Can Transparency About Financial Health Get Companies On The Same Page?

October 27, 2021 00:41:43
Can Transparency About Financial Health Get Companies On The Same Page?
I See What You Mean
Can Transparency About Financial Health Get Companies On The Same Page?

Oct 27 2021 | 00:41:43

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Show Notes

If you think buyers knowing the financial health of their suppliers is better for one side than the other - particularly if the supplier is struggling - you're not alone. It seems counter-intuitive, but not for RapidRatings. They help buyers and suppliers strengthen relationships on the basis of a financial health rating and the data to back it up. Data they get directly from the public and private companies they rate. And it works. Large enterprises with hundreds or thousands of suppliers have a deep interest in the financial well-being of their suppliers. They're willing to step up as a partner when needed - if they know it's needed. Listen in for some true business savvy about building business relationships and resilience on more than the usual contract terms and conditions.

Here are a few ahh-ha! moments I had.... 

4:54 - It seems suppliers take risks when disclosing financial information to buyers, but in reality it doesn't work that way.

7:59 - Transparency is key in any relationship but when paired with strong analytics you get intelligence. With transparency and intelligence, you're on a good path for solving problems.

10:55 - How data and analytics create a same page for companies to get on.

20:10 - How RapidRatings' rating and the analytics behind them provide a platform for a business relationship - with financial issues being a part, not the whole.

26:16 - Financial statements and analysis are a reflection of the human condition, because what you're really measuring are the results of management decisions.

38:14 - How RapidRatings' teams facilitate what might be contentious discussions with positive energy, loyalty and empathy.

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Episode Transcript

Speaker 1 00:00:07 Welcome to, I see what you mean a podcast about how people get on the same page and stay there or don't, or perhaps shouldn't today. My guest is Douglas Cameron Douglas co-founded and is president of rapid ratings, international SAS technology firm that provides information on the financial health of public and private companies around the world. Douglas, welcome to the show. Speaker 2 00:00:28 It's great to be here. Thanks. Speaker 1 00:00:30 Tell me a little bit about yourself and rapid ratings. Speaker 2 00:00:35 Sure. As you mentioned, uh, in the kind intro I'm I'm co-founder president and head of product here at rapid ratings and rapid ratings is a quantitative analytics firm that helps people in supply chain and third-party risk management, uh, understand each other better. So it's essentially, uh, you know, software that's designed to generate empathy, transparency, uh, and higher levels of communication between, uh, suppliers and their, um, their enterprise clients or vendors and their enterprise clients. And today's world is becoming a particularly interesting and relevant topic just as, uh, the issue of supply chain has become, uh, uh, really, you know, uh, a household topic as we've seen, uh, disruptions to that global supply chain due to COVID and, and other issues like the Suez canal, uh, ship incident, um, and in general, just people becoming more aware of, of this, these types of issues. So we work on helping to make people more functional in that role between, you know, understanding a supplier and having a supplier better understood by its client. Uh, and we do that through the expression of a financial health rating, which helps them to understand their strengths and their weaknesses, and it helps people to mitigate and work through the problems associated with, uh, supply chain, risk management. Speaker 1 00:02:06 That's the fascinating value proposition you've got there. And it seems to me a niche that seems pretty unique to me, tell me who your customers are. Speaker 2 00:02:18 That's a really good question. So by actually my customers are on both sides of the equation. So the enterprise clients, so let's say, you know, large manufacturing firms like, you know, general electric or general dynamics or Raytheon or Nike could be anybody. These large firms that have sophisticated supply chains, you know, they have a basic need, which is they rely on their supply chain to provide goods and material on time and on specifications. And a lot of engineering work goes into ensuring that those products are, are correct to meet the needs of whatever the advanced product, the differentiator product they're trying to make is whether it's a cat scan or a jet engine, or what have you and the supplier, you know, um, is also a customer of mine. And I empathize as deeply with them as I do with the, uh, with the enterprise clients. Speaker 2 00:03:12 But what they need is, is stability in, um, their relationship with their client, uh, and the opportunities to grow it and a place to showcase their strengths and their capabilities. And so, um, I'm really