CCR2 International Collections


Well what do you know?


To make progress in credit assessment, you first need to understand your own company’s motivations and risk appetite


Guy Thompson Credit risk manager EMEA & China, SunChemical Group Guy.Thompson @sunchemical.com


I know, I know, a good part of the Amazon rainforest has already been laid to waste to provide reams of paper devoted to KYC – Know Your Customer – so why am I writing yet another piece on the subject? Well, apart from the fact the editor asked me to write something, I also feel strongly that we should keep up to date on what is going on in the world so as to be able to offer our businesses the best and most up-to-date information. In this Brexit-just-around-the corner-but-


probably-some-way-off-maybe era, many businesses are thinking about exporting to countries that are not in the EU, but are, perhaps, unaware of the underlying complexities that can arise.


Know yourself Actually, before we do that, I think it is important, before trying to get to know your customer, that you should get to know yourself! No green leotards required here, no meditation and only appropriate levels of herbal tea – what I mean is do you know what your business is trying to achieve and are you working along those same lines, or is what you are doing at cross-purposes with the goals of your business? Insurance underwriters and bankers would


call this ‘risk appetite’ and it seems a fine phrase for me. How hungry is your company to do business with a customer? How committed are you to breaking into this market or sector? How crucial is it to deliver the stated operating income goals set by leadership and stakeholders? If you do not know the answers to these questions, how can you play your part in achieving the goals? If the CEO has given the sales force the rallying cry of getting out there and getting


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volume, volume, volume, how does your highly risk-averse credit strategy help? I think that one of the reasons that we, in


the credit world, are so often in conflict with our colleagues in the commercial side of the business, is that we are often working on different strategies and are constantly being frustrated from achieving our objectives by the downright obstinacy of those on ‘the Dark Side’. It may seem that I am stating the obvious


(or need to be placed in a strait-jacket) but would all of our lives not be better if we understood what it was that our company was trying to achieve and how we could best help get there?


Really knowing Once we have a strategy that supports the business goals, we are ready for our KYC lesson. When I started out in this business 30 years ago (yes, I was a child-prodigy!) KYC was pretty straightforward: sales rep fills out the customer application form, we would take up the trade references and might ask for a bank reference. Once we had the ‘deemed fit for purpose’ or whatever it was, that was that, limit set and quite often we would never look at that customer from a credit perspective again! If the customer was ‘overseas’, we might


just get in touch with a credit reference agency (CRA) to see what they might know about them, but, given the cost, that was definitely a one-off purchase. As time went by, there were more players


in the CRA pool. The new-fangled internet eventually brought this data to our screens at an instant; then we had the possibility of pulling this data into our ERP systems and


www.CCRMagazine.co.uk


monitoring meant we always had the most up-to-date data available for our customers. What more could we possibly need? The word ‘compliance’ enters our


vocabulary at this point. It is no longer enough that we understand our customers’ creditworthiness so as to assess their financial risk to our business, it is also required of us that we know our customers (and suppliers actually) intimately, that we know who the directors, owners or major shareholders are and whether or not they are deemed to be people with whom we should be doing business at all. We need to know the reputational risk


these entities and people bring with them when they want to buy from us. Getting it wrong and selling to the wrong sort of people can bring huge financial penalties to your business, and send your bosses to jail. Wow! That one word ‘compliance’ carries


a lot of extra weight now – but how do we go about being compliant? Where are the information sources to help us? To ensure compliance, we need to start


doing some third-party screening – not just for new customers, but also your back- catalogue too, not just your customers, but


We need to know the reputational risk these entities and people bring with them when they want to buy from us


December 2017


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