THREE TRENDS IN THE CREDIT BUSINESS
- Integrated and automated processes
- Portfolio perspective – from individual companies to entire stock
- Widening the concept of risk
Evaluate the entire customer portfolio
There’s also been a shift in how companies view credit issuing. Instead of focusing on a single company’s credit rating, they are increasingly looking at the entire customer portfolio.
”There has been a change of perspective from individual companies to the entire stock. Companies are realizing that they must adjust their focus to see how all their customers are doing and ask themselves how this influences their own business. What risks and dependencies are there in the portfolio? This is particularly important when you budget for the future. If, for example, there is a risk that five per cent of the customers will go bankrupt, then you have to include this in your calculations in order to get a correct consolidated view,” says Bernt-Olof Hellgren.
He explains that this can at the same time influence your assessment of certain specific customers. ”Traditionally you might have said no to a high-risk customer, but if the whole portfolio is in good shape, maybe you can afford to take the chance.”
Consider several factors
Company finances were previously the focus, while many companies have recently chosen to expand their risk approach. Bisnode has several services that calculate risk factors in other countries, for example.
”Geological aspects such as the risk for earth quakes or other natural catastrophes are increasingly taken into consideration. Look at the recent floods on the Balkan; they influenced Swedish companies that contract companies with established outsourcing in the region,” says Bernt-Olof.
Even political considerations are becoming more common
”In political considerations, companies are looking at the risk for corruption and how stable a country’s economic system is. During the Arab spring, the crisis in Egypt had an extensive impact on the Swedish lumber industry. This is because there is a big transshipment harbor in Egypt that they didn’t have access to for over a month, stopping them from shipping their lumber. In other words, a Swedish business can stand or fall due to changes that happen around the world. So these risk factors are extremely important to consider in your calculations,” he concludes.