catering to both sides of the equation, which is important because what makes our risk analytics differentiated is that we're getting the information directly from the source. So we're not relying on, on, uh, elements that are, you know, you know, firmographic information where publicly available information, where we're saying to that counterparty to that supplier, you need to provide specific disclosures to us, which we will share on a confidential and secure basis with the client. So they, the two of you can have a better relationship. So the two of you can communicate more efficiently with each other, and that ultimately provides a, a better solution for making sure that those goods and services are delivered on time and on specification to the satisfaction. If they're manufacturing from Speaker 1 00:04:15 That's an intriguing angle to getting parties on the same page, if my financial condition is, is, is vulnerable in any way, shape or form, it's not necessarily something I would want known. Now I might be motivated to improve it, but I wouldn't necessarily want it known. And it seems that if I am the, as if I'm the source of your data, I'm giving you data about my operations. There's some risk there. So tell me how, if I'm not seeing that right. Or how do, how is it that you're getting on the same page with somebody who's going to provide you data that you're going to make public to really their customers? Speaker 2 00:04:54 Yeah, so the, um, the theory around it is that, um, the supplier takes risk when it discloses information about itself to its customer, but I don't really believe that's the case, the, uh, the, the part where the sub-components, where the, whatever, if they're providing a logistical solution or a consulting service, whatever the case may be, the manufacturing firm, just in general, right? They have differentiated products and that differentiated product requires differentiated supply chain. It requires them to be nimble and different, and sometimes some of those, those best solutions are gonna come from smaller private firms. Um, and they're gonna, their behavior is going to be more idiosyncratic versus systemic, you know, behaviors of much larger public firms. And we, we inherently understand that there's this difference, the supplier itself. Yes. It could be very threatening if, if they were the only ones being evaluated way. Speaker 2 00:05:57 Right. You know, so out of a supply chain of 3000 critical suppliers, if, if we were to focus on your firm, you know, with a, you know, a rifle shot, then that would feel very exposing, but that's not the way risk management works. We're trying to understand this across the whole supply chain across all 3000. So you're not being singled out. You're part of a greater risk management project. Interesting. And if I, if, as the manufacturer, if I understand that you have differentiated differentiated engineering capabilities, and part of what comes with that is that you're a smaller firm. That's thinking about the problem differently. Then I'm willing to take the risk that you are less stable financially. And as a matter of fact, I can help you to become more stable, right? So, you know, if you get into trouble, don't tell me that you're in trouble when it's too late to help you. Speaker 2 00:06:53 If you're in trouble, let me know now, because these larger manufacturing firms, they have the wherewithal to be able to assist. They can accelerate payments to you. They can assist, can, uh, in, uh, engineering challenges, which could reduce your cost of operations. Um, they can buy commodities for you. There's because the partnership already exists. They already chose you for usually a very specific engineering issue. The fact that you may be struggling is not a big surprise, and it often it could be, the struggle could be caused by that, uh, larger client. You know, they have cut the order, right. You know, by 50% and say, well, I was expecting to produce a hundred units for you. And now I'm only producing 50 units for you. That's going to hurt. Right. And, you know, being able to make those types of disclosures and articulate them in a way that people can speak about them and resolve that issue is the, to me, that's the, uh, that's when risk management is working at its best. Speaker 1 00:07:54 And that's where the transparent, the transparency, it makes it work at its best. Doesn't it? Speaker 2 00:07:59 That's exactly right. The transparency is in any relationship, transparency is key. Uh, and then when you've got, you know, analytics that are, that are highly accurate, that leads to intelligence. And so if you've got transparency and intelligence, you're on a good path for solving problems. Speaker 1 00:08:14 Interesting. What kinds of things do you get people on the same page about what does that mean to them? Speaker 2 00:08:23 So in the, in the case of the underlying analytics that we provide, you know, if you're going to call out a strength, you know, what are those strengths and how should I understand them? So in the case of financial health, which is what our analytics are based around, you know, what does it, what is a financial strength and how am I meant to interpret