Latest Research: A New Way To Target Public Company Credit Risk

latest research on corporate credit risk bankruptcy forecasting

Get a group of credit professionals together, and you’re likely to have lots of lively conversation about all things credit-related.

The talk will inevitably turn to the state of the economy, Monday morning quarterbacking about companies that failed recently, and lots of opinions about the next big credit shoe to drop. The cocktail reception at the Credit Risk Foundation Forum and EXPO in Chicago will be no different, and we hope to see you there.

But what if technology could create a virtual gathering of high performing credit experts in between professional meetings and industry groups? What if you could tap the collective wisdom of these credit experts instantly and virtually, the next time you have a high stakes credit decision?

Thanks to innovative new research on credit risk crowdsourcing, now you can.

The Power of the Hive Mind

About a year ago, we set out to answer a simple question: how do the instincts of the ultra-experienced credit professionals who use our credit monitoring service correlate with corporate bankruptcy risk?

Dr. Camilo Gomez, SVP of Quantitative Analytics at CreditRiskMonitor, presented the results of our crowdsourcing research yesterday, at the CreditRiskMonitor user group in Chicago.

Turns out, credit professionals who subscribe to our service – roughly 35% of the S&P 500, plus high-performing credit executives from many other large companies – are an excellent predictor of bankruptcy risk. Collectively, their online behavior not only predicts bankruptcy, but predicts financial distress earlier than many other financial red flags that are commonly used.

Dr. Gomez explained how when the online behavior of our subscribers was aggregated and back-tested against actual public company bankruptcies going back more than five years, the results were so powerful that as of June, this metric became part of our bankruptcy prediction model, boosting the accuracy of our FRISK® bankruptcy score to 96%.

Make More Accurate and Timely Credit Decisions

What’s the real value of the research? As Dr. Gomez explained, adding credit peer expertise to our model helps you to identify bankruptcy risk sooner, and make better decisions. 

No single credit manager has all the answers, all the time. But collectively, you have the same instincts, the same concerns, and ask the same questions, at roughly the same time.  When combined with other financial risk factors, “credit risk crowdsourcing” can provide a powerful signal of deteriorating commercial financial health. There’s no better testament to your profession’s excellence and judgment than that!

If you weren’t able to attend today’s user group, we invite you to download the whitepaper on bankruptcy risk crowdsourcing. Or schedule a portfolio review, to learn how this innovative new technical advance can help you to keep your company's bankruptcy risk down and sales up, better and quicker than before.

Download the Crowdsourcing Enhancement 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.