What are Risk Models and How to Apply Them?

Companies that are within their own operating business, whether completely or only partially, while being exposed to their customers on account of placing goods or by offering services with postponed payment, are neverthelss exposed to a certain credit risk as well.

In order for credit risk to be controlled, it is important to integrate risk management tools into a standard business model.

The company that offers postponed payment, or exposes itself to third parties (customers, partners, and other participants in the business market), needs to conduct the assessment of the risk factor of each individual transaction. This is performed according to the volume which is placed with postponed payment, according to the company’s time ranges (30 days, 60 days, or more), or to the credit rating of the recipient.

Benefits:

  • checking of the solvency of customers, partners, and other third parties
  • determining the price of goods according to the payment method, and to the solvency of customers, partners, and a third party, i.e. the receiver (determining risk premium) reduction of bad receivables and costs of maintaining liquidity
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Although the completed project’s success is at a desirable level, we continue to emphasize the riskiness of outcomes related to any funding.

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