it as a, uh, as a buyer of, of, uh, goods and services at a large manufacturing organization? I probably come up through an engineering background. I understand the product really well. Like whether it's a turbine blade or what have you, but I may not be financially trained. I may not be a financial engineer. So when I identify these strings, they need to be contextualized in a way that I can, I can manage them. And more importantly, if a risk is identified, I need to understand that risk in a way that I can actually react to it. So you're taking a very complex idea, which is financial engineering, and that you need to be able to reduce it down to things that are very easy for people to understand and interact with so that they can solution from them. So I view it as a, uh, you know, we build analytics that, that construct a mosaic of the company in question, and helps to, uh, identify strengths and weaknesses. But regardless you say, you can look at the analytic and get a sense of the entire organization very quickly. Well, Speaker 1 00:09:45 And everybody, the whole point of this is to take some action. If there's a risk identified, if you assess it, reducing the complexity of the risk picture to things that are actionable is I assume, is something that customers look to you and do analytics for. So they know what actions did they take to. Okay, Speaker 2 00:10:08 Absolutely. So like this would lead to like the creation of say mitigation plans around risk. So once risk has been identified, you know, then what you would do is construct, uh, a mitigation plan that would attempt to resolve the problem. And of course the analytic needs to be sensitive enough to be able to provide early warning. Right. So that, you know, we can see the deterioration in a particular area. And we can use that as a way to, you know, think about solutions that we have ample time to put into effect. Speaker 1 00:10:39 Yeah. You'd want to be able to forecast some effects and put a solution Speaker 2 00:10:43 That is the benefit of, of risk management, right. Is say you want to be a, you, you want to have enough foresight to be able to, to put solutions in place that are proactive as opposed to reactive, right. Speaker 1 00:10:55 So are people getting on, tell me that the peop people are, are, are people getting on the same page? It does the data, is the data, does the data, or do the data? There's a, there's a plural there. I do the data, create a page for people to get on is maybe how I want to ask that question. Speaker 2 00:11:15 Yes. The, that's the accuracy element of the rating, right? If, if you take in the source derived data and you, and you do a really good job of analyzing and summarizing it in a, in a way that is that removes bias, then it is easier for both parties to see that there is truth and, and, um, and information. And it allows the counterparty in question, the supplier to react to it in a, in a, in a positive way. So that the conversation is starting off in a, in a positive light saying, you know, these are, you know, these are our, this is where we are in terms of our financial health, right? And this is the areas that we need to work on to make improvements because financial health is like anything else. I mean, companies are made up of people and, you know, it's the health of the company. Speaker 2 00:12:06 And it's a reflection of the decisions that management is making. And sometimes those decisions are really complex and, and, uh, navigating those waters are difficult. So if there's a reduction in revenue, why is that the case? Is it because of a loss of a client? Is it, um, you know, is there a portion of your market that's been negatively effected or is it that your cost structure has gone up or are you having difficulty rationalizing an acquisition that you've made or is it a combination of all these factors? Right. So, you know, being able to describe that in such a way that it helps people to establish common ground and then make a plan about how they're going to solution for whatever the problem is at hand, you know, and, and in the case of the manufacturing firm, you know, they're, they just want to make sure that those goods and services are coming in on time and on specifications that, that supply chain remains resilient and stable, and they're willing to work with people to better understand that. Speaker 1 00:13:03 So, interesting thing about getting on the same page is that we all are on our own pages. We've sort of all our, our own pages. We have a vantage point or a point of view on something. It comes from many things. It comes from our background, our training role responsibility, something we might be accountable for in a situation it comes from, you know, we could have different personality, characteristics. Myers-Briggs, there's a lot of things that could make up how we see a situation, how we would assess that, how we would size it up to decide what to do about it. And in a metaphorical way that constitutes a page to get on the same page, I think requires creating that page. So in a, in a, in a way, picturing a Venn diagram, peoples into individual pages could overlap to create a same page they're getting on. It's