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Mitigating Risk in Uncertain Times
Defining risk from your agency's perspective is the first step in risk mitigation. While recent economic focus has been largely centered on consumers and the financial services industry, D&B has been focused on the financial impact on businesses relative to payment experiences, bankruptcies and failure rates. D&B insights on these key trends are helping agencies manage their risk during this global financial crisis.
Payment problems are becoming a significant issue around the globe, with 33 countries, including eight in the Asia-Pacific region, paying more than 30% of their bills at thirty days or more past terms. In the past quarter alone, an additional six countries have increased their percentage of overdue payments to more than 30%. This trend is having significant impact on business cash flow at a time when funding to cover shortfalls is difficult to access.
Failure rates are sensitive to the changes in the economy, showing an increasing trend beginning in 2007 - a phenomenon last seen in April 2001 (at the dawn of the last recession.) D&B defines failure as bankruptcies going out of business with unpaid debt in the next 12 months. The rise in the business bankruptcy rate in the U.S. has been well documented, doubling in the last two years. What is not well known or understood, but far more revealing is the rise of failure rates.
Bankruptcy trends by industry show the volatility, but some industries are actually in a decline. Construction, Finance, Real Estate, Retail, Transportation and Wholesale have been the most volatile industries in terms of increasing bankruptcy rates in the last three years. Utilities and Telecom have been declining with Insurance being the least volatile. Contact us to learn more.
Bankruptcy, Failure and Delinquency Rates 2000-2007
Source: D&B Global Analytics
Bankruptcy Trends by Industry
Red indicates high volatility
|
Bankruptcy Rate |
Volatility
Score |
|
2006 |
2007 |
2008 |
| Construction |
0.17% |
0.17% |
0.25% |
13.5 |
| Finance |
0.08% |
0.10% |
0.20% |
18.1 |
| Government |
0.01% |
0.00% |
0.02% |
0.0 |
| Insurance |
0.04% |
0.06% |
0.03% |
7.9 |
| Manufacturing |
0.23% |
0.21% |
0.24% |
10.7 |
| Natural Res. |
0.13% |
0.13% |
0.16% |
12.1 |
| Real Estate |
0.06% |
0.10% |
0.13% |
14.5 |
| Retail |
0.15% |
0.19% |
0.23% |
12.4 |
| Services - Business |
0.11% |
0.11% |
0.13% |
11.6 |
| Services - Other |
0.11% |
0.11% |
0.14% |
11.8 |
| Telecom |
0.23% |
0.27% |
0.18% |
8.2 |
| Transportation |
0.23% |
0.22% |
0.33% |
13.6 |
| Utilities |
0.15% |
0.17% |
0.16% |
10.1 |
| Wholesale |
0.12% |
0.14% |
0.19% |
13.1 |
| Other |
0.12% |
0.07% |
0.09% |
10.6 |
Source: D&B Global Analytics
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Country Risk Trends Not surprisingly, in this global economic crisis, there has been a recent increase in business risk when companies are trading overseas. More than 90 of D&B's 132 Country Reports have been recently updated to reflect the very latest global and in-country economic developments. More importantly, 32 country risk indicator ratings have been re-evaluated and downgraded in October 2008, as compared to the four rating changes in October 2007.While ratings for some of the world's most important economies - China, Japan and India - remain unchanged these countries are not immune to economic challenges and there are signs that difficulties could lie ahead.
D&B business information, whether it is used for macro analyses on industries or countries or a micro analysis on a specific business can help you make better decisions during uncertain economic times. To learn more about countries at risk, contact us.
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Business Transparency is Becoming a Business Requirement Now more than ever, agencies are discovering the need to gain more than spend transparency of their business partners. Consequences of not having full transparency are severe - importers may be allowed to import defective goods, manufacturing sites may go uninspected, fraudulent healthcare providers may accelerate criminal behavior and financially unstable suppliers may go bankrupt.In 2001, when the USA Patriot Act challenged institutions to know your customers, some agencies were quick to adopt this approach to know their business partners. Recently, numerous GAO studies called for better transparency of regulated entities through annual registration. Now it appears that this best practice is becoming a standard business requirement.
Since agency missions vary - from cargo security to import safety to provider compliance to supplier determinations to fraud investigations, you may work with or be responsible for different types of businesses, such as:
- Manufacturers
- Shippers
- Importers
- Suppliers
- Grantees
- Healthcare Providers
- Parties of Interest
Establishing an annual verification and registration process by leveraging the D&B D-U-N-S® Number can help agencies streamline processes or meet compliance requirements. This process helps to keep track of business change to ensure the most current business information is available on a specific entity. The D-U-N-S Number is a globally recognized nine-digit, location-specific business identification system that identifies and tracks businesses globally throughout their lifecycle. For more information, contact us.
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D&B Sponsors NAPA's SES Study on Transition in Government Highlighting Key Priorities and Challenges D&B is proud to co-sponsor the National Academy of Public Administration's "Transition in Government Leadership" SES study report. In this first ever government-wide survey of SES views and experiences in managing presidential transition, the National Academy's aim was to better understand how the SES are approaching this transition - their needs, expectations, preparations and concerns.During this presidential transition - the first in eight years and during a time of great turmoil - it is more important than ever that our government leaders have the information and tools necessary to move forward quickly and effectively. Twenty-three percent of the 4,799 SES surveyed responded with their perspectives on how they define a successful transition, top challenges to success, opportunities to facilitating successful transitions and key attributes of Presidential Appointees.
The results of this study will be officially released on November 20th at NAPA's Annual Meeting in Washington, DC. Contact us to learn more.
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Strong Turnout for D&B's Scoring and Financials Webinar
D&B's webinar on How to Interpret D&B Scores and Financials for Additional Due Diligence was very well attended and well received. This webinar was in direct response to your feedback to learn more about how to use our scores and financials for different agency decisions.
The webinar detailed how to determine which score - PAYDEX Score, Financial Stress Score or Supplier Evaluation Rating - to use for your decisions. It highlighted the differences between the scores, how they're derived, and how to use them. It also showed how to interpret D&B ratios and financial information in our reports.
If you missed the event and want to learn more, check out the recorded webinar.
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