A lot of companies only use credit risk information for onboarding, as Group Financial Solutions manager Arjan Bakx observes in practice. They forget to continuously monitor their portfolio afterwards, while that's where all the gains are. Bakx: 'By integrating credit risk data into your own systems, as a credit manager you can easily focus on the real risks in your portfolio.
Bakx: 'Every minute a company somewhere in the Netherlands is screened using our data and solutions. Sales reps from large telecom and energy providers, for example, can often instantly tell whether they are allowed to take out a business subscription by looking at a traffic light in their CRM. They only need to enter the Chamber of Commerce number, after which our data is checked against the credit policy of a company using a decision tree. The result is a score for each customer - and thus a green, orange or red traffic light.
Apples that rot in the basket
You prevent rotten apples from getting into your basket, but you don't prevent apples from rotting in your basket. As soon as you start delivering, the risk really begins. Because while you have already invested a lot of money, resources or time in the relationship, it may turn out that the creditworthiness of your customer has drastically worsened. Bakx: "You can solve this by ongoing monitoring. You keep a live check on whether the companies you do business with are healthy and remain healthy.
Plugging into a credit risk database
With ongoing monitoring, there are two ways to access credit risk information, Bakx explains. 'You can do that by using an online platform such as D&B Finance Analytics, where you get emails when the creditworthiness of a customer you entered changes. But you can also monitor by integrating credit risk data via an API into your own system. This can be an ERP like SAP, Oracle and Exact, or a CRM like Microsoft Dynamics and Salesforce. In that case, the credit risk data flows into your own systems.'
Once you are 'plugged in' as a company via the API, you can monitor on an ongoing basis. In the workflow you will now receive monitoring messages. For example, about a change of a board member, or a company move. Changes can be overwritten in your ERP or CRM, either fully automatically or not.
Personalized decision tree based on your risk appetite
'Depending on your credit policy, you will be able to use our data and solutions to make your risk appetite embed in a rule-set," Bakx says. 'We convert that credit policy into a personalized decision tree. Current credit information and predictive indicators from the Dun & Bradstreet Data Cloud are automatically run through the decision tree, from which there is a rating figure for each customer.'
Bakx: 'You can include rules for our predictive indicators, such as the D&B Bankruptcy Score and the D&B Payment Score, in your decision tree. If, for example, the Bankruptcy Score or Payment Score is too low according to your credit policy, you will automatically receive a message in your ERP or CRM. But you can also include in your decision tree, for example, that a construction company may have a higher risk than a baker.'
Focusing on the real dangers in your portfolio
With continuous monitoring you can prevent your company from losing money. You predict in time which customers will go bankrupt or have payment problems. So that you can adjust the credit limit or insurance coverage. Or set different payment terms based on the risk. Do you receive an alert that a customer's creditworthiness has actually increased? Then that's an extra sales opportunity.
Credit managers can ignore the vast majority of their portfolio as a result, Bakx explains. 'Suppose you have 1000 companies in your portfolio. We can then say that 950 of them are risk-free. With 50 companies you have to pay close attention and chase the open items. Because you don't have to do anything about those 950, you can focus on those 50, even if they are small outstanding items. In other words, as a credit manager you can now focus on the real dangers in your portfolio.'
Are you interested in the possibilities of monitoring credit risk within your company? Then take a look at our credit risk management solutions.
