Financial Risk: Storm Clouds Ahead
As Bob Dylan famously wrote, "The hard rain, it's a-gonna fall."
When it comes to financial risk, we are living in some seriously soggy times. 2016 is shaping up to be a risky and volatile year. Whether or not the current turmoil turns into a full-blown recession is anyone's guess at this point — and there are a lot of guesses out there — but one thing for sure is that risk levels are rising, and rising fast.
Here's a quick weather report, based on our ongoing quantitative research of the risk of public companies (all stats as of March 2016):
- Overall public company risk is up 81% since the start of the Great Recession in the United States.
- Looking at all countries, risk is up 51%.
- Oil and gas risk is up an astonishing 567% in the U.S. — and more than 8% of publicly held oil companies are at high risk of business failure in the next 12 months.
So what's the impact on you, your customers and suppliers?
As a corporate credit or financial professional, you're responsible for safeguarding one of your company's largest assets: your accounts receivable. If you're in supply chain or procurement, your vendor and supplier relationships are the lifeblood of your business.
Looked at in dollars, your risk exposure from public companies in those accounts and relationships could be half — or more. Based on our ongoing analysis of leading medium and large companies, we show it averages 53%.
Our goal with this blog is to keep you current on best practices to stay ahead of the volatility of financial risk, with a focus on the sometimes underestimated impact of public company risk. We welcome your feedback.
It's not a question of whether it will rain. It's when — and how much. Protect yourself from the downpour.
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How exposed are YOU to public company risk?
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 $140 billion in trade data on their counterparties every month, giving them visibility into their biggest dollar risks.