“The Questions Your Business Information Provider Doesn’t Want You To Ask”

Ewan Mitchell – Senior MathematicianCompany Watch

“Hindsight In Advance”

“When I look up a company with three different business information providers I get three different ratings.”

- credit and collections conference delegate

Over The Next Few Years There Will Be An Unprecedented Risk Of Insolvency

Data from Insolvency Service Website

Over The Next Few Years There Will Be An Unprecedented Risk Of Insolvency

• Insolvency rate at record low

• One in ten companies is technically insolvent

(230,000) and will fail eventually

• Credit risk management is key to success

Don’t Be Complacent – You Need Tools You

Can Trust?

Quantity ≠ Quality

Cheap ratings are a false economy

£280 Million debtLess than 7p per pound

Recovered

Give Yourself The Tools To Discriminate

Come and find us on focal point X11 (in the bar!) to find out more about the questions you want to ask

£150Million debt

Question 1 – What percentage of companies

which failed were flagged up as risky?

• An indication of how often you are likely to lose money

• Does your ratings provider split up their success rate by country/ business type? If not, why not?

• Can I update the rating if I get management accounts?

Question 2 – What percentage of companies

are in your warning area or equivalent?

A big warning area decreases the amount of defaults/failures which are missed but decreases the amount of business you can do.

Question 3 – What Does The Distribution Of

Companies Across Your Ratings System

Look Like?

A scale of (for instance 0 - 100) gives an impression of uniformity but this can be misleading

If company A has a rating of 21 and company B a rating of 70, what can you say about them?

Question 3 – What Does The Distribution Of

Companies Across Your Ratings System

Look Like?

For some systems a rating of 21 could be the lowest a company can get

A rating of 70 is the highest a company can get

Question 3 What Does The Distribution Of

Companies Across Your Ratings System

Look Like?

A uniform distribution is honest. The ratings mean what they appear to mean.

Question 4 How do you know?

How closely is your provider monitoring the accuracy of their data and their ratings?

Question 5 – How Stable Are Your Ratings?

• The rating is overly sensitive to a particular input

• The company has changed which SIC code it files under

Question 6 – How well can you tailor your

ratings to my needs?

You need to be prepared for the insolvencies of the coming two years

Make sure you have a rating system that you trust

Ewan Mitchell

Emma Caister

Mike Newman

Arjun Davé

Focus Point X11 In The Bar