D&B Risk Assessment
Transcript of D&B Risk Assessment
D&B products and solutions are drawn from a global database of more than…..
230 Million businesses (5.5 Million in the UK),
In 214 countries,
In 95 languages or dialects,
In 181 Currencies
forming by far the world’s largest database of commercial insight
Did You Know?
D&B - The Most Trusted Source of Business Insight
2Helping you Decide with Confidence™
Based on D&B data – across the world today during the time it takes to do my presentation……………..
585 businesses will fail
5616 businesses will decline to show a high risk of failure
D&B Data – the DUNSRight® Quality Process
DUNSRight®
Global Data
Collection
Entity
Matching
D-U-N-S®
Number
Corporate
Linkage
Predictive
Indicators
Helping you Decide with Confidence™3
D&B Data Collection – UK Primary Sources
Contact Centers
Confirm and add data
by phone and e mail
Millions of contacts
annually
Directors and
Business Owners
Background
Experience
Prior Failures
Years of history
Registries:
Incorporation
Financials
Directors/Officers
Shareholding
Daily and weekly updates
of millions
of records
Public
Data
Court actions
Mortgages & Charges
Press & Media
Government Data
All publically recorded
actions and key events
Macro-Economic
Index
Key Indicators
Reflects Industry risk
during different
economic conditions
Trade Payment/
Collections Data
Payment Trend
Overdue
Passed for Collection
Daily updates
processing millions of
transactions
Web Sourcing
ID, demographic
Ownership
Financials, etc
Addition &
Confirmation of
data
11m total
records,
4m+ trading
4
D&B’s proprietary D-U-N-S Number:
Originally developed in 1962, this 9-digit business number uniquely
identifies and tracks a business entity anywhere in the world for as long
as it exists...and is never duplicated or re-used. It is assigned to each of
the 230 million businesses in the D&B Global Database.
Did You Know?
The D-U-N-S Numbering System is truly unique. It is the only
single purpose Global Numbering System to be endorsed by the
United Nations; the European Union; both the US and UK
Governments; and many other regulatory bodies and associations.
D&B D-U-N-S Number
5Helping you Decide with Confidence™
D&B Global Corporate Linkage
6
Using the D&B DUNS Number, there are 19,639,853 linked records in
the D&B Global File – Parent/Subsidiary; Branch/HQ; Minority Owners.
Current Top UK Family Trees by number of linked members:-1. JP Morgan – 9,515
2. RBS Group – 8,334
3. HM Treasury – 8,332
4. HSBC Group – 7,887
5. Lloyds Banking Group – 6,056
6. Co-operative Group – 5,829
7. Royal Dutch Shell plc – 5,748
8. Tesco plc – 5,639
Did You Know?
D&B’s Global Linkage is unrivalled, identifying both
Business Risk and Opportunities worldwide.
Over 200,000 updates are made to Global Family
Tree members every day…….
Helping you Decide with Confidence™
Development of the D&B Score Methodology
These characteristics are weighted by significance to form rules for our
“scorecards”.
Sample
Business
Universe
‘Good’
‘Bad’
Scorecards
Characteristics that
differentiate ‘Goods’
(healthy trading
businesses) from
‘Bads’ (failed or
distressed
businesses).
12 months
minimum
Observation
Point
Performance
Window
Helping you Decide with Confidence™7
Key Data Attributes of the D&B Failure Score and
Delinquency Score
Demographics
• Age and size of business
• Primary industry sector
(UK SIC 2003/2007)
• Employees
• Geographic Region
• National/Local Trading
Public Negative Data
• Court Judgments, Suits & Liens (By
Relevance to Business and by Age
and Volume)
• Acceleration of Court Actions
• Mortgages and Charges (By
Relevance - Type, Age, Volume)
Principals & Shareholders
• Experience & Associated Failures by
Individual and Overall
• High Risk Parent in the family tree
• Strength of Domestic/Ultimate Parent
Trade Payments/Collections
• Payment Score (Paydex) trends
• Volatility of payments
• Relevance to Business
• Passed For Collection
Financials
• Financial Trends
• Liquidity / Cash
• Solvency
• Profitability
• Debt
• Late filing / age of accounts
Economic Index
Reflects risk to specific industries
during different economic
conditions – reviewed Quarterly
Helping you Decide with Confidence™8
D&B Predictive Indicators – Scores & Ratings
Helping you Decide with Confidence™
The D&B Rating is a summary predictive risk evaluation mapped from the D&B Failure Score and is in two parts:-
First part is an indicator of Financial Strength (Tangible Net Worth or Capital of the Business in the range 5A down to H (plus N and O)
Second Part is an overall composite Risk Indicator based on the Score (1-4 or “-”), where 1 is Low Risk and 4 is High Risk.
