Tag: Supplier Risk

Dun & Bradstreet Pipeline Risk Analysis

Dun & Bradstreet is offering a free Pipeline Risk Analysis to help firms better understand which opportunities are at risk due to the pandemic.  The analysis may also be used for supply chain or portfolio analysis.  The Health Scan takes a corporate family tree approach to opportunity analysis that leverages Dun & Bradstreet’s global corporate linkages.  Thus, it flags accounts where greater than 20% of their locations are in geographies with commerce and population movement restrictions.  

The analysis also identifies accounts located in geographies with restrictions, accounts in industries directly impacted by government restrictions, and firms deemed at risk according to Dun & Bradstreet’s predictive metrics (Delinquency Score, Failure Score, or Viability Rating).

“Our predictive models indicate that companies operating with limited margin are likely to face hardships when their normal operating environment is disrupted significantly,” stated the firm.  “Our predictive scores show these populations of companies are more likely to struggle to balance all financial obligations, especially if direct sales are compromised through a change in customer behavior.”

As Dun & Bradstreet delivers both risk (credit, supplier) services and sales and marketing solutions, they are better positioned to offer a hybrid solution that evaluates accounts based upon a series of risk factors.

“By adding ‘risk’ as an additional dimension for account selection in addition to fit and intent, organizations can identify accounts that have the highest likelihood of facing financial strain and potentially going out of business. This helps sales teams prioritize their time and helps marketing teams allocate their limited resources more wisely.”

Dun & Bradstreet VP of Product Marketing Deniz Olcay

Olcay also noted that there is an information asymmetry that benefits purchasers.  Buyers have a much better understanding of their cash position and risk profile than sellers, resulting in “adverse selection,” to the benefit of buyers.

When modeling for Customer Acquisition Cost (CAC), collections risk is usually not a significant factor in the calculation; however, during a recession, collection costs and delays need to be factored into the CAC calculation.  Firms become much more guarded with their cash during recessions, extending payment periods to maintain liquidity.

“Marketers and sellers may not be measured on being able to collect payments, but it has a significant impact on the performance of the business,” said Olcay.

Dun & Bradstreet notes that the pandemic demonstrated how interconnected the global economy has become with problems in one region cascading into others.  As always, firms should be selecting target accounts based on fit, intent, and risk.  While diversifying your portfolio makes sense as a long-term strategy for hedging risk, it is a poor strategy when near-term risk information is ignored.

“As it relates to go-to-market planning, diversifying your target accounts to reduce risk can hardly be sound advice.  But, knowing the risk profile for your ‘basket of accounts’ may protect your organization from missing revenue targets.  Now more than ever, teams must keep their emotions in check and make sound targeting decisions based on risk.”

Dun & Bradstreet VP of Product Marketing Deniz Olcay

Dun & Bradstreet provided a set of recommendations for “protecting your go-to-market engine.”  These include maintaining a centralized repository of customer and prospect intelligence that is continuously updated, reassessing the Ideal Customer Profile in light of new risk factors, and reallocating marketing spend to focus on lower-risk opportunities.  Dun & Bradstreet also recommends identifying net-new accounts based on pipeline risk and concentrating on upsell and cross-sell opportunities at stable accounts.

Dun & Bradstreet is also offering Business Insights for Business & Government in the Age of COVID-19. I covered this service last week.

Dun & Bradstreet: Business Insights for Business & Government in the Age of COVID-19

Dun & Bradstreet launched a free COVID-19 Business Impact Research Platform for government agencies.  The service provides data, analytics, and insights to government decision-makers to assist with

  • Risk mitigation and risk initiatives
  • Prioritizing emergency management and economic support programs
  • Determining workforce disruptions and supply chain risks.

British and Canadian versions of the service are in development.

Dun & Bradstreet is also providing services to FEMA, the US Small Business Administration, and the National Economic Council at the White House to assist with CARES Act funding and administration.

Small businesses may review and update business information at no charge before applying for CARES Act funding.  They can then monitor their Dun & Bradstreet scores and ratings.

“We recognize that communities are managing through unprecedented circumstances.  Our team of data scientists are lending their skills and analytics capabilities to help organizations across public and private sectors as they face the economic downturn resulting from this global pandemic. We are all in this together and consider it our duty as a trusted advisor to find ways to use our insights and mission-critical data and analytics to help businesses manage risk and turn uncertainty of the moment into confidence in the future.”

Dun & Bradstreet President Stephen C. Daffron

Dun & Bradstreet is also offering free health scan tools for supply chains, portfolios, and pipeline risk.

Orbis: Analysis of Global Financial Disclosure Rates

Orbis Coverage Table
Orbis Coverage Table

I came across an interesting analysis of financial disclosure rates by regions around the world.  The blog, written by Mark Bodnar, a librarian at Simon Fraser University (British Colombia), observed limited financial disclosure in North America and much of AsiaPac, but broader financial availability in Europe.

Of the 18 million North American companies covered, only about 35,000 have detailed financials.  That’s about 0.19%. Those would be from the relatively rare cohort of publicly traded companies we mentioned earlier.  The other 99.81% of the companies are privately held, and in North America that means that they are under almost no obligation to reveal their financials.

Compare that to Western Europe, where about 10 million of their 30 million companies in the database have detailed financials…

Oceania (incorporating AUS, NZ, and many wonderful island nations) is also down around 0.2%, largely because there are detailed financials for only about 0.15% of the companies based in the biggest country in the region, Australia.

While none of this would be a surprise to people in the business information sector, it was a good way to surface the information for students and non-experts.  European countries have a long history of requiring non-public (aka non-quoted or non-listed) companies to publicly file annual returns.  The depth of filing varies by country and size of company, but Europe has a deep set of financials available to assist with credit and supplier risk analysis, prospecting, company research, KYC/AML, and market analytics.

In the US, disclosure is limited to public companies, non-profits, and financial services companies.  Of these, only public company financials, which are filed via EDGAR (SEC), are fully transparent with few accessing state insurance filings, IRS 990 filings (non-profits), or the FDIC (banks).

I would take the author’s analysis of countries with deepest coverage of financials with a grain of salt.  It is likely that many of the countries with the highest disclosure rates have limited coverage of companies not subject to financial disclosure.  Furthermore, some of the filing regimes do not require financials for smaller companies.

 

 

 

Dun & Bradstreet Beneficial Ownership

Dun & Bradstreet unveiled a new Beneficial Ownership product to assist with client onboarding and back-book remediation of current customers.  The service helps determine who are the ultimate benefactors of each transaction.  Beneficial Ownership assists with legal compliance including Know Your Customer (KYC), Anti-Money Laundering, Politically Exposed Persons (PEP), and sanctions lists monitoring.  Overall, there are around a dozen relevant regulations concerning beneficial ownership with different thresholds for research.  By automating these checks, which have historically required manual research teams, Dun & Bradstreet is reducing time, expense, and risk (e.g. credit, supplier, reputational) while expediting the client onboarding process.

“Compliance teams are challenged to manage third-party due diligence, Anti-Money Laundering, Know Your Customer and tax compliance regulations through manual processes that can be costly and inefficient,” said Brian Alster, Dun & Bradstreet’s Global Head of Supply and Compliance. “By harnessing Dun & Bradstreet’s verified data with D&B Beneficial Ownership, the process can be easily automated to fast-track standard onboarding, helping companies relieve compliance burdens, and get back to driving growth.”

While family trees focus on controlling interest there are numerous legal reasons to look beyond controlling interest.  These include onboarding and ongoing compliance (e.g. KYC, AML, PEP, sanctions) as well as company research relevant to conflicts of interest, supply chain risk, and vetting customers, partners, service providers, and resellers.

The new offering, which draws from the D&B WorldBase file of 265 million active and inactive company records, spans 62 countries and 71 million shareholders.  D&B Beneficial Ownership is available through batch, real-time, and online access via the D&B Direct API or D&B Onboard.   The service also delivers ownership change alerts and a visualization layer which displays a spider-web view of branches and loops of business structures.  To assist with varying global requirements, users can query at different ownership thresholds.  Both corporate and individual beneficial owners are assessed across 100 million plus connections.

With D&B Direct 2.0, API clients pass the company name which is DUNS Matched.  The API then returns a detailed list of shareholders to the desired threshold including percent of ownership and loops (i.e. cross-ownerships).

Visualization tools help contextualize shareholding and ownership relationships.
Visualization tools help contextualize shareholding and ownership relationships.

Dun & Bradstreet collects shareholdings data from registered filings (mostly in Europe), direct research teams, and licensed data.  Ownership data goes down to 0.1% ownership levels.  Other compliance data includes PEP flags,  sanctions lists (e.g. OFAC), and adverse media searches.

Beneficial Ownership intelligence is also important for companies with deep supply chains looking to prevent reputational risk and ensure a minimal level of ethical behavior amongst their subcontractors.  Last May, Dun & Bradstreet launched a Human Trafficking Risk Index tool which helps firms avoid dodgy suppliers that may be using slave labor.   The Human Trafficking Risk Index is the first in a series of “Responsible Business Analytics” products in their pipeline.