often the case that people feel threatened to get on the same page, because they feel like they have to get off of theirs or abandoned errors, just leave it behind something that they know, something that they, something they believe, something they feel strongly about. I'm guessing that the depth and sort of breadth of the analytics that you're, that you do addresses the things that I, those things that I just described is that it, would you say, would you agree, or do you see it differently? Speaker 2 00:14:34 Yeah, I mean, I think that, um, you know, we've been able to construct a firm that has a product led from, you know, where we are empathizing with our client, which as I described earlier as is really on both sides of the equation, that's the client and it's the supplier or vendor client, you know, to empathize in that way. It really requires you to dismantle sort of traditional decision-making. Um, and it requires you to think about decision-making where that process includes a much more, a much larger and much more diverse first group of stakeholders. You have to actually engage with them and listen to them as opposed to sort of traditional decision making, where I might have a really good idea. And I put that idea into effect. Now, when you have a broad group of people with diverse positions, that's going to create a complex environment. Speaker 2 00:15:34 And that is in fact more difficult. That's true, but more difficult and more complex issues that you work through lead to better, more innovative products. And subsequently you have, you know, a user experience for both the supplier and the enterprise that is more satisfying. And if both parties are satisfied through that process, then you have, uh, your contributed real value, um, and solved. And you, and you are well on your way to helping solve problems. And so that, no, it's just say that that approach to, you know, thinking about product and removing yourselves from, from bias, you know, is something that we work really hard to instill in, not just our managers, um, but everyone inside of the firm and having that deep empathy for our clients is, is a critical component of that. Speaker 1 00:16:33 You've mentioned empathy a few times. I'm going to come back to that bias is huge. I want to come back to that. Let me ask you one more question sort of on this line that I'm on, which is, it sounds like situations which could be contentious or even adversarial relationships between a supplier and a customer vendor and customer that could be tense or, or, or adversarial. It sounds like what you're saying is that you've, you see them sometimes become stronger relationships, improve relationships, more, more, open, more, more of a partnership then than just unloading the truck. Speaker 2 00:17:13 Yeah, that's, that's the key to it is that, you know, there's benefits to both sides. You go through, you know, better risk management, the manufacturing firms day in fact, get that resilience and that, uh, stability in their supply chain. They don't want to have to be reacting to issues that causes them a supply chain delays. And then conversely for the supplier, you know, they want to be able to maintain and grow that relationship. You know, uh, revenue maintenance is, is an renewal. You know, it's, it's critical to, to growing a business and being able to expand your, not just with your current client base, but with, uh, you know, new prospects, that's the lifeblood of, of, uh, you know, for profit businesses as we understand them. Well, Speaker 1 00:18:00 Last comment on this, and I'm going to get onto a couple of topics. It's, well-known that the interdependency between parties like you're describing as well known. We often, when we read about that, we hear about it. It can be a little conceptual, like, oh, okay. There's interdependencies between these parties in a supply chain in a, in a, that leads to a value chain. That's delivers something to a customer. We understand there are interdependencies in there, but what it sounds like your product and your service do is effectively respectfully manage, help, manage, help them manage the interdependencies. So sounds like you're respecting those interdependencies, helping manage those interdependencies in a very constructive and productive way. Speaker 2 00:18:52 I think that, um, you know, value chain as you describe it, which I think is very apt, uh, value chain. The, the idea that there, there are inter dependencies, it preexists it's, it is an understood area there, but the risk control area that we're speaking about here is financial health. And, and it's, it's in that particular area, which has been opaque prior to the solution that we're, that we've brought to the market. And so I think that it's really think of it more like, um, you know, there are many pillars of, of relationship control that sit on top of a foundation. And that foundation is the financial health of a company. How well is it positioned to survive the trials and tribulations of just normal business? And then you layer on top of that, you know, event based issues like pandemics or cyber issues, like how prepared am I to deal with those elements? That's a