D&B SUPPLIER EVALUATION
RISK RATING™
“D&B’s most discriminating predictor of supplier viability in a
single rating”
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The new and enhanced D&B SER Rating
• D&B’s Supplier Evaluation Risk Rating™ provides powerful supplier insight by
combining key risk indicators into a single rating that delivers a high degree of
differentiation between stable suppliers and those who have a greater likelihood of
closing their business operations or becoming inactive.
• This multi-dimensional rating builds on core insight about supplier closures,
enhancing it with:
– A broad scope that assesses all levels of business closure, including voluntarily and involuntarily
going out of business, dormancy and bankruptcy.
– A dimension for data depth that includes how much business intelligence is known about a supplier
based on the availability of predictive information such as trade references, financial records and
firmographic data.
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The SER Rating enhancements & benefits include:
Supplier Universe
Tailored to represent commercial entities
involved in business-to-business supply
management relationships (increased relevancy in
identifying high risk suppliers)
Improved Predictive
Performance
38% lift in bads captured in the
worst scoring 15% of the
portfolio and an improvement in
rating performance across all risk
classes (identify more risky suppliers
while realizing fewer false positives –
better segmentation)
Broader Scope
Enhanced
SER
Data Depth
Identifies wide variety of
supplier failures ranging from
those that file bankruptcy to
those that cease operations or
become inactive without prior
notice
Correlates the depth of
predictive data to future
supplier viability (provides a
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verification process & consistency
for factoring in additional supplier
information)
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What stays the same and what changes?
What stays the same?
• Long-term view of supplier risk (12 month
timeframe)
• Rating scale stays the same (1-9)
• Access and delivery methods for transactional
and batch scores
What changes?
• Enhanced SER is derived from the Viability Rating
(Portfolio Comparison and Data Depth dimensions).
The Old SER is derived from the Global Failure Risk Score
• Enhanced SER uses a broader “bad” definition and
incorporates depth of data, providing a multidimensional risk score. The Old SER is a one
dimensional risk score
• Enhanced SER uses availability of data to segment the
population while the Old SER segments population
based on number of employees
• Enhanced SER uses new data attributes – detailed
trade data that captures month-to-month trends and
business activity signals
• Enhanced SER will have new commentary
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The enhanced SER Rating is derived from the new D&B
Viability Rating™
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The enhanced SER Rating incorporates insights from the
Viability Rating’s Portfolio Comparison and Data Depth
Indicator and is much more precise
Portfolio Comparison:
Assesses the viability of a company, compared to
similar businesses, within the same model segment.
The type of data used to classify these segments is:
•Available financial data
•Established trade payments
•Limited trade payments
•Firmographics and business activity
Data Depth Indicator:
Presents the level of predictive data available on a
business that was used to score its viability. Data depth
includes how much business intelligence is known
about a business based on the availability of predictive
information such as:
•Commercial trading activity
•Financial attributes
•Firmographic data
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Viability Rating Example: The enhanced Ser Rating
incorporates Portfolio Comparison and Data Depth Indicator
Viability Score: When compared to all
businesses, Supplier XYZ, is ranked 6 on
the 1-9 scale
Portfolio Comparison: When compared
against similar businesses within the
same model segment, Supplier XYZ. is
ranked 7 on the 1-9 scale
Data Depth: Data Depth is an D
indicating rich firmographics, partial
commercial trading activity & no
financial attributes
Viability
Score
Portfolio
Comparison
Data Depth
Indicator
Company
Profile
6 7 D Q
Old SER = 5
Enhanced SER = 7
“Medium Risk”
“High Risk”
Company Profile: Company Profile is an
Q indicating a small, established
business with limited commercial
trading activity
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Data Depth Indicator - Overview
Data Depth Table
A
B
C
D
Robust Predictions
(deep records)
E
F
G
Basic Insight
(minimal firmographic data only)
•Data Depth range is based on the availability of:
•
•
•
Financial Statement Data
Trade Data
Firmographic Data / Identity Data
•Data Depth indicator considers confirmed high risk behaviors such as: (Scale H-M)
•
Out of Business; business is either bankrupt (chapter 7) or an officer or owner of the business confirmed they no longer
operate and are out of business
•
Unable to Confirm; business shows limited to no business activity & has multiple signs of inactivity (e.g. disconnected
phone, vacant address, no longer in the telephone directory etc. )D&B is unable to confirm active operations
•
•
•
Bankruptcy; business has filed for Chapter 9, 11, 12, 13 bankruptcy
High Risk – Severe Risk; a company which displays characteristics of misrepresentation, i.e. fraud etc….
