Credit Risk Monitoring: How to Monitor Credit Risk in Real Time

Global, Real-time Credit Risk Data is Critical For The New Economy

In our interactions with 200+ credit leaders globally across Fortune 1000 companies, we observed that credit teams are in dire need to access the latest credit data in real-time to mitigate credit risk.

Credit executives are required to constantly stay on top of customers who are more likely to default. Today, the short-term solution used by most companies is to pull more financial and credit reports, analyze them, and conduct frequent credit reviews. While this might be the right short -term approach, in the long run, performing frequent credit reviews means increased costs in terms of time & resources. This is because credit reports have to be manually extracted from credit agencies like Experian, D&B, and Equifax.

What Is Credit Risk Monitoring?

Credit risk monitoring is the continuous process of tracking changes in a customer’s financial health, payment behavior, credit exposure, and external risk signals to identify emerging risk before it impacts revenue or cash flow. Unlike periodic credit reviews, automated credit risk monitoring gives finance teams ongoing visibility into changing customer risk so they can act early—adjust credit limits, trigger reviews, or intervene before exposure becomes bad debt.

Six-fold Increase in Frequency of Credit Limit and Risk Class Changes

• Credit management firms doubled down on reassessing their customers and categorized them more accurately as their financial circumstances change rapidly.
• Teams began tightening control on extending credit limits. On average, the number of credit limit changes made in a given month increased by 6x.
• Additionally, significant changes in the risk class categories were observed with a 4x increase with the majority of customers falling under high-risk categories.
• 1/3 of credit organizations updated their credit risk metrics on a monthly basis or more frequently.

Fivefold Increase in Number of Order Lockouts/Blocked Orders

• On average, in a given month, the number of orders being blocked increased by 5x.
• To ensure sales didn’t come to a halt, credit teams grew hyper-vigilant, scrutinizing every single order and fulfilling the least risky orders

Twofold Increase in the Frequency of Credit Reviews

• Credit teams also responded by increasing the number of credit reviews that were previously conducted monthly.
• On average, there was a 2x increase in the number of credit reviews performed.

Twofold Increase in Due Diligence in Conducting Credit Reviews

• The amount of time spent specifically on credit reviews for new customer accounts increased by 4x, along with a 35% increase in the time to review a blocked order.
• Credit teams have been spending more time than usual examining customers’ latest financial health and updating their credit ratings. Thus, it has become challenging to conduct credit reviews in the most effective manner.

Twofold Increase in the Need for Latest Credit Data

• In a risk-prone economy with changing customer finances, teams have been forced to rely on credit and financial reports more than ever to ensure the right credit limits were always assigned to the right customers.
• This led to an 89% increase in the number of credit reports pulled by organizations to review customers’ creditworthiness. The average number of financial reports pulled by credit teams also increased by 4x.

Credit Teams Need a Tool That Enables Real-Time Credit Risk Monitoring

Today, credit teams have to spend their valuable time and effort on low-impact manual tasks. These include studying each credit report, identifying the correct data to consider, and then updating each customer’s credit information.

All of this becomes difficult to accomplish without the support of technology. Credit teams should only spend time making credit decisions based on the data gathered with such technology.

Credit departments need a tool that can monitor credit risk in real-time. Such an AI-powered automated credit management solution can help teams avoid all the low-impact tasks that are liable to oversight and human error. This scalable solution gives you:

• Access to unlimited credit reports from 40+ credit agencies and bureaus.
• Monitors all your customers in real-time to track changes to their credit profile, payments profile, filings, and other key parameters.
• Captures and analyzes different risk indicators such as credit agency data, news alerts, payment behaviors, bankruptcy, and court filings.
• Eliminates the need for periodic reviews by giving alerts and suggestions on revised credit terms, all in real-time.

The Huntsman Corporation Formula to 96% Improvement in Periodic Credit Review Timelines for Over 63,000 Global Accounts

Huntsman Corporation is a publicly traded global manufacturer and marketer of differentiated and specialty chemicals.
Credit management was one of the biggest challenges for their A/R department. With paper-based credit applications being faxed to the credit department, onboarding new customers or releasing blocked orders became a lengthy and tedious process at the Huntsman office. Credit reviews were performed with no scoring system in place.

To address these challenges, Huntsman adopted an automated cloud solution that delivers the following:

• Real-time centralized credit management.
• Efficient workflows for automatic credit, group, and opportunity reviews.
• Seamless integration with external agencies with 1-click access along with a fully integrated scoring system.

This resulted in lowering the time taken to conduct each credit review by 96%.

Conclusion

Today, credit leaders realize the importance of having an efficient, practical, and up-to-date credit risk management process. Increasing the number of credit reviews being performed or credit reports being pulled is just a short-term solution and cannot become your organization’s credit strategy. This outlook needs to change quickly and drastically if working capital optimization is a priority. Your credit management process needs a reliable and long-term solution to ensure unpredictable incidents and factors do not deter your business.

The utmost responsibility of directors and managers of credit is to guide their organizations on the right path to ensure intelligent real-time credit risk monitoring, preventing bad debt and enabling profitable growth.

This requires transitioning from traditional methods of operation to more futuristic and scalable digital solutions. Additionally, having global visibility across all A/R operations with the help of a platform that consolidates all the data from internal teams helps break silos and contribute to faster revenue growth.

How HighRadius Credit Risk Software Helps Improve Credit Risk Assessment

HighRadius credit management software helps finance teams move from periodic, spreadsheet-driven credit reviews to connected, AI-powered credit decisioning. The platform combines customer payment behavior, external credit intelligence, financial data, configurable scoring, automated approvals, and continuous risk monitoring to give teams a clearer view of changing customer risk. For mid-market companies scaling with lean credit teams, this means automating routine decisions and reducing manual reviews without adding headcount. For global enterprises, it brings credit risk visibility, policy governance, and decisioning across complex customer portfolios, entities, and ERP environments. 

• With real-time credit risk analysis software and credit decisioning software, you can receive alerts for any changes in your customers’ credit profile and make data-driven credit decisions from unlimited credit reports. Our software integrates with your ERP system and can start monitoring your customers in just 30 days.
• We offer configurable credit scoring software and approval workflows that can be customized based on geography, customer segments, business units, and other factors. You can fast-track credit approvals through complex corporate hierarchies, making the credit application process more efficient and streamlined.
• Our highly configurable online credit application allows you to onboard customers across the globe with multi-language, customized credit applications embedded on your website. You can automatically capture financials, personal guarantees, and check bank references, reducing the need for manual data entry.
• Our software also automatically extracts credit data from over 40+ global and local agencies, including credit ratings, financials, and credit insurance information. You can configure the auto-extracted data in your preferred currency, making it easier to analyze and interpret.
• With AI-based blocked order management, you can auto-predict blocked orders based on the customers’ credit limit utilization and payment history. You can leverage AI-based release or partial payment recommendations for faster credit decisions, reducing the need for manual intervention.