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2 October 2020

How to identify credit risk early

Ryan Macromalli

Creditworthiness is difficult enough to gauge during times of economic stability. The current fast-changing economic climate has the potential to lead to liquidity issues, downsizing and ultimately credit default. The challenge is to identify which are the companies that are struggling, and which may even exit the crisis in a stronger position. Companies seeking to eliminate credit risk within their current client portfolio or take on new customers need timely credit indicators.

Identifying softer signals of credit risk before it can be confirmed by hard data can be useful to inform decision making during times of rapid change.

Machine learning can now rapidly assess global media sources to highlight when a specific company or sector is mentioned in a context that may suggest negative credit implications. Difficulty in raising capital, trade tensions, or debt restructuring, for example, can all be used to produce a high credit risk score.

Technology developed by Moody’s Analytics filters and assesses media content using our proprietary deep learning tools to capture both daily and historical sentiment scores. The content we assess covers thousands of news outlets and millions of articles globally. If several articles suggest a company is facing many new lawsuits, for example, this would be reflected as risk in their credit sentiment score.

Our research shows the credit sentiment score can give you a timely indicator of credit developments, perhaps as much as six to eight months before they happen, creating a window for further investigation into highlighted companies or revisions of deals made. It also allows you to identify pockets of resilience before your competitors do, giving you more detail, on clients.

Find out more about how the technology underpinning the credit sentiment score is integrated into our Credit Catalyst platform.

Ryan Macromalli

Ryan Macromalli, Bureau van Dijk director, risk solutions

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Certainty is a highly-prized commodity in business. Data might be getting bigger all the time, but this only makes extracting value from it more difficult.

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Our solutions are designed to help different business challenges and streamline your workflow. Many of our customers blend our information with their own internal data to get a more complete picture of the companies in their ecosystem.

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