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Utilizing the LEI for Supply Chain Visibility

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The LEI provides a global standard for identifying entities that engage in financial transactions, beneficial for supply chain visibility. By using the LEI, companies can establish a common language, incorporate risk information into their enterprise risk management system, monitor customer and supplier risk profiles simultaneously, identify financial risks and opportunities, mitigate financial risks, automate the monitoring process, and facilitate due diligence processes. These are just some of the ways the LEI can improve supply chain visibility.

The benefits of using the LEI code are likely to be particularly significant for larger businesses that operate across multiple jurisdictions. However, even smaller companies can benefit from improved supply chain visibility by using the LEI code. The Legal Entity Identifier (LEI) is a unique 20-character code assigned to entities engaged in financial transactions. The LEI provides a global standard for identifying these entities, beneficial for supply chain visibility. Here are seven ways the LEI can be used for supply chain visibility:

Establishing a common language

One benefit of using LEIs is that it allows organizations to talk about counterparties and transactions without confusing who or what is being referred to. Using a standard identifier ensures everyone in the organization has a common language, which facilitates communication and speeds up the identification of risks and opportunities. In addition, because each company has an LEI code renewal reminder via email system, data can be aggregated from different sources when they share the same identifier. This makes it easier to organize data and spot trends promptly.

Incorporating LEIs in an enterprise risk management system

For supply chain visibility, it is beneficial for companies to have a common language to compare information across their value chain. One way to increase and standardize communication and data sharing is by using the LEI. In addition, LEIs play a significant role in an enterprise’s risk management system and make productivity smoother.

Monitoring customer and supplier risk profiles simultaneously

Integrating risk information of customers and suppliers can be managed more efficiently if organizations use LEIs for supply chain visibility because views of these entities are presented in a standardized format, unlike different countries’ credit ratings agencies.

Identifying financial risks and opportunities

The LEI can help organizations identify risks and opportunities that may affect their supply chain. For example, if a supplier does not meet some of the contract’s requirements, this could be an early warning sign of potential financial risks. The LEI can also help identify opportunities, such as new suppliers offering lower prices or better quality.

Mitigating financial risks

The LEI can help companies mitigate financial risks by understanding the full extent of their supplier and customer networks. Additionally, the LEI can help identify relationships between entities that may not have been previously recognized.

Automating the monitoring process

The LEI can help automate the monitoring process by providing a unique identifier for each entity. This allows for data to be filtered and organized more efficiently to identify potential risks and opportunities quickly.

Facilitating due diligence processes

The LEI can also help organizations conduct due diligence processes by providing a uniform identifier for all entities involved in a financial transaction. This decreases the time it takes to complete these processes and analyzes potential risks better.

The LEI code also helps reduce regulatory compliance costs for some businesses. They can use a single identifier across different jurisdictions rather than needing separate identifiers for each country in which they operate. This is particularly useful when trading internationally or where firms have subsidiaries regulated in other countries. The LEI code can also help improve the efficiency of the supply chain by reducing the need for manual data entry and improving communication between businesses.

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