The Role of the Credit Risk Manager

Before a business chooses to provide credit to new account it is important that they determine the creditworthiness of their partners through tracking and evaluating. If mistakes are made during this process then credit can be extended to a business that results in financially shaky contracts or accounts that may not be able to repay their bills. The companies can even potentially disappear overnight. Diligence in this process is even more important in today's economy when new accounts are often located on the other side of the world.

When it comes to determining the creditworthiness of a company the responsibility lies in the credit risk manager and their ability to monitor and assess potential accounts, business partners and clients.

The CRM (credit risk manager) often relies on a business credit report when making their decision. A business credit report provides an accurate and objective look at information that can help companies make an informed business decision about partners and clients. Often a business credit report will include important information such as the following:

Banking, insurance and leasing information
Banking, trade and collection history
Business background information
Corporate registration and contact information
Credit inquiries made in the last nine months
Credit risk factors
Financial information including balance sheets
In-depth credit history
Key management personnel
Major shareholders
Past liens, judgments, business registrations and bankruptcies
Predicted payment behavior
Standard and Poor's financial information
Uniform Commercial Code (UCC) filings
Through the business credit report, the credit risk manager determines if a company should do business with someone and knows what can be expected based on past practices. This makes it easier to determine the risk of extending credit or to offer credit increases to customers.
What a Credit Risk Manager Does

In some companies, the CRM is a stand-alone position within the financial department. Within a small business, the CRM may also be done by the accountant or the business owner themselves.

In today's economic crisis the role of the credit risk manager is extremely important. Today's market is volatile and accounts that are good in one month can easily find themselves in trouble the next month. It is important that the CRM keep up-to-date on the creditworthiness of a company's accounts, business partners and clients.

To do this the CRM needs to do five things continually:

Determine if an account's credit is overextended
Discover any changes to the account's financial status
Evaluate the choice between two possible vendors based on their credit history
Know when an important account gets behind on payments
Learn if a key supplier is planning to go out of business
In addition to keeping up-to-date on these responsibilities, the credit risk manager also needs to maintain the integrity of their own company profile. Just as with a personal credit report, accuracy is vital and needs to be routinely checked for any mistakes. Even the company that is providing credit requires a good credit rating from a bank, supplier or vendor. Without a good credit rating, it is impossible to have a strong and close business relationship, especially when the other company may be located on the other side of the world.
Patricia Bakers works for Credit Risk Manager, the business credit reports service powered by Graydon, a company with a history of more than 120 years in credit risk management.

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