How ‘Credit Crowdsourcing’ Can Help You Uncover Financial Stress

Using crowdsourcing for a credit scoring model to determine financial stress

Thanks to crowdsourcing, many businesses are solving challenging problems:

  • Retailers like Whole Foods and Starbucks create better local product assortments and new products.

  • Mobile traffic apps like Waze offer better routes.

  • Federal agencies from NASA to the NIH use public participation to advance scientific research.

Turns out, crowdsourcing can help us to identify the most financially risky public companies, too.

Here’s how the addition of crowd-sourced subscriber data boosts the accuracy of our credit scoring model, and how it can help you to be an even better manager of risk.

The Enhanced FRISK® Score: Now 96% Accurate

Our proprietary FRISK® score has always been the most accurate way to predict public company financial stress leading to bankruptcy. Now, we’ve enhanced it to factor in an important and, it turns out, predictive element for North American companies: subscriber behavior. 

As of today, the FRISK® score will be 96% accurate, and identify even more high-risk businesses.

By harnessing our subscribers’ collective wisdom, we’ve improved our accuracy.

How Crowdsourcing Helps to Up the Game

Most of our subscribers are credit professionals in large organizations. They manage giant amounts of credit risk every day and as they do, they perform due diligence on their customer and suppliers.

As a company becomes financially riskier, our subscribers change how they investigate the company on our website.  They scrutinize companies more closely, in identifiable patterns. This collective subscriber activity can signal that financial risk of a particular business is higher, which we then use to refine the FRISK® financial risk score.

The score was already excellent. But as a result of incorporating the aggregate behavioral activity from this elite group of credit professionals, it’s an even better way to detect rising financial stress, and reduce your company’s risk exposure.

Financial Risk in the Crosshairs: What This Means to You

A 1% difference may not seem like a big change. After all, the FRISK® Score already identified the vast number of bankruptcies.

But it turns out that most of the accuracy improvement is within the FRISK® red zone.  We now flag these risky companies as riskier, sooner.

By identifying more public companies as a FRISK® 1 or 2 -- the highest probability of business failure -- we help you to be even more proactive about big portfolio risks, even sooner.

Interested in the technical details? Learn more in our whitepaper.

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.