Chief Data Scientist Joris Peeters on financial security of international business, the power of data and the benefits to be gained from Global Financials.
Doing business internationally is no easy task
Gaining insight into the financial performance of customers, prospects, suppliers and partners is crucial to getting a clear picture of all risks and opportunities. But in this era of globalization, these parties are often located in other countries.
At first glance, this may not seem like a big deal. After all, companies are increasingly doing business across borders. The thing is, each country has its own requirements and standards regarding filing, financial reporting and generally accepted accounting principles (GAAP).
This can create considerable problems when evaluating the financial performance of companies. In addition, the filing requirements of laws and regulations are constantly changing. This makes it virtually impossible to continue using the standardized views you have developed.
Or at least it was until Dun & Bradstreet, along with its global partner network, introduced Global Financials .
Our global solution provides access to 150 million financial statements from public and private sources in 170 countries, standardized company reports and analytical benchmarking for the diverse international financial reporting standards.
More and more forward-thinking companies are using Global Financials to make informed decisions and assess the creditworthiness of companies in various countries. The solution provides seamless capabilities for comparing various business aspects, from the corporate balance sheet and income statement to financial ratios.
But it's not for me to explain the (legion) benefits of Global Finance. Our sales team can do that much better. Instead, I'd like to offer you insight into the new capabilities of the platform and show how we unlock the potential of data to support our clients' international growth.
Because at the end of the day, it doesn't come down to how much data you have, but what you do with the available data.
Unlocking the power of data with Global Financials
For example, we draw added value from data through the use of automation and the development of predictive credit scorecards. As any credit professional will tell you, credit assessments and decisions regarding new customers often include a subjective, time-consuming and labor-intensive process. Especially when the aforementioned GAAP comes into play.
To give an example, one of our customers had plans to expand into new regions. The company wanted to quickly identify companies that may have been paying late or represented a serious credit risk. We knew this was within the capabilities of Global Financials because of its long trading history, indicators of favorable/unfavorable business relationships, ability to draw unique conclusions regarding the financial condition of companies and functionality for calculating financial ratios.
We evaluated the client's portfolio, identified relevant industry/sector codes and used those in conjunction with our global database to understand the types of companies our client was doing business with. More specifically, we looked at the legal form, actual or modeled number of employees, and actual or modeled annual sales in dollars.
Using these dimensions, we created profiles of our client's clients in the targeted regions. The goal was to find out how many companies with the profile UNFAV PIE, or Unfavourable Out Of Business (bankruptcy), were present in Global Financials. Using these profiles, we searched Global Financials for similar companies in other countries.
As a starting point, we took countries with a similar gross national product to the region in question. Gradually we added more countries until two dimensions were met.
At first we tried to stay as close as possible to the region in terms of GDP. But of course we stepped away from this as we added more countries to the sample.
We were then able to provide a sufficient number of UNFAV PIE profiles in line with the statistics that work best with large numbers. It should be noted that we intentionally used a slightly larger UNFAV PIE sample than normal.
Using this new subset of data, we were finally able to report our findings back to the client, complete with an industry-specific scoring system that was able to predict, in the lowest 20% of scored cases, over 75% of future bankruptcies in the client's area. And this over a time horizon of bankruptcy within 1 to 5 years.
This delivered tangible benefits for our client. But the biggest success story lay in the fact that we were able to maximize the potential of data and Global Financials. We can identify and predict a substantial number of bankruptcies from one pool of data. This shows that it is not a question of the amount of data sources, but simply what you do with the data at your disposal.
Toward a data-driven future
In keeping with the spirit of innovation of Dun & Bradstreet and Global Financials, our efforts to differentiate ourselves from the competition and provide solutions to complex issues do not stop there. Another way in which we offer our clients additional added value is by combining data with new technologies such as AI (Artificial Intelligence).
Een goed voorbeeld hiervan is AI Layered Scoring. Dit omvat een combinatie van deep learning met klassieke kredietwaardigheidsscores. Hiermee veranderen we de regels van het spel op het gebied van credit scorecards. We kunnen met AI Layered Scoring namelijk zo’n 90% van alle faillissementen voorspellen. Maar wat nog indrukwekkender is: uit onze eerste bevindingen blijkt dat we met deze methodiek het jaar waarin een faillissement optreedt binnen een periode van vijf jaar buitengewoon accuraat kunnen voorspellen.
It is these types of continuous innovation that help our customers navigate and thrive in a business climate characterized by relentless change. As we have shown, the data and the will to provide smarter decision making are plentiful in businesses. Sometimes it's simply a matter of finding a partner who is able to connect the dots and solve problems with a refreshing data-driven approach.
Altares Dun & Bradstreet: your data partner
Altares Dun & Bradstreet helps organizations create a corporate culture that prioritizes data as a strategic weapon. Our Dun & Bradstreet data cloudis an inexhaustible source of information, with insights that 90% of all fortune 500 companies access daily. Do you need help setting up a master data management strategy? Get in touch with us.