Energy crisis risk: Price adjustment by suppliers

09/07/2022

In view of the current drastic rise in energy prices, experts are advising caution: Not only are the company’s own operating and production costs rising, but suppliers are also suffering from the price increase - and pass AI technology makes the risk transparent and companies able to act.

Price escalator clauses, more relevant than ever

Many companies are already examining what “own” additional costs they will face as a result of increased gas, oil and electricity prices and whether they can/are allowed to pass these on to their customers. However, an even greater risk sometimes lies in the contracts with other suppliers - because these can also increase prices.

Whether, when and under which circumstances a price adjustment by a supplier is possible is specified in the supplier contract. Deadlines and price fixing, but also about price escalation clauses, define the possibilities to adjust the price of a good or service in case of an increase in cost price.

The more suppliers a company has, the higher the risk of being affected by massive price increases from suppliers in addition to the rise in energy costs.

Know, secure, prepare

Wie hoch die Risiken der Preisanpassungen durch Lieferanten tatsächlich sind, lässt sich nur durch genaue Prüfung der bestehenden Verträge herausfinden.

Contract periods, price commitments, price escalator clauses: Knowing the relevant parameters of existing contracts and clustering them according to specific criteria enables a clear view of the current situation.

In this way, companies create the basis for developing an individual strategy and making sound business decisions - both now and in the coming years (of crisis).

AI-based checkup for rapid transparency

Checking supplier contracts costs a lot of time. The complex contracts are not formulated uniformly and the information is in different places. Many companies also have a large number of contracts that are almost impossible to check manually.

The latest AI technology is able to recognize semantic relationships in complex long texts and thus read them on a human level - only faster and more accurately.

This means that thousands of supplier contracts can be precisely checked for potentially critical clauses within a very short time. Even the AI-based clustering of information is possible - so it is quickly apparent which supplier relationships should be considered with high priority.




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