Four risk scoring options to help modernize b2b credit approvals1. 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!
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