Financial risk in the supply network arises when a supplier (either first tier or further down the chain) develops potentially precarious financial health. The risk is passed to buyers who may experience a decline in service, lower quantity, delivery, reliability and quality levels, requests for early invoice payments or requests by suppliers to re-negotiate contracts. In worst-case scenarios, the supplier may go out of business, usually causing serious issues for their customers, such as short or long-term supply and revenue interruption. Or supplier bankruptcy could force manufacturers to finance or even buy their suppliers to keep the production up and running, as witnessed in the automotive industry during the 2008 financial crisis.
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