From Watch to Know in 2018: How RapidRatings is Helping Procurement Filter the Risk Signals from the Noise

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Each year, some companies on the Spend Matters 50 Providers to Know and 50 Providers to Watch lists push themselves beyond simply a standout performance. They earn the recognition that they are not only bringing innovation into procurement organizations but also leading the charge to change the way we do business for the better. These are the providers who shifted from Watch to Know in 2018.

To learn more about these providers, we reached out to the four such cases in our 2018 50/50 lists, asking how they’ve changed over the years and what differentiates them from the competition. Today’s Q&A features Jim Gellert, chairman and CEO of RapidRatings, a supplier risk management solution that specializes in financial risk management.

Spend Matters: In case our readers aren’t fully familiar, can you give us a one-sentence summary of what your company does?

Jim Gellert: RapidRatings’ unique Financial Health System (FHS™) is a quantitative analytic solution that accurately predicts the current and future financial health of public and private suppliers, globally.

SM: How has your company changed since it was first named a Provider to Watch? What is the biggest lesson you have learned?

JG: Since being named a Provider to Watch in 2016, RapidRatings has experienced significant growth in customers, market share and overall size. Most notable achievements include the opening of our second U.S. office in the Boston area in mid-2017 to support our Client Success initiatives; a complete corporate rebrand including new messaging and new website in summer of 2017; and most recently, the release of the new UI/UX for the FHR® platform earlier this year.

Over the past few years, we’ve observed supply chain and procurement's broadening of responsibilities, both from a strategic and a risk management perspective. Businesses have higher expectations for prioritizing risk management. By extending our corporate reach and continuing to challenge leading companies around the world to build better business relationships founded on transparency, we’re taking advantage of the growing trend of investment in risk management across all industries and business areas.

SM: What are your two or three best features or services that make you a Provider to Know?

JG: Procurement, supply chain and finance professionals commonly cite the following three aspects of the RapidRatings solution as key differentiators.

  1. Superior accuracy. We have a proven track record of accurately predicting default and overall corporate financial health. Third-party tests regularly demonstrate RapidRatings to be well ahead of traditional ratings and default models, as well as internal rating systems built by companies for their own use. In our most recent Annual Default Study, we found that 96% of public companies that filed for bankruptcy in 2017 had an FHR signaling High Risk.
  2. Private company financial analysis and financial statement sourcing. RapidRatings is the only company that assesses the financial health of both public and private companies from any country, and any industry, on an apples-to-apples basis. Using only the financial inputs from the most recent company financial statements, RapidRatings is able to ensure the accuracy of if its ratings. To assist companies with assessing their privately held suppliers, our dedicated Financial Statement Sourcing team collects financials on our client’s behalf.
  3. Financial Dialogue report. Understanding that predictive analytics are most effective when they’re used as action items to be operationalized, we created the Financial Dialogue, a report that, after analyzing our clients’ suppliers’ financial health, automatically equips them with the five most relevant financial questions to guide discussion in a given relationship. We provide detailed explanations of the impact and relevance of specific financial ratios, how those numbers affect the supplier in question, and why certain issues are more important in a specific scenario than others.

SM: How are you thinking about your competitive landscape? How are you differentiating yourself from other Providers to Know in the industry and upstarts on the Watch List?

JG: Our Financial Health System (FHS™) eliminates the noise of market sentiment or payment history and uses only financial statements to provide an objective view of financial health, using a single methodology to rate private and public companies across the globe against their relevant and appropriate cohorts. Moreover, we are not paid by the companies we rate, and we don’t sell services to upgrade a rating. As a result, not only are we the only unbiased financial health system in the industry, but our system has also proven to be far more accurate than traditional ratings, default models, internally-built tools, and team- and payment-based scoring systems.

While we’re pioneering financial health, we recognize its important link to other risk areas and have seen it as an opportunity to partner with best-in-class solutions to provide the most holistic view of supplier risk to our clients as possible. Many of these providers that focus on very different risk areas such as CSR, geopolitics, natural disasters, etc., in fact, appear on the Providers to Know and Providers to Watch lists.

SM: Where do you see the procurement sector going in the next several years, and how is your company helping organizations through that?

JG: Market research indicates that procurement organizations will be given more responsibility for managing risk in the next two years. What’s more, in the next three years, organizations will be tasked with implementing a proactive procurement and supplier risk management strategy, a significant shift from the reactive and ad-hoc tactics being used today. Coupled with the rise of disruptive incidents from cyber-attacks to natural disasters to geopolitical uncertainty, organizations will lean on predictive tools and analytics such as RapidRatings to filter out the noise and narrow in on actionable insights.

Financial health is the gateway to understanding a company’s underlying strengths and weaknesses and speaking one single language for business decisions, providing a universal benchmark for choosing whom to partner with in the short- and long-term. For procurement professionals, it is also the most efficient way to gauge the risk level of their entire supplier ecosystem. Understanding how financial health can be a great proxy for supplier performance can help organizations use their supply chains to create a competitive advantage in their market.

 

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