Four risk scoring options to help modernize b2b credit approvals

Information about Four risk scoring options to help modernize b2b credit approvals

Published on October 17, 2020

Author: ExperianBIS

Source: slideshare.net

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1. 1 © Experian 22/04/2020 Sip and Solve Four risk scoring options to help modernize B2B credit approvals Featuring: Erikk J. Kropp Senior Product Manager Experian Business Information Services

2. 2 © Experian Path to modernization Credit Risk Data - Commercial - Consortium - Blended / Owner - International Data Risk Scoring - Generic - Judgmental - Custom Model Instant Decisioning - Decision Actions - Credit Limits - Audit Trails - Manual Overrides - Real-time / Batch Application Processing - Online Form Hosting - Digital Form Storage - Workflow Processing - Response Messaging System Integration - APIs - CRM / ERP Aps - Mobile Aps (iOS, Droid) - Aging Synchronization Sip and Solve: Four risk scoring options to help modernize B2B credit approvals

3. 3 © Experian Why score-based automation? Key Impacts: • Quickly assess risk and take action • Reduce dependency on manual reviews • Increase consistency and objectivity • Focus resources on medium risk, high balance Decline 10% of applicants 50.82% bad rate Approve 10% of applicants 1.25% bad rate Manual Review 80% of applicants 8.04% bad rate Sip and Solve: Four risk scoring options to help modernize B2B credit approvals Analysts AutomationAutomation

4. 4 © Experian 1. Generic scores Development: • Statistical-based • All-industry Purpose: • Define probability of a specific outcome or “bad definition” – Severe delinquency – Bankruptcy, default, failure Advantages: • Easy to access and implement (off-the-shelf) • Comprehensive data sets Challenges: • Usually limited to credit attributes • Compatibility Sip and Solve: Four risk scoring options to help modernize B2B credit approvals

5. 5 © Experian 2. Judgmental scores Development: • Judgment-based (experience of credit executive) • Attributes, weightings, scaling is hand-picked Purpose: • Rank order accounts based on perceived risk Advantages: • Highly configurable • Can include non-credit attributes – Financial statement ratios (large customers) – Portfolio / aging attributes (existing customers) Challenges: • Manual calculation (worksheet, spreadsheet) • Decisioning software to automate calculation (extra cost) Sip and Solve: Four risk scoring options to help modernize B2B credit approvals ATTRIBUTE 1 WEIGHT SCALE POINTS Years in File 20% <= 2 YEARS 0 3 ‐ 5 YEARS 2 6 ‐ 10 YEARS 5 11 ‐ 15 YEARS 8 15+ YEARS 10 (2) ATTRIBUTE 2 WEIGHT SCALE POINTS Intelliscore Plus 40% 1 ‐ 10 IPV2  0 11 ‐ 25 IPV2 2 26 ‐ 50 IPV2 5 51 ‐ 75 IPV2 8 76 ‐ 100 IPV2 10 (4) ATTRIBUTE 3 WEIGHT SCALE POINTS Financial Stability Risk Score 40% 1 ‐ 3 FSR 0 4 ‐ 10 FSR 2 11 ‐ 30 FSR 5 31 ‐ 65 FSR 8 66 ‐ 100 FSR 10 (4) SCORE SCALE DECISION DECISION RATING 0 ‐ 2.0 POINTS DECLINE E ‐ HIGH RISK 2.1 ‐ 4.0 POINTS MANUAL REVIEW D ‐ MED ‐ HIGH RISK 4.1 ‐ 6.0 POINTS APPROVE C ‐ MED RISK 6.1 ‐ 8.0 POINTS APPROVE B ‐ MED ‐ LOW RISK 8.1 ‐ 10.0 POINTS APPROVE A ‐ LOW RISK

6. 6 © Experian 3. Custom model scores Development: • Statistical-based • Business / portfolio specific Purpose: • Define probability of client specific outcome or “bad definition” – Severe delinquency – Bankruptcy, default, failure Advantages: • Highly predictive • Optimal business application Challenges: • Cost • Implementation time Sip and Solve: Four risk scoring options to help modernize B2B credit approvals

7. 7 © Experian 4: Deploy scores for portfolio management Portfolio Scoring • Apply risk scores to entire account portfolio • Run segmentation and trend analysis to spot risk • Take action accordingly to limit back-end exposure or to increase sales capacity. • Highly efficient and cost effective Sip and Solve: Four risk scoring options to help modernize B2B credit approvals

8. 8 © Experian Parting thoughts • Know your options and comfort level • Be realistic with expectations • Seek the right partner(s) – Flexible – Best interests in mind Sip and Solve: Four risk scoring options to help modernize B2B credit approvals

9. 9 © Experian 22/04/2020 Thank you! Have questions or want to learn more about B2B risk scoring options? • Chat with us: bit.ly/sip-solve-chat Upcoming Sip and Solves - • Join the list to stay in the loop: bit.ly/sip-and-solve

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