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In times of uncertainty and disruption, leveraging your data and knowledge is critical to  the survival and success of your business.

Previously healthy businesses are now feeling pressure from all sides, as customers withhold settlement and suppliers demand faster payment.

Adding to this challenge, trading partners are seeking greater insight into the trading performance and financial strength of their key counterparties. 

Businesses, now more than ever, need to reflect on key internal and external drivers of their trade, significant risk areas, potential mitigating actions and data available to support commercial and operational decision making.

Counterparty due diligence could greatly enhance your decision making. This could be performed on customers, suppliers or competitors, or you may wish to turn the lens on your own business. Analysis can be performed on publicly available information combined with commercial analysis or with the cooperation of, and access to, the relevant business.

This will help position your business to trade through the current challenges and emerge on a stable footing ready to thrive and capitalise on growth opportunities, whether driven by organic measures or an M&A strategy.

KPMG Deal Advisory can help companies rapidly navigate these matters. 

Some key questions to consider

Internal considerations

  • How have we been impacted by COVID-19 to date, and do we accurately understand its impact on trade, profitability and cash flow?
  • Would we co-operate with a counterparty request for financial information on our business?
  • Is relevant, robust and verifiable quantitative and qualitative information on our business readily available?
  • To what extent is information of this nature commercially sensitive or its disclosure restricted by contract?
  • Are we exposed to material concentration across our product range, customer base or supplier list?
  • Are our key contracts up to date, or are we operating on an uncontracted basis due to legacy contracts expiring? How might this impact us?
  • Have we identified alternative sources of supply, channels to market or users of our product / service?
  • What other steps have we taken to mitigate the challenges we face?
  • What information are we getting from divisional or subsidiary management to inform our capital allocation decisions?
  • If contemplating a disposal, or a refinancing, are we identifying and recording all relevant KPIs on a regular basis, including variance analysis? This will help explain the impact of COVID-19 on ‘normal’ trading and balance sheet and cash flow metrics to potential investors / funders. 

External considerations

  • What level of interaction have we had with key trading partners such as customers and suppliers?
  • Do we understand the financial stability of customers seeking to extend payment terms?
  • Have we sought access to their financial information prior to agreeing to payment deferrals and / or forbearance?
  • What other current and non-current commitments do these customers have, and where do we rank?
  • How diversified is our supplier base and how secure are our suppliers’ supply chains?
  • Are there logistical or financial blockers, outside of our control, which threaten continuity of supply?
  • Who bears the risk of inventory in transit, which may be impacted by travel restrictions?

Get in touch

If you have any related questions or need further information about KPMG’s response to COVID-19, please get in touch with our Deal Advisory team for assistance.

Further information