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A new economic era needs a new generation of tools to manage risk.

The economic situation, which is characterized by rising inflation, energy costs, interest rates and geopolitical instability, presents a changing scenario in which companies need to manage risk more efficiently than ever before.

According to data from Experian, a technology company specialized in credit services, decision-making software, advanced analytics and data, 46,422 companies have already been dissolved in Spain in the first eight months of 2022, up 7.62% year-on-year.

The wholesale and retail trade (6,506 companies), construction (8,636), professional, scientific and technical activities (4,897) and real estate (4,818 companies) were particularly affected by company closures. They are closely followed by the manufacturing industry (3,175), and the hotel and catering sector (2,592).

While Madrid (12,832), Catalonia (6,775) and Valencia (5,499) lead the ranking of company closures in this period, Aragón (16.70%) and Navarra (15.77%) are the autonomous communities with the highest percentage increase in the accumulated variation compared to the same period of the previous year.

In this same period, a total of 3,845 insolvency proceedings have been declared, 3.39% more than in the same period of 2021. After agriculture, the transport and commerce industries are the ones registering the highest relative growth. Meanwhile, hotels and catering closed the period with a fall in insolvencies of over 27%.

The decline in entrepreneurship is also becoming more pronounced. In fact, 2,371 fewer companies were created in 2022 than last year.

Technology to assess the risk of non-payment of companies and freelancers

Given the increase in indicators of company dissolutions and insolvency proceedings, especially marked after the end of the moratorium, effective assessment of business risk is becoming of paramount importance.

“It is more important than ever to be able to assess the credit risk of companies and to know their likelihood of default, as well as to analyse the solvency of their Shareholders and Administrators. The incorporation of new sources of information on individuals and legal entities, together with the use of new evolutionary variables and information from negative sources and advanced analytical data allow us to identify with high predictability the likelihood of non-payment of the Spanish business community, with a greater adjustment to the current economic situation, something of vital importance to promote economic recovery”, said Dionisio Torre Ramos, Commercial Strategic Director at Experian.

The new generation of Next Gen Scores, Delphi for Business, with data capabilities and advanced analytics from Experian and Axesor, is now the most comprehensive and accurate solution for assessing the credit quality of the Spanish business community. In addition to the Delphi for Business (D4B), specially developed to evaluate the credit quality of SMEs and micro-SMEs, they also incorporate the Delphi for Acquisition (D4A) for the admission of individuals, the Delphi for Self Employed (D4SE) in the case of the self-employed and the Delphi for Insurance (D4I), specially designed for the insurance sector.

Delphi for business (D4B) allows to sort company portfolios based on their credit quality, quantify the credit risk through the likelihood of default and estimate the payment behaviour, in order to improve the processes of prospecting, admission, monitoring and recovery on any business entity. The models use a variety of information sources from the credit bureau, unpaid receipts, information from annual and commercial accounts, information on financial sentiment or judicial information.

“The D4B makes it possible, for all contributors to our credit Bureau, to obtain a calibrated score to predict a possible default situation in a time horizon of 12 months. These can be consulted via API or by means of massive consultation of information through files (batch mode), in both cases with access to all the business information desired, both of the entity consulted and of the business group to which it belongs”, said Dionisio Torre Ramos, Commercial Strategic Director at Experian.

The D4B basically build predictive models that enhance decision making and make it easier to differentiate between those companies, mainly SMEs and micro-SMEs, that are solvent, but which may have a liquidity problem at a given moment, and those that do not have a business model that allows them to effectively meet their payment obligations.

The Delphi for the admission of individuals (D4A) predicts the future probability of non-payment by analysing profiles based on consumption and attitudinal habits associated with a geographic location, which allows segmenting the population, thus distinguishing between different types of customers. It also allows you to define the appropriate business strategy and value offer by improving the identification and quantification of the likelihood of default through machine learning techniques applied to both the selection of variables and the identification of customers with uncertain behaviour.

The Delphi for Self Employed (D4SE), on the other hand, is based on the universe of the self-employed professionals and stands out for providing a score specifically created for this segment, which captures the change in behaviour associated with the activity of the self-employed, based on the economic cycle.

Finally, the Delphi for Insurance (D4I) is a unique solution for the insurance industry. From a statistical and actuary's point of view, credit has a real and direct relationship with insurance losses. This Delphi is able to identify customer credit behaviour that is linked to claims experience. In fact, Experian studies have found that more than 80% of consumers with a high claims ratio also exhibit poor credit behaviour.

“These new generation scores incorporate highly significant improvements in terms of coverage, methodology and predictive power, which allow the financial and industrial fields to finance and support the elements of the Spanish manufacturing industry that have the potential to relaunch our economic activity.”, concluded Dionisio Torre Ramos, at Experian.

Learn more about the new generation of risk models with more coverage and predictive capacity thanks to the partnership between Experian and Axesor.

Written by Axesor - an Experian company


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