Why Credit Risk Monitoring Isn’t Enough When It Comes to Mitigating Supplier Risk
1. There is more to a company’s financial health than a business credit score.
Business credit reports, such as Experian Company credit scores and D&B credit reports, provide only one indication of a company’s financial health. Without additional insight into who you are dealing with across the complex network of third parties, your company is at risk.
A single business credit report does not reveal the entire picture. By the time the company credit score changes, it is too late to mitigate risk, causing supplier disruptions.
Measuring supplier/company credit scores are very important and you should continue to do so. But to gain a comprehensive and consistent view of your supply chain and third-party network, you need to look at other factors as well.
What are these business credit reports missing? On-going, timely monitoring to quickly identify issues that pose potential risks focused on factors relevant to your company - Political, Economic, Socio-cultural, Technological, Legal and Environmental (PESTLE). Complement business credit checks with PESTLE risk monitoring framework with LexisNexis Entity Insight.
2. The business financial information is often times self-reported.
Business credit reports, including D&B reports, gather the information in two ways. Some information is reported from collection agencies/credit reporting companies. Other information, including financial statements, is self-reported by the company.
A financial credit report partially generated by the company itself may lead to business risks for you. To best manage your supplier risk, other factors also need to be considered.
With LexisNexis Entity Insight, access a vast collection of media from around the world – including news publications, industry and trade journals, legal and regulatory publications, business journals, analytical sources and more. This includes information on private companies beyond what they self-report and information not found via Web searches alone. Plus, the tool scans global coverage in multiple languages, informing you on news that might not make it to national or international media.
3. The information in a business credit report is retrospective.
Your approach to risk management needs to be both proactive and decisive. When you request a business credit score, you’re only seeing what has already happened.
For example, while Experian Company credit scores attempt to predict a business’s future behavior, it’s solely based on what has already happened. This credit risk analysis is not proactive or comprehensive.
Gain better visibility looking both forwards and backwards. LexisNexis Entity Insight can be used to complement conventional credit scoring. Entity Insight allows you to assess third party and supplier risk both before and after determining the financial stress score.
Spot Other Third-Party Risks. Take Preemptive Action, Sooner.
LexisNexis Entity Insight is a fast, efficient and cost effective solution for proactively monitoring local and global suppliers and third-party business partners. It sets a new industry standard by helping you manage your supplier risk and third-party portfolio ahead of a financial stress score.
The solution leverages a wide range of market intelligence unavailable on the open Web and applies the industry standard PESTLE analysis framework (Political, Economic, Socio-cultural, Technological, Legal and Environmental). LexisNexis Entity Insight helps you anticipate and manage risk more effectively, gain better visibility and market intelligence on your supply chain and third-party portfolio.