It seems like information overload is creating the potential for disruption in credit risk analysis. Every day, we are bombarded with information from new sources presenting us with a 180º reversal from the challenges we faced 20 years ago. Back then, we were constantly searching for more information to validate our analysis. Today, the challenge is weeding out all the irrelevant information that can cloud judgement. It’s all too easy to wade through masses of information and lean in favour of what you want the outcome to be – but that can come back and haunt you.
This issue will only grow larger as the breadth of information, both structured and unstructured, continues to grow exponentially. And, with this, comes growth in information that does not add significant value to a credit decision. At least not when looked at in isolation. There is a mosaic that most of us do not have the time or expertise to decipher, within which seemingly irrelevant information can become credible indications that a business is becoming a payment risk. In addition to those pieces of the mosaic specifically related to a company or industry, there are many variables in trade that can influence this, with some
very high-profile international trade issues poised to shift economic growth into reverse.
For many, the smart way of handling this is to leave the assessment of a buyer to a credit insurer. The credit insurance industry is a good example of an industry that is embracing modern technology to improve the ability of businesses to make fast decisions about whether to offer credit to a buyer. Technology is enabling us to process large amounts of information online. Through the use of artificial intelligence, we are able to source information from all around the world, quickly read and process it, and then focus on the information that is relevant and will provide us with value in our assessments of a buyer’s probability of paying. More importantly, for a company to do this on its own it would take significant time and expense. The credit insurer can, in most cases, do this immediately.
Daniel Köhler is specializing as editor at Cryptocurrencies at Financial Magazine . Has a degree in mathematics science and a master’s in management from the London School of Economics. Initially working as a TV journalist, he then became an editor at several financial publications. He is passionate about new technology and has the potential to completely see new ways in the world of cryptocurrencies.