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Unintended Consequences of Declining Vendor Financial Performance

Apr 8, 2020 by Venminder Experts

If your vendor’s financial performance is declining, whether steadily or suddenly, you need to be on high alert. Should you discover that your vendor's income and financial performance is declining, there are some unintended consequences you need to look out for.

4 Signs of Declining Vendor Financial Performance

Look out for these four signs:

  1. Cost Cuts and Staff Reductions. When a vendor cuts costs and then reduces staff, this could affect the level of customer service that you’ve been receiving. Also, cost reductions in the operations area could decrease staff who are charged with maintaining the security of the system.

  1. Research and Product Development Stalls. A vendor could quit spending on product development, sunset a product or sell their operating division. This could result in bugs, unresolved issues, long waiting periods, downtimes and more.

  1. Bad Press and Litigation. Declines in service levels tend to result in bad press and, eventually, pending litigation.

  1. Merger & Acquisition Activity. If your vendor acquires or is acquired, money can be tight. Does your vendor or the parent company have money to sustain the current level of service? 

Protecting Your Organization

 Your SLA is the key to managing a vendor who has poor financial performance. Use it as a course of action.

Lack of financial performance is generally not a condition for termination of a contract. However, since declining financial performance usually manifests itself in other ways, your SLAs become incredibly important. The SLA can trigger a default.

Know what the signs are for declining vendor financial performance. Download the infographic.

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Venminder Experts

Written by Venminder Experts

Venminder has a team of third-party risk experts who provide advice, analysis and services to thousands of individuals in the financial services industry.

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