Compliance Evangelist Tom Fox sits in for an insightful yet powerful conversation with James Gellert, Chairman and Chief Executive Officer (CEO) of Rapid Ratings International. In this episode, glean the lessons that companies should never forget from the 2008 Financial Crisis to the Coronavirus health crisis and the total evolution of the business of compliance.
Key points discussed in this episode:
✔️ Finance and financial health is an excellent example of a risk area that historically may have been isolated or siloed for the finance team or a finance person within the supply chain to look at. But in reality, all of these risks are connected.
✔️ Why the Rapid Rating approach helps companies manage their third-party supply chains through assessing financial health. We’ve seen significant changes over the last five to 10 years in the importance of financial health and how it helps define risk management programs.
✔️ Understand what a 3rd party ecosystem is and why companies need to understand the breadth and scope of their 3rd parties are really powerful. The more businesses can collaborate and communicate with each other, supply chain, risk management, supplier collaboration; these are crucial elements to creating the most robust ecosystem and benefiting both sides of that equation.
✔️ The silver lining to the Covid crisis made supply chain risk management stronger from now on, and more companies were able to adopt techniques than we ever had before.
✔️ More companies will benefit from more robust ecosystem creation and strengthening the ecosystems they’ve got into the future by embracing the importance of the digitalization of data they already have. Companies will need to spend a lot of time, money, and resources cleaning their data on their third parties and then implementing systematic approaches to managing those risks.
James H. Gellert is the Chairman and CEO of RapidRatings International. Previously, he was the Managing Partner of Howland Partners, LLC, and Howland Securities LLC, which provided consulting, business development, capital raising, and M&A advisory to companies in the financial information and technology markets. Before those positions, he served as CEO of a number of technology companies, including wireless software and research companies SkyScout and Unstrung.
Website: www.rapidratings.com
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Welcome to the newest addition to the Compliance Podcast Network, Compliance and Coronavirus. As the Voice of Compliance, I wanted to start a podcast which will help to bring both clarity and sanity to the compliance practitioner and compliance profession during this worldwide health and healthcare crisis. In this episode, I am joined by James Gellert, CEO of Rapid Ratings. We discuss the services provided by Rapid Ratings to help companies understand the financial health of their third parties and why in this time of Covid-19, such information is even more critical.
For more information on Rapid Ratings, check out their website by clicking here. Also, check out the Rapid Ratings Covid-19 Resource Center, available here.
Today we conclude our five-part podcast series on an innovative approach to managing third party risk we consider how to use this information going forward. I have been joined by James H. Gellert, the Chairman and Chief Executive Officer (CEO) of Rapid Ratings International Inc. (RapidRatings), the sponsor of this special series. Our conversation has been on helping companies manage their third-party supply chains through financial health. The RapidRatings approach is incredibly innovative, with a series of products and services that should be considered by the compliance practitioner. In our final episode, we discuss the supply chain efficiency premium.
I began by asking Gellert the following: What is the ability of the compliance procurement, credit professional and other cross functional areas to have seamless communication of their data analytics and findings? Obviously, this is vitally important with a hindrance of siloed information across those different business units. He stated, “what we are finding is the most evolved and sophisticated risk management programs are making sure that each one of those areas that may touch on risk is in some form or another connected with the others on findings, so there’s efficiency in that process”; from the Chief Information Officer (CIO) to the Chief Compliance Officer (CCO) to the Chief Financial Officer (CFO).
This means that data and analytics should be shared across business units to benefit from the supply chain. Continuous monitoring and understanding that when a company is deteriorating its financial health could be an indicator of problems. Further, fraud, and even corruption, is more likely to occur when the company is weak and under extreme financial duress and pressure. This is why having a leading indicator like the Financial Health Rating (FHR) is critical because it can communicate to a compliance professional when a company is weakening and enables a risk management to be focused on those suppliers who require a more focused risk management solution.
Gellert related that another “big part of it is making sure that everyone in your organization is speaking from a common language and that the analysis and the findings are shared. This means developing workflow efficiency and also creating a return on the investment for an overall risk management program.” It also allows companies to help their suppliers. Finally, it allows your organization to have a dialogue with suppliers. “It comes from transparency around financials and other risk areas and being able to perform the appropriate risk analysis that can be fostered through a dialogue. The more a company understands the problems that its supplier may have, the more it can do things to help that supplier through those problems.”
The bottom line is that companies want to continue to work with their suppliers. It is not good or even efficient business to engage in looking for ways to stop working with them. The more a business can work with a supplier in a collaborative way to help them through times of difficulty benefits everyone and allows a company that is engaged in risk management and invested in a risk management process to be able to demonstrate the return on investment to the finance side of an organization.
With this process in place, you can develop a well mapped out workflow for handling problems when they arise so that if one comes up, it allows your organization to repurpose and reuse the workflow. Gellert said it “allows for maximum leverage, maximum workflow efficiency.” Once the “tools necessary to put these systems and process are in place, they can be replicated.” Lastly, “When that occurs, the business efficiency and the gain that can come from this kind of an analysis on financial health and other risk areas really does pay dividends in the companies that do it, I think are benefiting significantly across all the different business units that it touches.”
Gellert concluded, “It’s about creating ecosystem that can grow with your business. When your business is doing well, the last thing you want to do is have the opportunity to expand, but then all of a sudden there is a problem in your supply chain that you could have avoided, but you were not being proactive enough to do so. It is very much about creating the most resilient supply chain where you are reducing risks, but you’re also expanding the opportunities to grow over time.” This is the real supply chain efficiency premium.
This podcast series is sponsored by Rapid Ratings International, Inc. For more information, check out their website at www.rapidratings.com.
In this episode, I visit with James Gellert, CEO of RapidRatings, a company that uses a financial dialogue to determine third-party supplier health and viability. Gellert explains what supply chain resilience is and how examining your suppliers’ financial health can lead to a more financially efficient supply chain. We then discuss the company’s third-party risk management tools. We consider how a company might evaluate a potential purchaser, partner, or someone buying a part of a business. Finally, we have a lengthy discussion of how a corporate compliance function uses the health of a third party as a tool to determine third-party compliance risk.
For more information on RapidRatings, check out their website by clicking here.