financial health question. And that that's true for individuals as well as corporations. You know, what, you know, what is, what are the elements that are necessary to provide the stability and the, and the ability to grow and grow efficiently. Speaker 1 00:20:10 But, but Douglas, when companies, my experience, his company was having a conversation with his self about his financial health. That would be mostly internal where you, what you've done is externalized. Some of that, so that the conversation about financial health is in the relationship. And there's a mutuality. There's a where there's a respect of the interdependency between us that your financial health affects me. My financial health affects you. And maybe you're giving people a platform to talk about that when that might never have been a conversation before. Speaker 2 00:20:43 That's correct. Speaker 1 00:20:45 Okay. So that's really amazing value proposition for your customers that I don't think somebody hears when they hear the word fighting and financial health or risk analysis of financial conditions, right. That's just not where the mind goes first, but I see you drive you guys driving it there for the benefit of all the parties. Is that accurate? Is that, is that how the parties experience it when it works well, Speaker 2 00:21:12 When it's working properly? I think that's correct. Speaker 1 00:21:14 That doesn't surprise me to hear you say that at all. And I think it could have been very hard or still could be hard to have that conversation without a third party. I think it could be really difficult for, especially as you mentioned, the large enterprises who have hundreds or thousands of suppliers in their supply chain system, they'd have to stand up an entire operation just to correct. Speaker 2 00:21:36 And the hope of Speaker 1 00:21:38 Starting an empathetic relationship with that many parties, but then communication with that many parties. Speaker 2 00:21:44 That's correct. It's just too much to ask of any, uh, risk management group inside of a, uh, supply chain organization. Speaker 1 00:21:52 That's not what they're in the business of. So Speaker 2 00:21:55 They need to, to be able to do a programmatically, they need to be, they need to be able to understand very quickly who's at risk and how they need to mitigate that risk and who is, uh, strengthened and how to leverage that. Speaker 1 00:22:09 Very cool. Very cool. So one of the questions that I think a lot about what, what, what does it mean to be on the same page? I think here we have a unique example of getting on the same page of a relationship around the issue of financial health and obviously the, the product being supplied it's is, uh, you're, you're in the business of supply chain, risk management, but there's a relationship between parties that could be, that is strengthened by getting on the same page around the, uh, I don't want to overstate it, but it seems to me a fair amount of this comes down to predictability of both sides can predict, uh, with, with reasonable accuracy over a reasonable period of time. Anything that could disrupt that a lot of things can disrupt that things that are within our control to disrupt that or things that we could prepare for that are outside of our control. Speaker 1 00:23:03 We're all better off if we do that. And someone in li coordination, if not a full-blown collaboration, at least in some coordination, correct? Yeah. So, so getting on the same page, it's about the, is about the predictability of the S of the relationship, what they're in the business of together, the literature on bias and heuristics in decision-making regarding risk management is vast and legendary it's decades old it's heavily grounded in is good research. As a scientist can make them, you can Google bias in decision-making and getting millions of hits and read about dozens and dozens of dozens of biases and heuristics decision making rules that people use, which sometimes introduce systematic bias. You mentioned removing bias a few times, and it just, it seems to me, correct me if I'm wrong. It seems to me that the focus on data is, is one way maybe the chief way that you help remove bias in decision-making that could introduce errors in decision-making. Is that a fair statement? Speaker 2 00:24:12 It is on the, uh, on the model development side, that's a key component to our approach is working very hard to avoid those types of biases and letting the data speak for itself that generates a, an output that is accurate and fair. And, you know, that allows, you know, people from moving from a place where it's generally negative, where they don't have enough information, right? And there it's unclear to something that's neutral where now either through preparation and, and, and strong analytical work, you know, people have a, uh, uh, a they're in a neutral place to then suddenly being able to go to a positive place because they've got now information that they can make, uh, you know, decisions with that enhance a relationship. Speaker 1 00:25:03 If you were trying to broker discussions between parties like you have without the data, or as much data or complete or accurate data, you would have