Power of Portfolio Analytics and the New 4C's of Credit: Consistency, Compliance, Consultancy & Creativity, The

Credit & Financial Management Review, 2004 by Balduino, William F

Portfolio analytics also enable the use of family tree linkages that allow you to identify customers with related business objectives or locations that mirror your physical manufacturing capabilities. You can also append economic data that shows the historic growth or decline of certain industries and what is forecasted to happen with these sectors. This compass will significantly enhance your existing profiles. It is another variable in your review and when coupled with risk and profitability factors you've built a sound, insightful, comprehensive and detailed portfolio diagnostic.

Another example of the many possibilities that proactive portfolio management creates is the ability to append product dependency and demand estimation-marketing models to your risk management portfolio. The outputs from these models can provide more insight about the strength of the relationship between your product/service and your customer's final product for sale. This along with the total consumption estimates provides you with a more strategic view of your portfolio. Whether performed on existing customers or for the prospect universe you've identified, you'll now understand much more about your portfolio and what might drive it. You'll know exactly who you are selling to and their relationships in your account base. You'll also have a better idea of related concerns or locations you've missed; the associated risk and the credit limits that can be expected; the propensity to buy and how much; whether or not it is a growth industry; and, the impact on your bottom line should you capture all these opportunities.

Here's the ROI. Using the strength of portfolio analysis - whether for operational reasons, strategic purposes, or both - a company that seizes the power of portfolio analytical tools and adjusts their behavior by one percent, one half of one percent or even a quarter of one percent will significantly alter their company's bottom line performance. Clearly, such diligence can easily pay for itself in a very short time.

Information is power. Progressive corporations that leverage internal information, combine it with appropriate external data and understand the power that this insight provides can, at a minimum engage in more informed and intelligent dialogue with customers and internal resources to drive the most profitable activities.

Finally, risk management practitioners need to own, lead and drive internal change. Essentially, they need to personally invest in creating an enhanced value proposition for both the company and themselves. The Risk Management discipline has moved from basic order management activities to more strategic customer level credit management and will significantly prosper when it applies the substantial operational and strategic advantages presented by portfolio analytics.

Bill is Leader - Risk Management Practices for Dun & Bradstreet. He is responsible for establishing the internal vision that determines the current and future company position in the risk management space. He is also a former credit management practitioner with more than 25 years of credit management experience with Fortune 500 Corporations in multiple industries.