Macroeconomics, geopolitics, insolvency or bankruptcies: Disruption can come out of the blue! One wrong commercial decision can impact seriously your business. But what if you had a simple way to assess financial health of your counterparts at a glance? Let’s dive into Urba360 Score and how it can bring confidence to every decision and help you trade smarter.
Disruption and early signals: what should I pay attention to?
Geopolitical and economic impacts
Ukraine-Russia, trade wars, US tariffs, Israel-Hamas war… If we look at disruption in supply chains, we think typically of major events. So, whether it's the invasion of Ukraine, the Ever-Given cargo ship blocking the Suez Canal, or whether it is a climate event, now we are seeing risk more prevalent in all markets and major economies particularly.
Impact of insolvencies
France, Germany, Italy, the Netherlands in the EU, but also the United States, the United Kingdom, Japan and Brazil elsewhere in the world: insolvencies are increasing everywhere and are exceeding pre-pandemic levels (2019). Actually, despite the headlines, the continuous main cause of supply chain disruption is business failure, the headline event can indeed be the trigger point.
Companies are not standalone entities, they have many connections in trading partners, both domestically and globally – clients and suppliers. A supply chain is the interconnection of these links that transcend the direct supply but grown into the secondary and beyond tiers of suppliers.
But don't get fooled: it may not be a company that's in your primary supply chain that poses a risk! Risk comes from further up the supply chain tiers too. So you should monitor your suppliers not just at the point of onboarding, but also through the life cycle of that supply chain, since it is a critical component of your business and your own solvency.
To provide you with this kind of early warnings, our score is targeted to represent the company probability of default over the next 12 months, with a unified assessment all over the world. One of the main expertise of Coface is to detect and assess companies within your supply chain that are very weak and what we class from a probability of default perspective are as high risk. Our analyzes do not only focus on single parts of the supply chain, but also on interactions between companies in the chain. We assess your buyers, considering them as an ecosystem where companies are directly or indirectly connected to each other’s. That’s how we can warn you as early as possible of any weaknesses to come. And that gives you time to react!
As an airplane, your business needs to be in the air as long as possible. But insolvencies and any kind of impact can really ground that plane. Ultimately, if you don’t have the time to react, it can impact your business quite severely.
Andrew Share, Group Engineering Solutions Director.
Watch out (also!) your own sector
When it comes to connection within the same sector, every company thinks that they know perfectly their own sector. But this is not true. Insolvencies are not only cross-sector, but also occur within the same sector, indicating internal weakness. Our recent economic studies underlined that many claims are from the same sectors. It means that, in addition to your different levels of suppliers, it is crucial to keep an eye on your entire sector!
The second point is that some industries show systemic vulnerabilities that amplify risk. And what happens is that, if you look at the single company at your supplier, it may not be at risk, but what you see is that all the connection from and into this supplier are becoming weak and are deflating. This is a warning signal that you must analyze and monitor!
When it comes to measure the risk today, we need to focus moreover on weak signals rather than hard signals. After the pandemics, all hard signals have been diluted over time, but weak signals became stronger!
Matteo Gatti, Head of Data Strategy, Mediterranean and Africa Region.
Early warnings and predictability: deploy the Urba360 radar!
A powerful risk management platform, Urba360 provides a 360-view of your entire business-partner portfolio. You access predictive, prescriptive and descriptive insights on companies worldwide, allowing you to make strategic decisions to mitigate risk and drive future growth.
- Score: it reflects the probability of default over a 12-month period. All companies are assessed using a standardized score from 0 to 10, so you can adopt a consistent approach on a global scale.
- Credit opinion: Access expert credit opinions formulated by the Coface team of trade-credit experts. Recommendations take into account current financial performance, historical data, future forecasts and insurance-claim records.
- Financial ratios: 24 financial ratios available to understand how a company’s financial performance compares to other businesses in their peer group. The ratio is calculated using turnover, shareholders’ equity, fixed assets, liabilities and financial results
- Late payment index Evaluate the potential risk of future non-payment of your prospects and current business partners. You have the up-to-date insight into payment behavior you need to inform decision-making and risk management
- Country risk assessments: Understand the relative risk presented by an entire country’s businesses. The assessment is calculated using macroeconomic, financial and political data, reflecting the average credit risk across the country.
- Sector risk assessment: Access unique risk assessments across 13 major sectors, based on the evolution of five financial indicators: revenue, profitability, net-debt ratio, cash flow and confidential claims information
Watch our dedicated webinar below to learn more about:
- What’s behind Urba360’s score and how it’s calculated
- How to interpret and apply it in real-life scenarios
- A live demo to see the Score in action
