Strengthening Supply Chain Stability: Why A Financial Viability Risk Assessment Comes First
Supply chain resilience has always been critical to the stability of any business. In 2025's increasingly complex landscape, Everstream Analytics has identified five major threats to supplier stability, all of which should be considered when conducting risk assessments. These insights, however, hold little value without a solid financial foundation and must be underpinned by a rigorous Financial Viability Risk Assessment.
The Foundation: A Robust Financial Viability Risk Assessment
This crucial starting point, and a mandatory requirement under The Procurement Act, is highly complex and demanding of both time and resources. But it doesn’t need to be. RiskTrace has streamlined the process with its automated Financial Viability Risk Assessment Tool, which evaluates suppliers’ financial health and delivers results within minutes, not days. The analysis is carried out against the nine key indicators prescribed by the government, generating a risk score to identify any weaknesses in a supplier’s financial health. Automating this onerous task not only saves time but, most importantly, eliminates errors from manual data entry, enabling government departments to make improved, informed and safer decisions. This assessment is a critical component of supply chain risk analysis, without which identifying financial vulnerabilities and risk of collapse is impossible. Therefore, it is a necessary prerequisite before considering any secondary risk factors.
Everstream’s Additional Risk Factors
Once a thorough FVRA has been completed, an evaluation of each supplier's exposure to threats identified in Everstream's report can be undertaken. This requires a detailed analysis of supplier operations, including their geographic footprint and supply networks, to determine sensitivity to each risk category.
1. Climate Change and Extreme Weather
Climate change is at the top of Everstream’s list with a 90% risk score. Of course, this affects suppliers differently based on their specific operations and locations. For example, a manufacturer with production facilities in flood-prone Valencia is at far greater risk of supply chain disruption than a software provider with a global remote workforce.
Effective risk assessment requires detailed climate vulnerability maps overlaid with supplier locations and climate threat projections. This, therefore, allows for an evaluation of each supplier's resilience measures, such as business continuity plans and alternative site capabilities.
2. Geopolitical Instability
With an 80% risk score, geopolitical instability has the potential to cause major supply chain disruption. Again, however, the impact varies dramatically based on supplier geography and supply chain configuration. A supplier solely dependent on raw materials from regions experiencing trade restrictions or conflict is far more vulnerable than one with diversified sourcing across multiple stable regions.
Procurement teams must undertake a similar exercise in mapping supplier locations against geopolitical hotspots, then assessing dependence on vulnerable trade routes, exposure to potential sanctions and currency risk from politically unstable regions.
3. Cybersecurity Resilience
Earning a 75% risk score, cybercrime presents a serious risk to supply chains and the potential of such must be considered when assessing suppliers’ overall stability. A financially strong supplier with inadequate cybersecurity practices may pose a greater risk than a financially weaker one with robust digital protections. Key considerations include supplier compliance with frameworks like ISO 27001, implementation of multi-factor authentication, regular security testing and incident response capabilities.
4. Material Dependency
Rare metal shortages can pose a significant threat to supply chains and garnered a 65% risk score. Organisations should identify which suppliers use critical materials, any single-source dependencies and evaluate supplier strategies for material alternatives or stockpiling.
5. Forced Labour
With a 60% risk score, forced labour concerns represent a significant regulatory and reputational risk. However, like much of the above, the impact varies based on industry, sourcing regions and existing compliance programmes. Suppliers with operations in high-risk regions require careful evaluation of their human rights due diligence processes, transparency initiatives and certification programmes.
The result: An Integrated Risk Profile, Informed Decision Making and Increased Supply Chain Stability
By conducting detailed sensitivity analysis against each of Everstream’s risk categories, organisations can develop an enhanced understanding of their supply chain vulnerabilities. However, this is futile without a comprehensive and more precisely accurate financial viability risk assessment, upon which these additional factors can be added. This critical step no longer needs to take hours to complete. It can be conducted within minutes by RiskTrace, allowing quick, informed decisions about a supplier’s financial stability and whether or not it is worth considering the additional risk factors above.