Five essentials for your credit risk transformation project
Credit teams not only manage bad debt but also handle cost savings, customer experience, fraud prevention and improving the process of onboarding new customers. The new and added demand comes at a tough time with volatile costs, political uncertainty and increasing operational complexity affecting day-to-day risk. It’s no wonder that finance professionals are turning to digital solutions to help build resilience.
It’s a high priority for many businesses, with 45% listing ‘automation and systems’ as the area of their credit function they’re most looking to improve in the next year. But how can you ensure a digital transformation will be a success? Here are five non-negotiables to help you get there
1. Define success and keep it measurable
Digital innovation is much more than a risk control exercise; it’s a business enabler too. Before embarking on your digital transformation project, it’s important to ask some key questions: What are my current capabilities? What would I like my capabilities to be? What are the key drivers behind the project?
Improving cashflow, preventing fraud and reducing days sales outstanding (DSO) can contribute to growing your business, so why not set goals based on these areas?
KPIs can cover anything from bad debt, data quality, customer satisfaction and more. Whatever targets you choose, it’s important to revisit them regularly post-transformation to continually optimise ways of working and climb the credit maturity curve.
2. Match and enhance your data
There’s no such thing as a successful digital transformation project without good quality data. And it all starts with data hygiene.
A recent D&B poll found that 11% of businesses see data quality as their biggest challenge in credit risk right now and that’s outside of a transformation project.
Migrating messy data from one system to a new one can feel like pushing square pegs into round holes. For the smoothest possible process, credit teams should check for missing data, badly formatted data or records with a lack of data history.
‘Hygiening’ can be tricky. But with tools like Dun & Bradstreet’s Master Data service, finance professionals can cleanse existing data and enrich it too, with the latest available information to produce more complete records.
3. Don’t just replicate what you already do
If you do things the same way, you’re not just standing still — you’re moving backwards. Rather than replicating inefficient ways of working, finance professionals should use a transformation project to build leaner processes and move resource to more meaningful tasks elsewhere.
The start of a digital transformation project is the perfect time to evaluate workflows. Perhaps there’s a lack of coordination between credit and customer service teams, or outdated policies are preventing you from finding suitable clients. Existing processes are often shaped by limitations no longer at play, so building new ones can be a freeing exercise.
Credit teams should treat a transformation as a blank canvas, where simple processes, aligning with new systems and meeting customer expectations take priority. Running old and new systems in parallel can also help to map decision making and optimise policies.
4. Choose technology that works for your credit function
With so many businesses undergoing their own credit risk transformation it’s important to think about ‘why’. Why are competitors investing in digital acceleration and more importantly, why should you? Aim to equip your team with tools designed for decisioning from day one. To avoid a common mistake made by other businesses, plan to make regular updates too.
IT departments may push for complex or redundant features, but the perfect solution should be built around your business’ commercial needs, it’s a source of frustration for many credit functions. In fact, 46% of businesses surveyed by Dun & Bradstreet say ‘aligning credit with commercial goals’ is their biggest credit risk challenge.
A logical place to start is with your everyday processes. Once you’ve evaluated them and understand what improvements are needed, this information can be used to push back on the bells and whistles that may complicate a new system. Tools should automate repetitive tasks, integrate with existing systems and scale with your company without becoming overly complex.
5. Don’t underestimate time, people and training
Software may roll out quickly, but people need time to adjust. A thorough digital transformation project considers what’s needed before, during and after implementing new systems.
Rather than thinking of a digital acceleration as large-scale project, it may be helpful to think about next steps and quick wins.
To start, you’ll need stakeholder buy-in. That means defining roles and responsibilities, managing expectations to offset future complications and empowering teams to lead improvements. By encouraging stakeholders to make links between credit KPIs and wider business goals, they’re more likely to see the value of new tools.
Training is a must and will lead to a smooth launch but even the most effective tools can stall without ongoing support. Partnering with a third-party could make this process significantly easier.
