HomeRisk Analysis, Credit and Risk Gauge Reports

Risk Analysis, Credit and Risk Gauge Reports

What is Ageing Analysis?
Ageing analysis is a way to categorize and track outstanding invoices based on how long they’ve been unpaid (for AR) or unpaid bills (for AP). It’s a tool used to monitor cash flow, credit risk, and payment patterns.

Alright, let’s dive into it — Risk Analysis, Credit Reports, and Risk Gauge Reports — all connected but a bit different. Here’s a simple breakdown:

1. Risk Analysis (General)

  • Definition: It’s the process of identifying, assessing, and prioritizing risks that could affect a company, project, or investment.
  • Goal: Understand what could go wrong and plan how to manage or minimize the damage.
  • Typical Types of Risks:
    • Financial Risk: Credit risk, liquidity risk, market risk.
    • Operational Risk: Failures in internal processes.
    • Strategic Risk: Bad business decisions or changes in market conditions.
    • Compliance Risk: Legal or regulatory issues.
  • Tools: Sensitivity analysis, scenario analysis, stress testing, Monte Carlo simulations.

🔵 2. Credit Reports

  • Focus: Specifically on the creditworthiness of a customer, company, or individual.
  • What’s in a Credit Report?
    • Credit history (loans, repayments)
    • Outstanding debts
    • Payment behavior (on time, late, default)
    • Credit scores (for individuals/businesses)
    • Public records (like bankruptcies or liens)
  • Purpose: To decide whether to lend money, extend payment terms, or partner with a company.

👉 Example:
If you’re selling on credit terms (say, 60 days), you’d pull a credit report to check if the customer is reliable.

🔵 3. Risk Gauge Reports

  • Definition: A summary report that scores or categorizes risk levels across a portfolio (like a list of customers, vendors, or investments).
  • Usually includes:
    • A rating system (like low, medium, high risk)
    • Visual gauges (think of a speedometer graphic)
    • Key risk indicators (KRIs) such as debt-to-income ratio, overdue payments, or industry risk
    • Recommended actions (tighten credit limits, monitor closely, etc.)

👉 Example:
A Risk Gauge Report for customers could look like:

  • 70% = Low Risk (pay on time)
  • 20% = Medium Risk (sometimes delay)
  • 10% = High Risk (often overdue)

🔵 How they all connect:

  • Risk Analysis looks at risks broadly.
  • Credit Reports dive deep into credit-specific risks for individuals or companies.
  • Risk Gauge Reports summarize and visualize risk across many accounts or relationships.