Risk Predictor Score Methodology

The Risk Predictor Score is based on a scale of 0 to 10, where 0 represents a higher risk and 10 lower risk. Developed using advanced statistical techniques and available data from D&B’s information database, the Score predicts the probability of business failure (i.e. going out of business) within the next 12 months.

* The Risk Predictor Score Probability Table measures the average risk of business closure based on the score development sample. When using the Score to make individual applicant decisions, a customized version of this table, based on analysis of the Score against your customer portfolio, is recommended.

Key Drivers and average weight in the Risk Predictor Score include the following :

Business Demographics : Employee Size Industry Legal Structure Business Age	Payment Information : Trade Experiences Slow Payment Maximum High Credit Paydex Collection Amount
Financial Information : Net Worth Turnover Current Ratio Debt Ratio Profit Margins	Public Record Information : High Court Records District Court Records

Risk Predictor Score Application

The Risk Predictor Score can provide you with a quick assessment of a business's risk standing and when used together with other information, can help you make a more informed business decision. Applications of the Risk Predictor Score can include using it to:

• Assess new credit applications or new vendors, or
• Monitor existing accounts for credit limit adjustments or determine account receivable collection activity or track suppliers stability trends

Below is a sample decision matrix to apply the D&B Risk Predictor Score to new credit assessments:

NEW CREDIT ASSESSMENT APPLICATION

Low Risk Score	May proceed to process applicant quickly with minimal or no manual review depending on the extent of score validation analysis. All credit limits should be based on applicant's ability.
Medium Risk Score	Recommend a manual review of the applicant / or adjusting your credit terms based on applicant's capacity, your internal credit policy and risk tolerance.
High Risk Score	Requires thorough manual review of potential decline, or approval based on up front cash basis depending on applicant's capacity, your internal credit policy and risk tolerance.

The above illustration assumes that the credit grantor has no prior history or experience with the new applicant and is using the D&B Risk Predictor Score in combination with other information including internal credit application, other D&B data, and sales channel input. The D&B Risk Predictor Score values within each level should be based on, and defined by, the analysis of the D&B Risk Predictor Score against your customer account portfolio to determine the optimal score ranges.

Below is a sample decision matrix to apply the D&B Risk Predictor Score to monitor existing customers for credit limit adjustments and receivable management follow up:

MONITOR EXISTING CUSTOMERS APPLICATION

	Low Risk	Medium Risk	High Risk
High Existing Credit Limit*	Revise to very high limit Proactively target for upselling opportunities	Maintain high limit (no adjustments) Monitor on regular basis for upward or downward score trend	Adjust to lower credit limit Monitor closely for upward or downward score trend
Medium Existing Credit Limit*	Maintain medium limit or revise to high limit Proactively target for upselling opportunities	Maintain medium limit (no adjustments) Monitor on regular basis for upward or downward score trend	Adjust to lower credit limit Monitor closely for upward or downward score trend
Low Existing Credit Limit*	Maintain low limit, or revise to medium limit based on capacity	Maintain low limit Monitor on regular basis for upward or downward score trend	Monitor closely for upward or downward score trend Consider cash terms and the receivable management option

The above illustration assumes that there are 3 levels of credit limit ranges for your existing customers from small to medium to large, and that these limits are mapped to 3 levels of the D&B Risk Predictor Score values from low risk to medium to high. The D&B Risk Predictor Score values within each level should be based on, and defined by, the analysis of the D&B Risk Predictor Score against your customer account portfolio to determine the optimal score ranges.

* Assumes credit limit range has been developed from existing understanding of customer's capacity