to manage a great deal of bias that anybody comes to the conversation they're bringing to the table. We all have that in our minds, we're wired to make decisions using decision-making rules. Those are the heuristics. Sometimes they introduce systematic bias. That's what we referred to as bias humans operate that way. If you were the third party that you are without as much data, you'd be managing the biases in more of a, um, analytic persuade, communication, persuasion kind of way, and people resist changing their views on things. What do you find happens when, when folks were looking at data, do you still see their biases emerge? And do you, how do you overcome them, how to use the data to address them? What do you see as the process of getting people on the same page with the data? When part of the page they have to leave behind is maybe their own individual biases about something that the data contradict. Speaker 2 00:26:16 I mean, you guys, I was referring to before, you know, financial statements and financial statement analysis. To me, it's a reflection of the human condition, because what you're measuring are management decisions. Uh, you're looking, you know, uh, you hire a new salesperson, you expect them to ramp up and be able to generate revenue after a certain amount of time, if they do, that's a good investment. So assets go down, cash is consumed. The higher is made. Uh, the expenditures are incurred as wrap up, uh, continues. And then, uh, if the training is successful and the, and the hire was a good one, then revenue is generated because the salesperson has a territory and, and execute against that territory by, by building pipeline and converting that pipeline into paying customers that can all be tracked in financial statements. So that decision saying, we're going to hire a new sales person. Speaker 2 00:27:11 We can track all of that through that, that process. And, uh, and you have a number of managers making a series of decisions about how they manage their teams. And so financial data provides us with, with, uh, enormous amounts of information that we can sift through, but it's complex, right? So the relationship between balance sheet income statement and cash flow, uh, contributions, they vary industry by industry. Um, you know, there's no such thing as what's the right amount of assets to leverage, for example, or what's the correct gross margin. It's going to vary industry by industry, and it's going to vary, uh, to a certain extent, geography by geography, um, and being sensitive to those, those geographic differences, those, uh, industry differences and being sensitive to size differences, um, smaller companies can't operate the same way that large companies do. Um, and so their behavior is different and needs to be understood because of that. Speaker 2 00:28:18 And if you're willing to accept that, then you, that in and of itself is going to necessitate you to abandon a bunch of bias where you say, I think I know how a logistics firms should work. Well, let's look at the data and, and, uh, let's look at how a logistics firm operates in Germany versus how they operate in the United States versus how they operate in Japan. And let's think about that in the context of Brazil. And what we see emerging from the data is an, uh, is a picture. And we can then benchmark ourselves against that greeter image of data and draw comparisons to it. And what that allows the, in this case, a supplier, but really anybody to say is, you know, yes, it is true. You know, that I'm, I'm struggling, but let me explain why I'm struggling in this particular area. Speaker 2 00:29:10 And that's where you're moving from neutral to positive. Cause now I'm, I'm explaining something to you about my business. Um, so you know, this good thing happened to me or this bad thing happened to me. And as a manager, I'm reacting to that. And these, this is I've analyzed the problem. I prepared our strategy, and I'm executing on that strategy. And I'll explain that to you now. And that's moving into a really positive position because now, you know, as a buyer of your services to whatever product that I have, I'm an understanding of, of how you're going to mitigate the risks in the future, right? Speaker 1 00:29:47 That must be very eyeopening for a large enterprise that might have thousands of suppliers in a supply chain network or system, which are probably global in reach to see the variations that you described by geography by, um, by type of product by size of company. Uh, it must be quite eyeopening to come to understand this is not a one side. They can't think about all their suppliers in one way Speaker 2 00:30:17 True, but I can't also expect them to have that level of understanding of financial engineering side. So the analytic itself distills that down into something that's much easier for them to consume a rating is a good place to start. Uh, so like a cartel rating system, like a zero to a hundred scale, it says, you know, this company is a 60 and in the prior period, it was a 14. So there's improvement. That's something that's very easy for people to understand that very high level, right? If you, if you can understand the methodology that