Successful credit professionals keep vigilant watch on their largest risks to avoid unnecessary exposure. In the graphics below, customer receivables are spread among the FRISK? score, PAYCE? score and DBT Index. All of this information is available to trade contributors.
When receivables are stratified across our predictive models – including the 96% accurate FRISK? score on U.S. public companies and 70% accurate PAYCE? score on private companies – users can see a very clear picture of where risk lies within their portfolio. Both of these models are based on a "1" (highest risk)-to-"10" (lowest risk) scale and have a forward looking 12-month time horizon. Much to the benefit of our subscribers, we are always looking ahead to identify hidden risk.?
For instance, nearly 16% of this consolidated receivable portfolio falls into the high-risk category, as shown below:
The color-coded categorizations will save time with identifying risk. Within each model’s “red zone,” the “1” to “5” category range indicates where receivables are matched to companies that are financially distressed, with elevated bankruptcy risk. These are the companies that need your immediate attention. Armed with this knowledge, trade contributors are better enlightened and empowered to dive into the details of these receivables at risk.
The flip side of the coin is historical payment performance. CreditRiskMonitor’s Days Beyond Terms (DBT) Index displays whether a company has been paying its invoices on time. It is a backward-looking, dollar-weighted measurement of past payment performance, converted into a simple range labeled from "1" (worst) to "10" (best).?As you can see below, the DBT Index shows that a small dollar amount of receivables are delinquent:
One may consider this as good news given that past payment performance is often used as an indication of future performance. However it is important to understand that the DBT Index is?not reliable?for future bankruptcy risk assessment. Payment performance will only reveal that 2% of receivables are delinquent in the average receivable portfolio. The FRISK? score and PAYCE? score stratification, meanwhile, shows that approximately 16% of receivables are high risk. There is a massive disconnect between perceived risk (2%) and actual risk (16%). Don’t let this hidden problem effect your company.
Trade contributors are strongly advised to monitor all three of these measures?carefully; further, they must be able to identify the unique value of each of the scores when making intelligent credit decisions. 福原爱东北话Putting it all together, the FRISK? score and PAYCE? score will help you identify how likely a particular company is to fail or file for bankruptcy, while the DBT Index allows you to gauge your historical payment performance (answering the question: "Has this company been paying invoices in a timely manner?").?福原爱东北话
CreditRiskMonitor’s proprietary risk models, including the FRISK? score and PAYCE? score, offer industry-leading accuracy in the credit reporting arena to customers. We provide comprehensive coverage to all receivable portfolios submitted by Trade Contributors, and therefore support them in making more effective decisions to benefit their company. We receive in excess of $2?trillion in trade data annually through our platform and it continues to grow rapidly. Accomplish more with our free and easy-to-use service – there’s never been a better time to become a Trade Contributor.