Supply Chain Risk Management

108 • Supply Chain Risk Management: An Emerging Discipline

investment groups have long thought about risk from a nancial perspec-

tive. e following approaches for managing supply chain risk borrow

heavily from the nance side of the business.

Supplier Financial Health Assessment through Ratio Analysis

A common approach for evaluating a company’s nancial situation

involves ratio analysis. Ratios, also called nancial performance metrics,

simply represent one number divided by another to provide a value that

is then compared to an industry benchmark, internal historical perfor-

mance, or to other companies, usually in the same industry.

e reasons for calculating and then interpreting nancial ratios

are straightforward. We use supplier nancia ...