Look up and down the supply chain for concentration risks
Abstract: Concentration risks happen when a borrower relies on a customer or supplier for 10% or more of its revenue or materials. If a “key” customer or supplier experiences turmoil, the repercussions travel up or down the supply chain and could quickly impact the borrower’s business. These risks also arise when a borrower relies on several customers or suppliers located in the same geographic region. This article explains why it’s important to evaluate a borrower’s product and geographic concentration risks and provides strategies for lowering these risks to more acceptable levels.