The Risk Calculator

This issues key takeaways:

• Risk exposure is not static — it changes along with economic fluctuations and business relationship changes between counterparties (a company and its supplier, a company with its customer, etc.)
• Inflation, tariffs, and increasing bankruptcy rates make having visibility into supplier risk crucial
• The risk calculator is an interactive tool that helps companies evaluate risk levels in their supplier base, both with and without tariff stress applied
• Detecting financial risk early gives companies much-needed optionality

Risk trivia:

Long before anyone looked at their paycheck and immediately started punching numbers trying to understand why the final number was so small, people have been calculating things.

While the history of calculating devices is long and varied, our trivia question is about a specific calculator milestone.

When was the debut of the first commercially-successful calculator, and what was it called? Keep reading to find out.

Ferris Bueller’s Risk Lesson: Stop, Look Around, and Assess Your Supply Chain

By James H. Gellert, Executive Chair, RapidRatings

A wise man once said: “Life moves pretty fast. If you don’t stop and look around once and a while, you could miss it.”

Now I must be clear, that “wise man” was a divisive fictional teenager from the 1980s, but there’s truth in the quote.

It certainly applies to financial risk, which can shift quickly, amass discreetly, and spread rampantly in the absence of systematic scrutiny.

This month I’m focusing on how important it is to monitor supplier risk and review an assessment tool that helps companies uncover and understand the key vulnerabilities in their supply chains.

Risk is a moving target. You need to move with it.

For companies that rely on a healthy supply chain for success, it’s vital to monitor supplier risk closely and adapt as that risk changes.

But that’s not easy.

For starters, risks are many and can be tricky to assess and hard to isolate. An imprecise risk evaluation based on incomplete or outdated data might show acceptable levels of risk exposure, when in reality that risk could be concentrated in a distressed sector of high-risk suppliers.

A vague analysis shows manageable risk, while a detailed view reveals a more nuanced, urgent situation: an example being accumulated risk in a vulnerable sector that will cause systemic upheaval if ignored.

This type of accurate, comprehensive insight requires a proactive financial risk strategy, which more than ever is a top priority for companies with board-mandated reporting standards, supply chain resiliency targets, shareholder pressure for increased risk management or working capital efficiency business objectives.

Making things more difficult today are tariffs, which add volatility to day-to-day operations and uncertainty to risk projections and strategic financial planning. While some uncertainty is simply part of doing business, the fewer decisions made with unclear or incomplete data the better.

Which brings us back to Ferris Bueller. His quote at least. Companies need to stop and look at supplier risk, or else they’ll miss something important.

The Risk Calculator

The Risk Calculator is a free, interactive tool that helps companies see where financial risk is concentrated in their supply chains and third-party ecosystems.

It does so by guiding users through a customized risk assessment that reveals blind spots, benchmarks exposure against peers, and pinpoints the sectors most at risk.

Additionally, it features a dynamic risk model that uses RapidRatings’ tariff stress-test data to forecast the impact of tariffs, giving users a view of supplier risk both with and without tariff stress.

What you gain

Companies can gain insights from the risk calculator that can help inform strategic decisions about the best path forward.

The risk calculator provides companies with:

• Immediate, data-driven visibility of where supplier financial health risk is concentrated
• A clear understanding of how tariffs would change the risk picture
• Benchmarking against industry standards to identify whether their exposure is exceptional
• Evidence to prioritize supplier reviews, diversification, or contract renegotiations

How it works

The assessment is a quick, three step process.

In Step 1, the user creates a profile of their company’s supply chain by providing details in four categories:

• Industry/sector
• Supply chain size
• Percentage of private suppliers in the supplier network
• Percentage of suppliers based in the U.S.

These inputs tailor the model to reflect the user’s supplier network.

Step 2 displays the top ten supplier sectors within the selected industry. Each sector has an exposure slider that can be adjusted to mirror the company’s reliance on that sector.

The user moves the slider to one of five levels of reliance: None, Below Average, Average, Above Average, Well Above Average.

This customization ensures the results match the actual supply chain composition.

The risk calculator then synthesizes the information into a comprehensive risk profile which the user can access.

So, step 3 isn’t really a step but more of a result.

What’s included in the report?

The full risk profile includes a ton of information, too much to fully review, but here’s a brief summary of what a final report includes.

A risk snapshot

This is a high-impact summary of total suppliers, number of distressed suppliers (pre-tariffs), private suppliers’ relative risk, and the impact when tariffs are applied.

Deep-dive views and benchmarks

Users can then dive deeper by viewing results for the full supply chain, private suppliers only or public suppliers only.

Each result can be compared to industry benchmarks, layered over year-on-year results to show changes over time, and juxtaposed with both tariff stress-test data and baseline outcomes.

Sector-level analysis

A detailed breakdown of the likely percentage of distressed suppliers in the user’s network, which can be isolated between full supply chain, private, and public suppliers.

This data can be compared to year-on-year results as well as tariff stress-test outcomes for a visual representation of how trade pressure will escalate risk.

Financial profile comparison

This section includes a table that shows how low and high-risk suppliers differ across:

• Cash ratio
• Leverage
• Operating margin

These metrics act as early warning signs, giving users a clear picture of the structural weaknesses driving supplier risk.

Why does this matter right now?

Improved risk visibility has multiple benefits. It helps companies detect issues early and respond proactively to avoid unnecessary disruptions.

It identifies sectors with concentrated levels of risk so valuable attention can be laser focused on top-priority areas.  RapidRatings’ clients can use FHR ratings to isolate individual high-risk suppliers that require active risk management, and can align closest with those that are lower risk.

A risk model that applies tariff stress provides much-needed clarity on which suppliers will be most affected and extends the runway for troubleshooting tough decisions on the horizon as a result of tariffs.

Regardless of the industry, the risk calculator helps companies maintain standards and uphold their reputation by exposing financial risk that could potentially wreak havoc on supply chains. This in turn has the greatest positive impact on a wide variety of business objectives.

Oh yeah, that’s a Ferris Bueller quote from the movie “Ferris Bueller’s Day Off”. If you haven’t seen it, the titular character cuts school and spends the day forcing his best friend and girlfriend to follow him across Chicago in pursuit of fun. It’s a movie, so all the risks he takes end up working out.

A real-life Ferris Bueller would desperately need a risk calculator.

Begin using The Risk Calculator.

Upcoming Webinar

Navigating Supplier Uncertainty with Financial Intelligence and Operational Agility

Are you a Procurement, TPRM, or SCRM leader who wants to make difficult decisions with confidence?

Join RapidRatings’ Executive Chair James Gellert, and ProcessUnity CEO Sean Cronin, on October 1 at 11AM for a live discussion on how to spot, assess, and respond to supplier financial risk before disruption occurs.

This session is for Procurement, TPRM and SCRM leaders who need to make confident, data-driven decisions in volatile market conditions.

Stat of the Month: August

It doesn’t take a calculator to figure out you need a lot of money to buy a sports franchise. But just how much do you need if you’re in the mood to buy the most expensive team in the world?

Oh, just a cool $10.3 billion, give or take, for the NFL’s Dallas Cowboys, which factors in the team’s market value, team-related businesses, and real-estate holdings. It also confirms that when it comes to owning a professional sports franchise, winning big has nothing to do with winning games.

Trivia answer

In 1851, Thomas de Colmar debuted his Arithmometer, a mechanical calculator durable and accurate enough for daily office use. It enjoyed a 40-year run as the only commercially available mechanical calculator and launched the mechanical calculating industry.

If you’re curious about how RapidRatings offers the most accurate and comprehensive financial data analytics in the industry, check out RapidRatings.com to learn more.

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