Category: Credit Limit Methodologies

Customized Credit Risk Management: Fintech, analytics and big data

Customized Credit Risk Management: Fintech, analytics and big data.


What is Credit Limit: it is the maximum exposure that a company is willing to support in a business relationship with a given holding during the year.


The recent economic and industrial crisis has spread among companies greater sensitivity in commercial risk management.

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modeFinance offers credit risk management services to businesses, by evaluating any enterprise in the world. The core of this service relies in the MORE Credit Limit, as it provides an objective and standard limit strongly linked to the creditworthiness of the company analyzed.


In addition to this, and thanks to the expertise acquired, modeFinance has developed and applied an even more effective service for its customers: the MORE Credit Limit Custom. Combining company’s private information to the algorithmic MORE evaluation, modeFinance ensures a more personalized and objective assessment of Credit Limits, so that these are perfectly client-tailored and incorporate company’s private information.


This additional specificity level in the Credit Limit services is primarily intended for industrial and commercial companies.

MORE Credit Limit

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Starting from the MORE, Multi Objective Rating Evaluation, modeFinance developed the MORE Credit Limit: based on a massive sectoral- country-size based statistical analysis, modeFinance has defined the estimated costs that a firm supports for its major suppliers. By correcting this numbers with parameters such as credit rating, cash cycle, duration of activity, etc. modeFinance defines a recommended Credit Limit for each company.


The MORE Credit Limit standard strongly depends on the company’s creditworthiness, but it is based exclusively on financial statements and on the assumption that the company is a strategic supplier for its customers.modeFinance offers the customization of these standard Credit Limit, integrating them with company’s private information (such as, for example, the historical trade relations that the company has with its customers and its business policy on the limits’ assessment).

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The Credit Limit Custom brings considerable advantages to the company:

  • The Credit Limit is no more subjective, it comes from objective procedures hence it is standard, still heavily dependent on each customer’s creditworthiness.
  • The model considers the strategic importance of the supplier to the customer, and also vice versa.
  • Although standardized, the Credit Limit Custom is in line with company’s policies and previous credit limit evaluations.

The Credit Limit customization process, considering each and any of the above variables, aligns the MORE Credit Limit standard to the historical Credit Limit that the company assigns to each customer. This approach will ensure that the overall exposure of the company (hence its working capital) won’t be upset.

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modeFinance analyzes this private information through an intensive big data and machine learning statistical process, then merging the results obtained from private data to public data, in order to develop a non-linear model which lets mF create a custom Credit Limit. A real massive Big Data analysis.Before being released, this model is thoroughly tested and discussed with the client.modeFinance adds an even greater value: the Credit Limit Custom can be updated on a daily basis, through customer’s private data. The MORE Credit Limit Custom evolves over time, according to updated invoices data.


The MORE Credit Limit Custom is available for all those companies (groups) that want to refine and standardize the Credit Limit definition throughout their entire portfolio.


modeFinance has also developed a Credit Limit model for companies that have no public financial data, built solely on a qualitative analysis basys (the non-Financial Analysis, which modeFinance already adopts for Scoring). The first non-Financial Credit Limit Custom have already been developed to some large companies, by integrating modeFinance's qualitative score to their private data.

Safety

The model is usually integrated into the customer’s IT systems.
modeFinance’s own physical servers are safe, and the data is protected by strict https protocols.
All companies’ confidential information are signed under an NDA.

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