One supplier can carry more risk than the balance sheet shows

A business can have a broad customer base and still depend heavily on a single supplier. The concentration may sit in raw materials, specialist components, fuel or a service essential to production.

That exposure can be difficult to see in a summary financial presentation. It becomes more visible when the operating plan is examined for what happens after a disruption.

World Bank project-risk guidance treats operating inputs and performance as part of the financing assessment. The question is how much the business depends on arrangements it cannot readily replace.

Test the alternative, not just its existence

Naming another supplier is different from being able to switch. Capacity, specifications, payment terms, transport and qualification processes can make a nominal alternative impractical.

The cost of changing supplier also matters. A substitute that preserves production at a substantially higher price can alter repayment capacity even where sales continue.

Put resilience into the commercial plan

Inventory policies, longer-term arrangements, maintenance and approved alternative sources may help, depending on the business. Each carries costs and limitations that should be examined rather than presented as a complete solution.

Investors should be able to see the dependency and management’s response. Hiding it within an optimistic base case leaves less time to act when circumstances change.

Our view is that concentration analysis is most useful when it leads to an operational decision. Which input can stop the business, how long would recovery take and what resources would that recovery require?

A credible answer can strengthen the financing case without pretending the exposure has disappeared.