New Failure Risk Score FAQs

Frequently asked questions

What has changed?

We have rebuilt our Failure Risk Score to include new datasets and improve the use of existing data. We have also optimised the scoring algorithm for various entity types (companies, businesses, trusts, etc.) as well as location data throughout Australia and New Zealand.

When will the score change?

We will provide an update on timing for the score change shortly.

Why have you changed the score?

As market dynamics and economic circumstances change, our scores and scoring methodology also need to change to make sure we are getting the best assessment and outcome possible with current information.

With the expansion of data available on unincorporated entities, comprehensive reporting for consumers, and advances for trade and payment data, we have improved the score to utilise these data assets to maximise value.

Are you using new datasets and how do they enhance the score?

Our new score will include:

• New score model segmentation with improved coverage of unincorporated entities
• Use of financial data when available
• Information on parents and subsidiaries factored into the score
• New score ranges for risk band with a better distribution of failure risk
• Use of industry and geographic indices in the score reflecting economic changes

In addition to updating the scoring calculation, the new score will have the option to include the director’s credit scores (consent from the director may be required), to give a more complete picture of risk.

Do you take industry risk into account?

Yes, we use a Dynamic Industry Risk Index to adjust the score for each entity based on the industry that they belong to and how the risk of that industry changes over time.

How is the new score better?

These changes help deliver best-in-market predictive performance with a Gini index of 70 points or better for key segments, which is an improvement of up to 25% in predictive performance.

How does this new score help me make better decisions?

The new score helps you identify risk sooner than the legacy score. Time is paramount when it comes to risk management, meaning the sooner you become aware of something, the more time you have to address it and prepare your response. In a recent case study, we found that the new score identified high risk prior to default 60% of the time, which goes up to 67% when used in conjunction with the Late Payment Risk Score. This is almost double that of the legacy score.

How will the new score help me avoid bad debts and write-offs?

Using a more predictive score will help you make better decisions during onboarding by identifying customers who are more likely to default or pay you late. The new score highlights changes in risk for current customers as an early warning sign when you monitor the scores of your portfolio through illion.

Can the new score help me identify growth opportunities?

Yes. Not only does the new score do a better job of identifying high-risk customers, but it also does a much better job of uncovering low-risk customers and distributes them in the low to minimal risk categories. This enables you to better segment which relationships you want to grow, based on your risk appetite.

Have the risk grades/bands changed?

No, we still assign risk grades from minimal to severe, same as the old score. However, the mapping from score to risk grade is changing . The actual risk grade assigned to an individual entity under the new score may change when compared with the old one. For example a company that was considered low risk under the old score may now be considered average risk for the new one. This means that you may want to adjust your risk policy for underwriting and account approvals under the new score models.

If you would like to know more or discuss the changes with our team, please contact us using the form below.