GTDC’s Virtual Credit Exchange to Manage Risk,
Knowing the unsecured credit risk of a business continues to be a significant challenge for every technology organization shipping products and services to resellers and buyers around the world. This is accentuated in emerging markets or geographies where data is sparse.
During and prior to economic downturns, those trade creditors are left dealing with credit information reports that lack critical and fresh trade experience information and the premiums for receivables insurance are just simply prohibitive. Many suppliers are left trying to assess how to reach their peers in the industry or vendors by phone and email to get clarity about payments by a particular customer. This model is just not scalable for the fast growing world of IT distribution.
After extensive research in this area, the Global Technology Distribution Council identified a global cloud technology partner, Credit2B, to design and deliver a cost effective, safe and highly interactive solution for GTDC members to safely exchange payment experiences and receivables information on their shared customers. When launched in Europe, GTDC members who participated in the initial program were able to get smart intelligence on 220,000 common business customers.
Credit2B’s extensive regression testing algorithm when applied to thousands of bankruptcies and millions of lines of industry supplier trade can identify the probability of default months ahead of the event. This is in stark contrast to the often less relevant information like a utility or some general services company payment experience that you would typically see on a company credit report. Credit2B’s highly predictive payment score called a Payment Quality Index (or “PQI”) also accommodates seasonality, size of orders and trending. In a recent study of 240 bankruptcies in the United States from 2014 to 2016, PQI identified 30% of that sample as cautionary or high risk two years prior, and these higher risks constituted 80% of the sample thirty days prior to the actual filing. Trade is becoming global and Credit2B’s platform is designed to accommodate this kind of need for GTDC members doing business with buyers around the world.
With strong leadership from the GTDC management team, member organizations are able to participate in the first global, industry-wide exchange to manage credit risk, while also reducing costs. The organization’s platform, called the GTDC Virtual Credit Network, is available on a global basis, including a specific European solution that deals with the complexities of data privacy rules in the region. The system provides actionable trade payment metrics, including the predictive scores, highest and average credits and detailed recent trade lines from other GTDC members in the network on an anonymous or identifiable basis. Additionally, users will receive detailed monthly benchmarks stacking their portfolio cash metrics versus blended portfolios of the others in the network on a sanitized basis. This will help GTDC member CFOs assess their company’s cash generation performance from receivables through a simple fully automated report.
When we first launched the platform, one GTDC member’s senior credit leader in Europe said “readily-available industry credit information is essential to our overall credit management process. The creation of this credit network has helped us in various ways, especially by advancing the timeliness, quality, and affordability of credit decision-making.”
Credit2B’s dedicated team of specialists will help you understand how to upload your trade to your secure account and set you up. We will also be providing multiple CFO-credit executive webinars on this subject with dates to be announced shortly.
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