How MPW Industrial Services' Credit Team Manages Risk in Tough Industries
A credit manager’s fundamental task is pretty straightforward: turn invoices into cash and mitigate risk in a portfolio. But as any credit manager working today knows, it’s rarely that simple.
So far, 2016 has been a tough year for managing financial risk, especially in struggling industries like energy, steel and paper. Global volatility and high corporate debt levels have increased public company financial stress, making it more important than ever to detect the risk in your credit portfolio. It’s unlikely to get easier anytime soon.
Our latest customer story shows you how Lee Tompkins, Credit and Collections Manager at MPW Industrial Services, and his team manage a disproportionate number of customers in challenging industries.
Digging Deeper, and Taking Calculated Risks in Struggling Industries
In struggling industries, it can be easy for credit managers to say “no” to too many deals, too fast.
As Lee put it, “there are some companies that say, "Hey, if you don't score above the standardized scoring, we don't give you an open line of credit." I'm not going to tell you that that's wrong, but in most of the industries I've been a part of, they're looking to me, as that risk manager, to be able to find some gray areas”.
So Lee considers a wider set of financial metrics to evaluate a customer’s financial health, such as days past due, payment index scores, the FRISK® score, and other factors—to engineer win-win solutions that make taking calculated risks both profitable and financially feasible.
Creating a Strong Credit-Sales Partnership
Lee describes his job as looking for the gray areas, to make a sale possible, and stresses the importance of investing time in building strong relationships with the sales team, so they understand and trust the reasoning behind his decisions.
“It's always been my style to explore every avenue that I can, to get to, ‘Yes, let’s do this’, and make a sale occur. So when I do say no, I’ve covered the gamut in trying to get us there. Hopefully, the no’s are pretty rare.” He continues, “If you have the data to back up what you're saying, and you cultivate those relationships with sales, they'll grow to trust you.“
Gaining Insight Into Portfolio Risks, With Real-Time Data
Lee relies on the CreditRiskMonitor’s trade contributor program to understand his portfolio exposure, and show his CFO how much of the A/R portfolio, dollar wise, is at high risk.
And when reviewing annual credit limits for specific customers, Lee uses the tool to download a custom data set, and create special reports that make it easy to assess a customer’s creditworthiness. These color-coded, graphical reports show the financial health of a customer at a glance, with historical and seasonal trends, industry data, financials, and more. Lee also relies on CreditRiskMonitor’s news alerts to keep up with rapidly changing risks in a challenging environment, and which customers may, in the coming months, file for bankruptcy.
To learn more about Lee’s unique credit and collections philosophy, and how his team uses CreditRiskMonitor to keep risk at bay, Download the complete customer story
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.