A one-time check of a counterparty before concluding a contract does not make it possible to fully control commercial risks: a company’s financial condition, its owners, management and payment discipline may change already in the course of cooperation. Therefore, Ukrainian businesses should move from one-time checks to continuous monitoring of key partners.
International business information systems, including Dun & Bradstreet (D&B), make it possible not only to obtain information about a company before starting cooperation, but also to track changes in its profile.
According to Maksym Urakin, Director of Development and Marketing at Interfax-Ukraine and head of the D&B-Interfax-Ukraine business unit, monitoring is particularly important for companies to which a Ukrainian supplier regularly provides deferred payment terms or with which a significant volume of turnover is associated.
“A counterparty may have looked absolutely reliable at the time the contract was signed, but six months later the situation may be different. The company’s debt burden may increase, its owner or management may change, or its payment discipline may deteriorate. If the supplier learns about this only after an overdue payment, managing the risk becomes significantly more difficult,” Urakin noted.
International D&B databases are used to track changes in corporate data and assess business risks. Depending on the information available for a particular jurisdiction, a user can analyze changes in an enterprise’s financial condition, its corporate structure and other characteristics.
This approach is particularly relevant for companies with a large number of customers and suppliers. With hundreds or thousands of counterparties, regularly checking each of them manually is practically impossible.
“Businesses need to identify critically important partners. The greater a counterparty’s debt to the company, or the more strongly the supply chain depends on it, the higher the frequency and depth of monitoring should be,” Urakin believes.
A change in risk indicators does not necessarily require the immediate termination of cooperation. It may serve as a signal to revise the credit limit, shorten the payment deferral period, request additional collateral or conduct a more in-depth check.
A separate area is supplier monitoring. Financial problems at a raw-material producer, carrier or another critically important partner can lead to a halt in supplies even when the Ukrainian company’s own financial position remains stable.
According to Experts Club, Ukrainian enterprises should divide counterparties at least according to their level of financial significance and the potential damage from default or termination of supplies, while the most critical partners should be monitored continuously.
“In a modern risk management system, the question should be not only ‘whom did we check before concluding the contract,’ but also ‘what has changed with our largest counterparties since the check.’ It is monitoring that makes it possible to identify a problem before it turns into a direct financial loss,” Urakin emphasized.
Dun & Bradstreet is an international provider of business data and analytical solutions whose history began in 1841. The company provides tools for business identification, counterparty checks, assessment of credit and commercial risks, compliance, supply chain management and work with corporate data.
The official representative of Dun & Bradstreet in Ukraine is the Interfax-Ukraine news agency. The specialized D&B-Interfax-Ukraine unit helps Ukrainian companies work with international business data, check foreign partners and obtain a D-U-N-S Number.
