Report on the most popular risk management tools among Spanish Companies

A total of 23.4% of companies control client risk mainly through commercial or financial reports on their clients, provided by specialised external suppliers·

Some 12.3% of companies use credit insurance as their first option, which combines the possibility of a default risk appraisal with compensation and recovery

Some 60.3% of companies use an external tool as the basis for their commercial risk management.This is one of the main conclusions reached by the working group set up within the Linkedin Delinquency and Default Group, which collected the opinions of more than 300 professionals related to delinquency control and default risk in different sized companies in different sectors.

According to the results of the study, 23.4% of companies choose commercial or financial reports on their clients first, supplied by specialist external suppliers. These types of very reasonably priced reports provide up to date information filed with public registries, access to financial data and information on the company's activity levels, their influence in their geographical area, stock levels, client portfolios, suppliers, and the banks which they use or default appraisal forecasts.



The second most valued external service, used by 12.3% as their first option, is credit insurance. Credit insurers, particularly those integrated in a global operator, have developed significant capacity to appraise default risk, since this is what they insure, with constant communication about extensions, delays and defaults, all of which provides dynamic and real time data on companies' payment performance. In the case of default, their evaluations are covered by an insurance that usually also includes recovery services.

Confirming and factoring services and employing an external recovery service complete the external strategies used by companies to fight delinquency.

A total of 35.7% of companies use internal tools for default risk control. Another 22.8% analyse their clients based on their own information, which includes the history of their relationship and its evolution. Only 10.8% of companies have developed forecasting models to appraise the possibilities of default in the coming months based on their own information. Self-insurance, consisting of making provisions for default is the first of option of 2.1% of companies.

Finally, 3.9% of companies admit that they do not have any clear strategy to control delinquency.

There is a wide range of solutions to deal with the problem of delinquency. Although the study seeks to clarify the main strategies used by companies, it only shows their first option. In practice, almost all companies usually combine several of these, since they are complementary tools.