Business Deterioration - Severe Risk; company which displays signs of financial stress, including signs of current or
imminent business failure or operating difficulty
D&B
& Proprietary
Information
• Confidential
Self Reported
DUNS
Support
Record; a company that has self-requested a DUNS# and D&B has not yet investigated
The enhanced SER Rating will be mapped to the depth of
data and portfolio comparison dimensions of the new
Viability Rating
Rich Firmographics,
Extensive Commercial Trade,
and Financial data attributes
SER: (1 – 9)
Customer Benefits:
 Improved insight into the
health of a supplier
Rich Firmographics,
Extensive Commercial Trade
(16% of monitored suppliers)
Rich Firmographics, Partial
Commercial Trade
(4% of monitored suppliers)
Basic Firmographics only,
Trace Commercial Trade
(1% of monitored suppliers)
Depth of Data : Predictive value of data
(69% of monitored suppliers)
SER: (2 – 9)
 Better understanding of
the predictive value of the
data driving the assessment
SER: (3 – 9)
 Two-way data exchange to
authenticate and objectively
evaluate updated data
provided by the business
SER: (5 – 9)
Viability: Probability of ceasing operations or becoming inactive
Very High
Probability
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Very Low
Probability
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Data depth example: These 2 companies display dramatically
different data depth views and display different rating classifications
ABC Company
XYZ Company
 Data Depth - Moderate
 Data Depth - Robust
 Rich firmographics, trace
detailed trade data, and
no financial data
attributes
 Rich firmographics, extensive
trade transactions, and
comprehensive financial
attributes
 The one trade payment
shows declining trend
within the past couple of
months
 Company shows increasing
net income and modest
Return on Assets
Enhanced SER =
“High Risk”
Limited business intelligence available on the
supplier, calling for additional due diligence before
any decision can be made on the business
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Enhanced SER =
“Low Risk”
Comprehensive business intelligence available on
the supplier shows that the company is in the low
risk category of ceasing operations or becoming
inactive and a suitable decision can be made by
the business based on internal risk 10
policy
The enhanced SER Rating provides a seamless and
consistent process for facilitating a two-way data exchange
to collect additional supplier information
Prior to Enhanced SER
With Enhanced SER
Streamlined
Two-way data
exchange
D&B Supply Customer
Complicated , oneway data exchange
Phone
Email
Fax
Mail
Suppliers
Suppliers
Consistent
view of
supplier risk
can’t be
realized
Process, validate, analyze & calculate
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D&B processes
information collected
and it is then
calculated into SER
rating
Customer
receives a
seamless,
consistent,
assessment of
supplier risk
D&B Supply Customer
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The enhanced SER rating has a higher ‘bad’ rate and
provides improved discrimination between low and high
risk suppliers
SER Projected Bad Rate
25.00%
21.05%
20.00%
15.00%
10.00%
12.96%
Avg. OOB Rate 5.63%%
8.02%
9.27%
5.37%
5.00%
1.28%
2.14%
3.06%
3.74%
0.00%
1
2
3
4
5
6
7
8
9
~4 times more likely to
cease operations or
become inactive than the
average and ~16 more
likely than businesses in
SER class of 1
The enhanced SER has
avg. OOB rate of 5.63%
versus the prior
version, which has
average failure rate of
0.5%
 The enhanced SER provides an easy screening mechanism that helps to quickly identify and
evaluate troubled suppliers
 Meaningful Bad/OOB rates resulting in fewer false positives
 Movements in SER Rating is driven by significant changes to underlying data elements
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A broader “bad” definition and use of new data elements
such as Detailed Trade, and Business Activity Signals
has resulted in a predictive lift across all score segments
% of population versus “Bads” Identified
New SER and Old SER
100
Share of Bad Accounts
90
80
70
60
50
40
30
20
10
0
1
5
9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101
Random
New SER
Old SER
Customers will be able to proactively identify 38% more
troubled suppliers in the riskiest 15% of their portfolio of
suppliers, or SER class of 8 and 9.
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The difference between the red
curve (New SER) and the green
curve (Old SER) shows the lift in
capture rate. New SER outperforms
Old SER across all risk classes.
Cumm
Lift in
SER SER SER Capture
Decile Class 8.0 7.1 Rate
Capture
Rate (%)
10
9,8
27
19
41%
15
8
38
28
38%
20
7,6
46
35
33%
30
6
60
48
24%
40
5
70
60
16%
50
5,4
78
69
14%
60
4
85
77
11%
70
3
90
84
7%
80
3,2
94
91
4%
13
90
1
98
96
2%
The enhanced SER Rating uses new data attributes –
detailed trade data - that captures month-to-month
trends and business activity signals
Data Category
Demographic Data
Business
Activity Signals
Legacy &
Detailed Trade Data
Public Record Data
Financial Data
Data Variables
Actual sales, Actual employees, Business Year. Years under same management,
Industry Classification, Building own/rents, History Indicator
Number of updated data sources in the last 6 months
Number of payment experiences, Percent of slow and negative payments,
Average monthly percent balances, Average Monthly 30+ Days Past Due Amount - 12
Months, Composite 3 Months Paydex, and others.
Total Dollars/Number of suits, liens and judgments, Presence or absence
14 of
UCCs, Bankruptcy.
Number and type of financial statements, Total Assets, Total Liabilities, Net Worth, and
ratios such as Quick Ratio, Current Ratio, Return on Assets, Total Liabilities/Net Worth
and others.
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The enhanced SER’s commentaries provide insights into
high level drivers of the new rating
SER commentaries available in the supplier risk reports provide up to six factors
adversely impacting the SER score. Customers can use commentaries in conjunction
with other business intelligence available on the supplier for comprehensive
understanding of supplier risk profile.
Example commentaries for a supplier with
high SER score:
-
-
No payment experiences reported
Limited business activity signals reported
in the past 12 months
Limited time in business
Higher risk region based on inactive rate
for this industry
Financial Statements not reported
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The following inference can be drawn on the
supplier risk profile based on the SER
commentaries:
Young business, located in region considered
as high risk, has shared limited business
intelligence with D&B, business signals from
D&B’s Intelligence Engine indicates limited
business activity as well.
Recommendation: Hold discussion with the
supplier to determine new or existing
relationship with the supplier is warranted
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The SER’s Cumulative Performance Table provides
cumulative % of suppliers, Projected Out of Business
(OOB) