d&b risk assessment

D&B Risk Assessment

Ron Turner

Dun & Bradstreet Ltd

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D&B products and solutions are drawn from a global database of more than…..

230 Million businesses (5.5 Million in the UK),

In 214 countries,

In 95 languages or dialects,

In 181 Currencies

forming by far the world’s largest database of commercial insight

Did You Know?

D&B - The Most Trusted Source of Business Insight

2Helping you Decide with Confidence™

Based on D&B data – across the world today during the time it takes to do my presentation……………..

585 businesses will fail

5616 businesses will decline to show a high risk of failure

D&B Data – the DUNSRight® Quality Process

DUNSRight®

Global Data

Collection

Entity

Matching

D-U-N-S®

Number

Corporate

Linkage

Predictive

Indicators

Helping you Decide with Confidence™3

D&B Data Collection – UK Primary Sources

Contact Centers

Confirm and add data

by phone and e mail

Millions of contacts

annually

Directors and

Business Owners

Background

Experience

Prior Failures

Years of history

Registries:

Incorporation

Financials

Directors/Officers

Shareholding

Daily and weekly updates

of millions

of records

Public

Data

Court actions

Mortgages & Charges

Press & Media

Government Data

All publically recorded

actions and key events

Macro-Economic

Index

Key Indicators

Reflects Industry risk

during different

economic conditions

Trade Payment/

Collections Data

Payment Trend

Overdue

Passed for Collection

Daily updates

processing millions of

transactions

Web Sourcing

ID, demographic

Ownership

Financials, etc

Addition &

Confirmation of

data

11m total

records,

4m+ trading

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D&B’s proprietary D-U-N-S Number:

Originally developed in 1962, this 9-digit business number uniquely

identifies and tracks a business entity anywhere in the world for as long

as it exists...and is never duplicated or re-used. It is assigned to each of

the 230 million businesses in the D&B Global Database.

Did You Know?

The D-U-N-S Numbering System is truly unique. It is the only

single purpose Global Numbering System to be endorsed by the

United Nations; the European Union; both the US and UK

Governments; and many other regulatory bodies and associations.

D&B D-U-N-S Number

5Helping you Decide with Confidence™

D&B Global Corporate Linkage

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Using the D&B DUNS Number, there are 19,639,853 linked records in

the D&B Global File – Parent/Subsidiary; Branch/HQ; Minority Owners.

Current Top UK Family Trees by number of linked members:-1. JP Morgan – 9,515

2. RBS Group – 8,334

3. HM Treasury – 8,332

4. HSBC Group – 7,887

5. Lloyds Banking Group – 6,056

6. Co-operative Group – 5,829

7. Royal Dutch Shell plc – 5,748

8. Tesco plc – 5,639

Did You Know?

D&B’s Global Linkage is unrivalled, identifying both

Business Risk and Opportunities worldwide.

Over 200,000 updates are made to Global Family

Tree members every day…….

Helping you Decide with Confidence™

Development of the D&B Score Methodology

These characteristics are weighted by significance to form rules for our

“scorecards”.

Sample

Business

Universe

‘Good’

‘Bad’

Scorecards

Characteristics that

differentiate ‘Goods’

(healthy trading

businesses) from

‘Bads’ (failed or

distressed

businesses).

12 months

minimum

Observation

Point

Performance

Window


Key Data Attributes of the D&B Failure Score and

Delinquency Score

Demographics

• Age and size of business

• Primary industry sector

(UK SIC 2003/2007)

• Employees

• Geographic Region

• National/Local Trading

Public Negative Data

• Court Judgments, Suits & Liens (By

Relevance to Business and by Age

and Volume)

• Acceleration of Court Actions

• Mortgages and Charges (By

Relevance - Type, Age, Volume)

Principals & Shareholders

• Experience & Associated Failures by

Individual and Overall

• High Risk Parent in the family tree

• Strength of Domestic/Ultimate Parent

Trade Payments/Collections

• Payment Score (Paydex) trends

• Volatility of payments

• Relevance to Business

• Passed For Collection

Financials

• Financial Trends

• Liquidity / Cash

• Solvency

• Profitability

• Debt

• Late filing / age of accounts

Economic Index

Reflects risk to specific industries

during different economic

conditions – reviewed Quarterly


D&B Predictive Indicators – Scores & Ratings


The D&B Rating is a summary predictive risk evaluation mapped from the D&B Failure Score and is in two parts:-

First part is an indicator of Financial Strength (Tangible Net Worth or Capital of the Business in the range 5A down to H (plus N and O)

Second Part is an overall composite Risk Indicator based on the Score (1-4 or “-”), where 1 is Low Risk and 4 is High Risk.

……………..

Did You Know?

D&B’s Global coverage of Scores and Ratings is

unparalleled – over 200 million records carry an up to

date risk evaluation derived from multi-variate

automated models which are blended with business

rules and manual interventions.

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• Indicator Tangible Net Worth (in £)

Net Worth From To

• 5A 35,000,000 And above

• 4A 15,000,000 34,999,999

• 3A 7,000,000 14,999,999

• 2A 1,500,000 6,999,999

• 1A 700,000 1,499,999

• A 350,000 699,999

• B 200,000 349,999

• C 100,000 199,999

• D 70,000 99,999

• E 35,000 69,999

• F 20,000 34,999

• G 8,000 19,999

• H 0 7,999

• Alternate Symbols Used

• N Negative net worth

• O Net worth undetermined

(accounts unavailable or older than 2

years)


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The D&B Rating is presented in the

following format:

• Financial Strength - Based on Tangible

Net Worth from the latest financial

accounts.

• Risk Indicator - Derived from the D&B

Failure Score. Dynamically kept up-to-

date.

Example, 2A 4 ……

the D&B Rating indicates a business with

Tangible Net Worth of between £1,500,000

and £6,999,999 and a high risk of failure.



» The D&B Failure Score predicts the likelihood that a company will obtain legal relief from its creditors or cease operations over the next 12 month period.

The scorecard looks for the onset of failure such as meeting of creditors, administrator appointed, bankruptcy, receiver appointed, petition for winding-up among others legal events.

» The D&B Delinquency Score predicts the likelihood that a company will pay its bills in a severely delinquent manner over the next 12 months.

Delinquency is defined as less than 75% of Trade Experiences paid within terms and 10% or more paid 90+ days late.

All of these Scores use a 1-100 scale; 1 representing High Risk and 100 representing Low Risk

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Failure Score Risk Indicator Probability of Failure

86 – 100 1 Minimum Risk

51 – 85 2 Lower than average risk

11 – 50 3 Higher than average risk

1 – 10 4 High risk

- - Insufficient information


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The D&B Delinquency Score (Predictive)

The main difference between the calculation of the D&B Failure and

Delinquency Scores is that we use different data elements and weightings

because we are predicting a different result.

• The D&B Delinquency Score is a relative measure of risk, whereby 1

represents organisations that have the highest probability of

delinquency and 100 the lowest.


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D&B Paydex (Payment behaviour to date)

• The D&B Payment Score (or Paydex) is a score that

evaluates an organisation’s payment history based on

trade experiences collected through D&B’s Trade

Programme i.e. how the organisation has been paying its

bills.

• A Paydex Score of 80 indicates prompt payments, less

than 80 (down to 1) indicates slow payments, and greater

than 80 (up to 100) indicates payment before due.


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• An annual review of data and score performance is conducted by a leading

Credit Insurer across the UK Credit Reference Agencies based on a sample of

20,000 Ltd Companies and 6,000 unincorporated businesses.

• Results showed D&B with by far the best database coverage:-

• 100% coverage of Ltd Companies (lowest 75.9%)

• 95.6% of unincorporated businesses (next nearest 67.8% - ICC).

• D&B score performance met all required parameters

• D&B current performance-

• At 3 months prior to failure – 86.3% prediction of UK business

insolvencies

• At 12 months prior to failure – 42.7% marked as high risk

Thank you for listening!

External Validation of D&B Data and Scores

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d&b risk assessment

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