered information on your supplier, you'll need to conduct a risk assessment to identify potential risks associated with them. This may include operational risks, ethical risks, as well as risks associated with geopolitical instability and natural disasters. 

Once you've identified potential risks, you can develop strategies to mitigate them. 

A key thing to remember is that risk assessment is meant to be ongoing. There will be new risks and issues that may come up during your partnership. Continuous monitoring ensures that you’re prepared for anything. 

 

5. Leverage Company Watch for effective KYS checks

Company Watch is a powerful tool that can help businesses conduct thorough KYS checks. Our financial risk solutions provide intelligent and actionable insights, giving you a proactive edge when it comes to financial risk management.

 

Supply chain management with Company Watch

 

Unlike other providers, we have the ability to map medium to long-term risk as well as short-term risk. As a result, you can accurately predict financial risks before they become financial losses.

Read our guide to supply chain risk management to learn more about how Company Watch can help you streamline your supply chain and protect your bottom line. 

 

Key takeaways

  • “Know Your Supplier” or KYS is the process of gaining a comprehensive understanding of your suppliers' operations, financial stability, and potential risks.
  • KYS is essential for businesses because it helps them mitigate financial risks, prevent supply chain disruptions, and protect brand reputation.
  • To conduct diligent KYS checks, you need to identify critical suppliers, gather information, do financial due diligence, and conduct a risk assessment.
  • Company Watch can help you monitor supplier risk and predict financial risks so that you can make more informed decisions about supplier relationships. 

 

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