Bureau van Dijk Integrates RepRisk Reports

RepRisk Issues span 28 topics
RepRisk coverage spans 28 issues and 45 topics across 70,000 global firms.

Bureau van Dijk partnered with RepRisk to integrate RepRisk’s environmental, social, and governance (ESG) risk reports into their global ORBIS database.  Content includes ESG risk metrics and analytics from the RepRisk ESG Risk Platform.  RepRisk claims to provide “the world’s most comprehensive database on ESG risks.”

The RepRisk Index combines company and country risk intelligence alongside Bureau van Dijk’s corporate ownership data.  RepRisk  screens 80,000 third-party sources spanning fifteen languages.  Company, country, and industry risk data is updated daily.  The company tracks 28 specific issues and 45 topics (e.g. fracking, indigenous peoples, illegal mining) across 70,000 companies.

Use cases include client onboarding, credit risk, compliance, and supply chain vetting.  Content will also be available via Bureau van Dijk’s Catalyst workflow solutions.

“In today’s business climate, there is a growing demand for information on environmental, social and governance reputational risk,” said Louise Green, Bureau van Dijk’s global marketing director. “RepRisk is an industry leader in the field of dynamic ESG risk analytics and metrics whose data complements our own extensive combination of financial, compliance, sanctions and risk-related information and gives our users the ability to make better-informed business decisions with a greater degree of certainty.”

“Our research focuses on capturing and analyzing data from media, stakeholders, and other public sources external to the company. This insight helps balance and substantiate the information provided by the company itself, and helps assess whether a company’s intention – policies, processes, and commitments – translates into practice,” says the RepRisk website.  “We believe that corporate responsibility goes hand-in-hand with sound financial and reputational risk management, operational excellence, and profitable growth in the medium and long term.”

Earlier this year, Bureau van Dijk rolled out an improved user interface for ORBIS.

Dun & Bradstreet Human Trafficking Risk Index

HTRI

This is a bit off the beaten path for my usual discussions, but it is always welcome when a company is able to create new products which take their core capabilities and direct them towards a global (or local) problem.  In this case, Dun & Bradstreet has developed a Human Trafficking Risk Index which helps firms avoid dodgy suppliers that may be using slave labor.   What’s more, this appears to be the first in a series of “Responsible Business Analytics” products they are planning to launch.

Their new Human Trafficking Risk Index helps procurement departments identify potential vendors that utilize trafficked labor (21 million people globally).  This shadow economy has been sized at $150 billion in annual illegal profits by the International Labor Organization.  Dun & Bradstreet is combining data from the US Departments of State and Labor with their global linkage information to help their customers “address supply chain risk while also helping them to be responsible corporate citizens.”

In “Trafficking in Persons Report” (July 2015), Secretary of State John Kerry said “This year’s Report places a special emphasis on human trafficking in the global marketplace. It highlights the hidden risks that workers may encounter when seeking employment and the steps that governments and businesses can take to prevent trafficking, including a demand for transparency in global supply chains.”

When people are asked about Dun & Bradstreet, they usually think of business credit reports, but the credit products are part of a broader Risk Management Solutions division that covers both business credit and supplier risk.  Along with credit scores, they have one of the world’s leading company databases, the 250 million company WorldBase file, which covers both active and inactive companies with deep company linkage.  It is this linkage intelligence that helps firms see through shells and holding companies to connect known bad actors with the rest of the organization.

Companies are already looking for the risk management companies to assist with KYC (Know Your Client), AML (anti-money laundering), and PEP (Politically Exposed Persons) to root out corruption.  Responsible Business Analytics is simply the next set of tools for helping companies act responsibly, maintain compliance, and avoid reputational black eyes.

What was impressed me was that on their Q1 earnings call, CEO Bob Carrigan spent a few minutes of his prepared remarks discussing their new index.  His focus wasn’t on profitability or future revenue streams, but about helping to reduce a global problem.  Carrigan argued that the role of the Chief Procurement Officer has expanded from optimizing the supplier base to managing supply risk including reputational risk.  Thus, the CPO needs tools that assist with regulatory compliance and brand risk management.  According to Carrigan,

Our supply risk solutions help customers manage this full spectrum of risks.  Today, CPOs have a fast growing need in what we call “Responsible Business Analytics” to help them guard against regulatory and reputational risks.  We help them as they comply with Government diversity requirements and monitor global banned entity lists, as well as meeting their social responsibility commitments like funding suppliers with sustainable business practices and meeting best in class ethics standards.

Is this a product category that will be a big money maker for Dun & Bradstreet?  I doubt it.  But at the margins, it provides a differentiator between Dun & Bradstreet and other supply risk vendors.  As such, it could tip a few deals their way while helping to reduce the profits of human traffickers.