Credit Management Succeeds When People, Process, and Tools Intersect

Automation helps to manage credit risk, but it takes more than tools to get the job done.

So much data, so little time.

Credit executives everywhere are overwhelmed by enormous volumes of financial data. Just staying on top of industry news and customer financials is hard enough. Determining what is worth paying attention to for credit analysis and decision making is even tougher.

Efficiency is certainly the imperative, and judging by the conversations we have with many of you, our profession has made great strides toward achieving it.  

By using a combination of internal processes, automated tools, and the human touch, your team can successfully manage the job at hand, and limit risk exposure.

Efficiency Is An Imperative

Now more than ever, credit professionals need to expedite all the tasks involved in managing financial risk. As Credit Today’s 2016 Outlook Survey stresses, “efficiency is an imperative.” This is especially true as bankruptcy risk increases with each passing month, and credit teams are asked to do more with less.

Automation helps, but it takes more than tools to get the job done.

By assembling the right financial tools and streamlining internal processes, your team can manage credit risk effectively at scale, and provide the human touch where needed.  

The Right Tools Go a Long Way

If we learn nothing else when speaking with customers, it’s that credit teams need a variety of helpful tools to gauge and manage risk.

Several tools exist to make the job easier, and help to minimize vulnerabilities. The most experienced managers review a multitude of data sources to assess risk -- internal scoring models, industry trade group data, and third-party risk assessment tools -- especially when dealing with a wide variety of customer accounts.   

Here are a few features that our customers find useful, to get a complete financial picture for their public customers:

  • The FRISK® financial risk score supplies a current assessment of public company financial health, supporting the credit decision process.
  • News alerts for portfolio companies are useful for maintaining a “watch list” of struggling companies for closer monitoring, and to track new developments well in advance of trouble.
  • Comprehensive financial information like payment history and quarterly financial data is valuable when conducting annual reviews or more frequent trend analysis.
  • The Confidential Financial Statement tool helps to quickly standardize private company financials.
  • A variety of up-to-date reports available to trade contributors provides additional insight into a large receivables portfolio.

Nothing Can Replace the Human Touch

Having automated processes and streamlined decision-making is crucial, but managing troubled accounts also requires the human touch.  And troubled accounts are more common lately, especially in troubled industry sectors such as oil & gas, solar energy, apparel retailing, container shipping, and many others.

In fact, in one subscriber’s FRISK®-scored portfolio, fully 24% of his companies now have a FRISK® score of 5 or lower, presenting many situations that require taking a calculated risk in order to maximize sales opportunities. It takes an extra layer of customer contact to truly understand what’s going on in this kind of business, and to supplement the data at hand.

At the end of the day, individuals, not algorithms, make credit decisions, and even the most reliable risk score cannot be used in a vacuum. The most successful credit teams apply data, technology, and the human touch to limit exposure in the face of increasing financial risk.

To learn from real world credit risk management best practices, check out our library of customer stories

About CreditRiskMonitor

CreditRiskMonitor is a financial news and analysis service designed to help professionals stay ahead of public company risk quickly, accurately and cost-effectively. More than 35% of the Fortune 1000, plus thousands more worldwide, rely on our commercial credit reporting and predictive risk analytics for assessing the financial stability of more than 56,000 global public companies.

At the core of CreditRiskMonitor’s service is its 96%-accurate FRISK® score, which is formulated to predict public company bankruptcy risk. One of four key components calculated in the FRISK® score is crowdsourced subscriber activity. This unique system tracks subscribers' patterns of research activity, capturing and aggregating the real-time concerns of what are essentially the key gatekeepers of corporate credit. Other features of CreditRiskMonitor’s service include timely news alerts, the Altman Z”-Score, agency ratings, financial ratios and trends. CreditRiskMonitor’s network of trade contributors provides more than $150 billion in trade data on their counterparties every month, giving them visibility into their biggest dollar risks.