Moody’s released their latest “Bottom Rung” list yesterday and 283 out of the 2,073 companies evaluated by the ratings agency are on it. The list has nearly doubled in size since last year when 157 companies earned the dubious honor. According to the Wall Street Journal, it includes “the companies that Moody’s says are most likely to default on their debts.” In fact, Moody’s predicts 45% - or roughly 127 companies - will default on their debt in the next year. It’s no surprise that the list includes “much of the U.S. auto industry, the casino sector, and many retail chains, newspapers and broadcast-TV and radio-station networks. Energy firms, airlines and restaurant chains appear often.”

Did your customers or suppliers (or your employer) make the list?

[for full list click the "Read More" link]

Moody’s Bottom Rung 3.1.09 - Get more Business Plans

With risk management currently rivaling cost containment for the top spend management priority, the “Bottom Rung” list should be a wake up call for any company that has not taken a serious look at their supply base. My colleague, Sundar Kamakshisundaram, recently urged buying organizations to take 5 steps to evaluate your suppliers’ health, including; address risk in your RFx process, look for early warning signs (delays or drops in quality), increase the frequency of site visits, automate your supplier management process, and of course, look at the company’s financial viability:

“Audit the financial, operational, and balance of trade exposure of your most strategic and mission-critical suppliers. Too often investigation of supplier solvency and dependencies are limited to the initial sourcing project. You need only to open a newspaper or turn on the nightly news to realize that the health of even the seemingly most stable companies can degrade quickly.”

If it makes sense in some strategic relationships, supply chain finance options may help some temporarily cash strapped suppliers. And as Erez Azaria said earlier this week, it’s a good time to consolidate your supply base in order to weed out riskier vendors and help the viability of prefered suppliers.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.