Building a Real-Time Credit Risk Engine for Large Corporates with Deep Supply Chains

In a world of interconnected global trade, a large corporate’s supply chain is its most valuable asset. Within this complex network there are hidden weaknesses: the financial health of each supplier / vendor, from raw material providers to logistics partners. Traditional trade credit risk assessment approaches, based on annual reports and quarterly filings, are no longer adequate. By the time a warning signal appears, it is often too late.

Dynamic in nature and intelligent platforms provide constant, up -to -date visibility of companies’ supply chain and financial health. This active approach is not just a technical improvement rather, necessary to maintain business continuity and reduce financial risk.

From Yearly Checks to Continuous Credit Risk Assessment  

The traditional method of Credit Risk Assessment offers a snapshot in time. An organisation’s creditworthiness is evaluated annually or quarterly, based on past financial data. While this method can be helpful, it is fundamentally reactive. It assumes that an organisation’s financial situation remains stable between assessments, which is a risky assumption in today’s VUCA world.

A near to real-time credit risk engine changes this model. It continuously collects a wide variety of data points, creating an active risk profile for each supplier. This goes beyond traditional financial reports to include:

1. Transactional Data: Real time analysis of payment history, including changes in payment patterns or delays.
2. Market and News Feeds: NLP driven analysis of news headlines, social media sentiment, and industry reports for negative signals like layoffs, leadership changes, or regulatory issues.
3. Behavioral Data: Patterns in a supplier’s / vendor’s behavior, like a sudden rise in credit usage or changes in trading partners or while following other compliances.

By combining these various data sources, the platform can create a much more nuanced and accurate view of a supplier’s / vendor’s risk profile at any moment.

The Power of Proactive Credit Risk Monitoring  

With continuous assessment in place, the platform’s main function becomes Credit Risk Monitoring. It’s all about moving forward and spotting potential issues / trends before they grow. The near to real-time platform acts as an early warning system, automatically flagging and alerting finance team about changes in a supplier’s / vendor’s status.

Here’s how effective monitoring works:

• Dynamic Risk Scoring: The platform provides a continuously updated risk score to each supplier based on the collected data. Any significant change in the risk score automatically triggers an alert to the relevant teams.
• Automated Alerts and Notifications: When a set risk threshold is crossed for instance, if a supplier’s score drops below a specific score, or a news alert indicates financial trouble, the platform quickly notifies the relevant teams.  
• Predictive Analytics: Using AI/ML, the platform can forecast the likelihood of a supplier / vendor defaulting soon, allowing the organization to take proactive steps, such as diversifying its supplier / vendor base or finding alternative sources of materials.  

This level of detailed, ongoing monitoring using platform’s turns a reactive risk management function into a proactive one. It enables corporations to address risks before they affect operations, ensuring that the flow of goods and services remains steady.

Advantage Rubix

With Rubix’s Automated Risk Management and Monitoring System (Rubix ARMS™ platform) and Early Warning System (EWS), you get a complete solution for your entire credit lifecycle. From conducting due diligence during onboarding to ongoing monitoring of your portfolio, our platform offers insights that simplify complex decisions. Our customizable models can fit your specific industry and risk profile, ensuring that the insights you receive are not only accurate but also actionable.

Building a Resilient Future  

For MNCs with large complex supply chains, near to real-time credit risk platform is the key to business resilience. Through the abandonment of old, classified static methods and the adoption of an ongoing Credit Risk Assessment and Monitoring mechanism, organisations can protect their financial health and foster relationships with suppliers/vendors/partners, thereby gaining a true advantage in the VUCA world. Those able to embrace will be best positioned to win in the risk management of today and tomorrow.