Here's how you can employ analytical skills to assess and select potential business partners.

Before diving into financial data, ensuring you have the expertise necessary for accurate assessment is crucial. If you lack this knowledge, don't hesitate to involve your finance team. Evaluating financial statements, credit ratings, and payment terms are essential to using data to assess potential business partners. Establishing a rating qualification matrix beforehand allows for consistent and fair comparisons. By comparing apples to apples, you ensure a just and objective assessment of each potential partner's financial stability.

Alot would depend upon the nature of partnership, but nonetheless even a basic financial analysis would go a long way. It is important to focus on the financial health of the business in terms of liquidity, solvency and some forensic analysis is always recommended. Even a macro level analysis would guide you in the right direction as to where should your focus be, what are the key areas and where should you be deep diving into: in order to understand the business and how it is being run. It'll also help you to understand whether this partnership would be fruitful or not: whether the partnership will push your organisation forward or pull you down. If you look hard enough, and listen carefully: the numbers will tell you the story.

After you're done playing around with the numbers, you should be able to pin-point a few key areas from where you could start your due diligence. Complement your financial analysis with an in-depth understanding of the business of the potential partner through a thorough reading of the organisation's various policies, guidelines and other relevant documents before setting up meetings with the management, employees/ process owners and, if need be, with the clients/ suppliers as well. Post this homework, you'll be able to ask better questions, and be able to better understand the conversations during the meetings. This will not only help you to analyse the working cultural of the organisation, but also help you to optimise this partnership.

Compliance is a key aspect of every business, for some more than others. A good business should have systems in place in order to not only mitigate but also avoid foreseeable severe regulatory risk. Ask your potential partner (if possible) for their: -RCM (Risk Control Matrix) -ICFR (Internal Control over Financial Reporting) -Internal Audit reports -IA Team detail -Statutory and Compliance reports -Reports pertaining to their Past/Ongoing legal proceedings -and other relevant documents along with access to their Regulatory/ Compliance Management System. Also, try to assess the quality, frequency and the independence of such reports, along with the severity of the risks listed. Lack of these documents/ systems in itself is a red flag.

Clearly define the type of risk you are assessing: strategic, operational, and so on. Ideally, your risk assessment process should encompass all areas, but assigning appropriate weights to each is essential. Not all risks have the same impact on your business, so a weighted assessment is imperative. When considering risk assessment, think of a risk matrix. If a business partner poses a high risk but you must work with them (due to exclusivity in the market, client imposition, etc.), your risk assessment should include mitigation procedures. Planning for potential issues in advance allows you to respond effectively and unemotionally if problems arise since the necessary steps and decisions were pre-identified.

In todays scenario, its important to check how the potential supplier fits into your long term goal and companies strategic focus. Accordingly decisions can be taken. For example, if you don't have specific capability in particular country or region and your strategic plan is the have worldwide presence, then the criteria to select vendor will change. In this case, partner who has more geographical presence will be preferred.

Supply chain reliability and ESG criteria are also important. Analytical skills can help assess various aspects such as the robustness of the partner’s logistics processes, suppliers' stability, and inventory management capabilities. Simultaneously, it’s essential to consider potential partners' Environmental, Social, and Governance (ESG) criteria. This involves analyzing their commitment to sustainability, social responsibility, and ethical governance. Evaluate their ESG reports, sustainability initiatives, and compliance with relevant regulations. Assessing these factors can highlight the partner’s dedication to responsible practices and their potential impact on your company’s reputation and compliance standing.