we go into building out that analytic and you wrote to trusted because we demonstrate high risk. And when you dig into your like yesterday, that is risk that as, as you build trust in the analytics, then you can rely more and more on the higher level, uh, ratings. Um, and then, you know, dive deep with the counterparty, with tools that we would provide them both. Let's say like, you know, given that this rating is X, you know, here are the underlying, uh, primary reasons for it and provide people with enough information and context to be able to discuss it. Speaker 1 00:31:24 The, uh, Speaker 2 00:31:25 People can approach, I'm sorry, go ahead. I was gonna say people can approach that conversation in a, in a positive way, then the likelihood that they're going to have in a, a positive resolution that might reflect itself in a mitigation plan is, is much greater because both parties are aligned, but they were they're pre aligned anyway. Right? We're just trying to facilitate that alignment. And the reason they're pre aligned is there, or there already is a relationship out there. The supplier is already providing a critical part to the sub assembly or, or, uh, a direct component into this end product. And you, weren't just, we're trying to help facilitate the decision to work together that, that pre-existed, and, uh, it helps route over, uh, differences of opinion and, and make this portion, Speaker 1 00:32:20 But what you helped them achieve as a far greater type of alignment, which is built as I, as I, as I see what you mean, but on unshared knowledge. So they increased the shared knowledge, the knowledge shared between them, the information, and then the knowledge of that information, what that means the, you mentioned the rationales, the whys shared knowledge and shared intent when parties have shared knowledge and shared intent, they've got, uh, I would consider that a much greater form of alignment. That's that's that, to me describes more a collaboration. One of the definitions of collaboration I like is that parties who are collaborating are sharing risk and reward. There's one model I use there's four, four levels of, of, of working together, networking, cooperation, coordination, and collaboration. I hear you saying you are a help able when this goes well, to get the conversation to that level. Speaker 2 00:33:23 Yep. And I would argue that that's, that is exactly the relationship, uh, an ideal relationship between a supplier and a, and an enterprise buyer, um, is that they're sharing both the risk and the, uh, Speaker 1 00:33:37 Yeah, that's pretty amazing Douglas. That's, that's pretty amazing what happens when some of these parties that you work with, can't quite get to the, get there the way we've discussed it and what happens when they can't get on the same page or, or, or it's going to be a slower process to get them there. You want to try to preserve some respect in the relationship and see if you can deal with differences constructively. What's that look like in the work you do? Speaker 2 00:34:02 What's easier for me to comment on that on like the way that we would manage like our own teams, ultimately, that the decision to continue the relationship in the work that we do with our clients, both the enterprise client and the supplier that, you know, if the, if there's a logical breaking point or they feel like mitigation can't be achieved, then you know, the, uh, we have done our job getting to people to that point. Right, right. You know, that we w we don't actually need to help them to take that further. So in the process of collecting information, if the supplier refuses to comply with the program, which is quite rare, but if they do refuse and we've left no stone unturned in terms of explaining to them the value and, and helping them understand that they're not being singled out, et cetera, you know, once we report back to the enterprise client that we've done everything we can, then, you know, they're designated as high risk of side of the risk management program, right. Because they're unwilling to make the disclosure. Speaker 1 00:35:12 Um, and that's a legitimate, if that, Speaker 2 00:35:15 That is a legitimate outcome and it, it is reasonable. Uh, and, uh, you know, that it may, it may lead to the termination of the arrangement and both parties might be satisfied with that, right. That may be a, uh, an adequate outcome. But again, it's, it's following a process as well, understood by, by all parties, you know, because our approach is systematic. And this way we know that we've done all the correct things in order to, to be able to say to the enterprise client that, you know, this counterparty is not going to be compliant with your program. That would be an example, but how they choose to react to that depends on the stance that they have. Uh, this restrict whole area. Speaker 1 00:35:58 I'm just always curious at how, if you can't get on the same page, where does it, where might it end? Where might it be a left and what could happen after that? Speaker 2 00:36:08 I would argue that there are probably other reasons in addition to the financial health component that is leading to the, uh, deterioration of that