Contractor risk management is a key focus area for businesses to make sure they only work with contractors in their supply chain who can do the job safely, ethically and complying with relevant legislation. While contractors and suppliers can provide many essential benefits to businesses such as expertise, efficiency, and cost savings, it can also significantly increase the risks they need to manage.
As part of their contractor risk management, businesses need to protect against their exposure to elevated levels of financial risk, particularly due to COVID-19 as the UK economy edges towards a double-dip recession. Some of the most common impacts of supplier failure are direct financial loss and costly operational disruption.
Unsurprisingly, with contractors and suppliers operating on squeezed margins, further pressure could lead to serious instability or even supply chain failure. Tough payment terms, delays and onerous contract terms can significantly harm trading, trust and operational delivery, but they can also be an important opportunity for relationship-building. Providing access to and reviews of your current financial data such as management accounts or cashflow records can help to ease concerns from the businesses you work with and to demonstrate financial resilience. Buyers are increasingly featuring such due diligence in selecting the suppliers they want to partner with for longer-term business.
Why do these risks matter?
The Federation of Small Businesses (FSB) warned in January 2021, at least 250,000 small firms in the UK could close unless the Government gives them more financial help.
The FSB Small Business Index (SBI) confidence measure stands at -49.3, down 27 points year-on-year. The reading is the second lowest in SBI history.
In 2020, the Simply Business SME Confidence Report found that 41% of owners fear at risk of permanent closure as a result of the pandemic and 36% concerned about running out of money.
We want to make it simple for you to evidence that your business is compliant, ethical, and resilient and give your clients peace of mind about you to reduce risk in their supply chain. Discover how the SafeContractor SSIP and PAS91-aligned certification can help you demonstrate your capabilities.