……………..
Did You Know?
D&B’s Global coverage of Scores and Ratings is
unparalleled – over 200 million records carry an up to
date risk evaluation derived from multi-variate
automated models which are blended with business
rules and manual interventions.
9
• Indicator Tangible Net Worth (in £)
Net Worth From To
• 5A 35,000,000 And above
• 4A 15,000,000 34,999,999
• 3A 7,000,000 14,999,999
• 2A 1,500,000 6,999,999
• 1A 700,000 1,499,999
• A 350,000 699,999
• B 200,000 349,999
• C 100,000 199,999
• D 70,000 99,999
• E 35,000 69,999
• F 20,000 34,999
• G 8,000 19,999
• H 0 7,999
• Alternate Symbols Used
• N Negative net worth
• O Net worth undetermined
(accounts unavailable or older than 2
years)
D&B Predictive Indicators – Scores & Ratings
10
The D&B Rating is presented in the
following format:
• Financial Strength - Based on Tangible
Net Worth from the latest financial
accounts.
• Risk Indicator - Derived from the D&B
Failure Score. Dynamically kept up-to-
date.
Example, 2A 4 ……
the D&B Rating indicates a business with
Tangible Net Worth of between £1,500,000
and £6,999,999 and a high risk of failure.
D&B Predictive Indicators – Scores & Ratings
Helping you Decide with Confidence™
» The D&B Failure Score predicts the likelihood that a company will obtain legal relief from its creditors or cease operations over the next 12 month period.
The scorecard looks for the onset of failure such as meeting of creditors, administrator appointed, bankruptcy, receiver appointed, petition for winding-up among others legal events.
» The D&B Delinquency Score predicts the likelihood that a company will pay its bills in a severely delinquent manner over the next 12 months.
Delinquency is defined as less than 75% of Trade Experiences paid within terms and 10% or more paid 90+ days late.
All of these Scores use a 1-100 scale; 1 representing High Risk and 100 representing Low Risk
11
Failure Score Risk Indicator Probability of Failure
86 – 100 1 Minimum Risk
51 – 85 2 Lower than average risk
11 – 50 3 Higher than average risk
1 – 10 4 High risk
- - Insufficient information
D&B Predictive Indicators – Scores & Ratings
12
The D&B Delinquency Score (Predictive)
The main difference between the calculation of the D&B Failure and
Delinquency Scores is that we use different data elements and weightings
because we are predicting a different result.
• The D&B Delinquency Score is a relative measure of risk, whereby 1
represents organisations that have the highest probability of
delinquency and 100 the lowest.
D&B Predictive Indicators – Scores & Ratings
13
D&B Paydex (Payment behaviour to date)
• The D&B Payment Score (or Paydex) is a score that
evaluates an organisation’s payment history based on
trade experiences collected through D&B’s Trade
Programme i.e. how the organisation has been paying its
bills.
• A Paydex Score of 80 indicates prompt payments, less
than 80 (down to 1) indicates slow payments, and greater
than 80 (up to 100) indicates payment before due.
D&B Predictive Indicators – Scores & Ratings
14
• An annual review of data and score performance is conducted by a leading
Credit Insurer across the UK Credit Reference Agencies based on a sample of
20,000 Ltd Companies and 6,000 unincorporated businesses.
• Results showed D&B with by far the best database coverage:-
• 100% coverage of Ltd Companies (lowest 75.9%)
• 95.6% of unincorporated businesses (next nearest 67.8% - ICC).
• D&B score performance met all required parameters
• D&B current performance-
• At 3 months prior to failure – 86.3% prediction of UK business
insolvencies
• At 12 months prior to failure – 42.7% marked as high risk
Thank you for listening!
External Validation of D&B Data and Scores
15