relationship products could be sunsetting. For example, I think that's a good one where the supplier in question is like, look, I can, I can already predict where this is going to products that are related to our Southern setting, um, in the next two to three years. And through that deprecation process, your reliance on me is becoming, going to become less. So the relationship between us is already skewed against me, and I may choose not to participate in your program because I don't think that I'm going to be, there's not as much value in it for me, because I'm not going to achieve anything right. Through the process of, of going through this, um, risk management, um, assessment. Right, right. That I, I can understand how that could happen. Speaker 2 00:37:04 Um, the, uh, does that, does that leave the relationship in such a way that they can't work in the future? Uh, not, I don't think that, that, uh, it is damaged through that in such a way that they can't work together again. Right. Um, and if anything, it's going to establish what the, what the criteria to work together as a future. So they do, re-engage on an, on a new initiative. There will be a financial disclosure because that's part of, of the process that they go through to, um, you know, validate the procurement process, because at the end of the day, that enterprise client is transferring brand over to that supplier. If the supplier doesn't provide, because the services on time and on specification, it could disrupt the supply chain and disrupt the end customer to the detriment of the brand of the enterprise client. So, you know, it's not an unreasonable request. And I think, you know, recent history has demonstrated the, the need for a better collaboration and better understanding and, and value chain and supply chain in general. Um, because we're all interrelated, we're all interdependent. Speaker 1 00:38:14 The pandemic certainly taught us that lesson. So tell me about the way your teams work to implement this innovative approach. Speaker 2 00:38:22 No, I think that the way that, you know, driving towards creating products that are, are, uh, transformational like this, it requires, you know, a staff, you know, where, you know, we try really far to promote ideas like common sense, and having an optimistic disposition and being energetic and loyal, you know, um, and a willingness to take risk and be determined. And, you know, in the process of doing that, you know, we're going to, we want people to be entering into conflict, um, that may arise, you know, with a positivity and, and, and a positive energy, because it's a lot people, may you, uh, we, we want to encourage ideas, um, that help our, help us to make our products more impactful to our clients in order to do that. We, we really want to encourage, uh, uh, you know, people to come to discussions that, that may be contentious, you know, prepared, uh, willing to empathize with each other and listen, uh, and, you know, make modest, incremental steps, uh, so that you have agreements and next steps and, and, uh, and you can move through issues. You, that to me is a very agile approach to problem solving. Uh, and it reflects, I think really positively on our, uh, on our product, um, you know, empathy with each other is critical. And I think those characteristics are, are some of the key ones to establishing empathy. And the more empathetic we can be of each other, that the easier it is for us to be empathetic to our clients, both the enterprise and the supplier side. And, um, it helps us to provide, uh, better solutions for them. Well, Speaker 1 00:40:12 It's just fascinating words, like common sense, loyal, positivity, optimistic. I would, if I was told folks going to interview Douglas, sign, financial risk management and health, those words wouldn't have come up. I would think your customers get out of working with you exactly what the kinds of things we've described that had to do with relationship that had to do with respect, empathy, and the things that make for a strong relationship on the foundation of financial analysis, analysis of financial risk, um, understanding and working on conditions of financial health. I think it's a fascinating leap you've made, or maybe it's just a really smart step you have made from something that might have nothing to do with such human emotions and human. Um, as you said earlier, the human condition, but you've tied it together. And my guess is your clients have that experience. Speaker 2 00:41:09 So then what we endeavored to do, it's a journey, but we continue to work down that path Speaker 1 00:41:15 Was thank you for joining. I had a lot of fun. I learned a lot. Speaker 2 00:41:18 That's great. I appreciate the opportunity and thanks for the appropriate questions. Speaker 1 00:41:22 And that's how we see it. My friends, I want to thank Douglas for recording today's episode with me, send questions and suggestions through the app, subscribe and give me a five star rating unless you can't. In which case, tell me why and join me next week. We'll be taking a look at how to get on the same page to stay there, unless we should have.

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