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Understanding credit risks: Insights to protect your business from late payments

by | Dec 14, 2023 | 0 comments

In the financial world, staying informed about industry trends and potential risks is crucial for success.

In a recent “Lunch & Learn” webinar with Louis Tsang, Head of Data and Analytics at illion, and AJ Singh, CEO & Co-founder at ezyCollect, discussed equipping businesses with the knowledge to navigate credit risks effectively.

Here’s a breakdown of the key insights from the webinar:

Macro-level industry risks

Identifying sectors experiencing fluctuations in credit risk offers insights into rising and declining industries. Understanding macro-level industry risks is crucial for businesses aiming to stay ahead of industry trends and potential risks that may impact their financial stability.

Assessing customer risks

There are specific customer risks within different industries associated with these risks:

  1. Consumer lending – the extension of credit to individuals for personal needs, encompassing products like personal loans and credit cards. Major players in this sector include banks, credit unions, online lenders, and fintech companies. The landscape is influenced by factors such as interest rates, economic conditions, regulatory changes, and technological advancements. Challenges in consumer lending include managing rising default rates, regulatory scrutiny, and the imperative for effective risk management.

2. Company insolvencies – occur when businesses can’t meet their financial obligations. Causes range from poor financial management and economic downturns to high debt levels and intense market competition. The consequences of insolvencies are far-reaching, leading to job losses, disrupted supply chains, and contributing to economic downturns.

3. Trade late payments – involve buyers delaying payments to suppliers beyond agreed terms. This can be due to cash flow issues, disputes, or negotiation tactics. The consequences include financial strain on suppliers, strained relationships, and disruptions in the smooth functioning of supply chains.

 

assessment of customer risks

Micro-level insights

Provide a nuanced understanding of segment-specific credit risk trends, enabling businesses to tailor risk mitigation strategies, make informed and precise decisions, detect emerging risks early, and strategically navigate industry challenges for enhanced financial planning and resilience.

Practical application of data

illion’s data can help leverage making informed business decisions— from identifying high-risk customers to implementing proactive measures. Businesses could visualize and monitor late payments and failure risks in real-time. Setting up alerts to receive timely notifications about changes in customer risk profiles is important.

data application

Conclusion

From macro-level industry trends to micro-level insights and practical applications, it is important to understand and navigate credit risks effectively and safeguard their businesses. illion’s commitment to empowering businesses with data-driven solutions is a valuable resource for anyone navigating the complex landscape of credit risks.

Let’s connect to unlock how our accounts receivable automation software drives seamless payments, boosting customer satisfaction and fueling your business growth. 

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