When you consider the comprehensive lengths that employers will go to when screening a potential new recruit, it’s somewhat surprising that the same rigour isn’t typically applied to the companies they buy goods and services from. After all, the fall-out from being in business with a supplier that’s disreputable, fake, subject to sanctions or teetering on the brink of financial collapse can be highly damaging.
The loss of your IT supplier – for reasons that might have become apparent if only you’d screened them properly – would blow a sizable hole in your daily operations
Admittedly, not all businesses present the same level of risk. The loss of your stationery supplier, for example, while annoying, probably won’t do much harm to your business-as-usual activities. On the other hand, the loss of your IT supplier – for reasons that might have become apparent if only you’d screened them properly – would blow a sizable hole in your daily operations and have a severe knock-on effect for your customers.
This vetting involves taking the kinds of checks that you would run on an individual but applies them to a corporate entity. Are they who they claim to be? Are they financially healthy? Are the banking and VAT details they gave you correct? Are they dogged by adverse media coverage? Are the accreditations and certifications they claim to have both legitimate and valid? Screening for answers to all these questions helps build up a fuller picture of the business you’re about to associate yourself with.
The supplier’s ‘ultimate benefactor’ is also a significant consideration here; essentially, the parent company or individual that the proceeds of your business relationship end up with. If that trail leads you to someone or something that appears on any of the international fraud and sanctions lists, you’re now breaking the law by working with them.
There are two main reasons why many businesses may not screen their suppliers. Firstly, corporates are generally perceived as trustworthy; they have brands, offices and suppliers of their own, after all. But, in reality, they can be just as disingenuous as any job candidate, faking their accreditations and references or hiding some of the shadier parts of their past. Being a seemingly reputable outfit isn’t something that should always be taken at face value.
Secondly, supplier contracts might be signed for seemingly incidental amounts at a line manager level, with little or no governance oversight, allowing potentially problematic suppliers to fly under the radar. The same could be said of more junior finance teams, used to operating in a transactional, book-keeping environment, rather than taking this bigger picture view of the organisations they’re being invoiced by. On both counts, these employees simply don’t think to look for these things. The question, however, is whether you can afford not to.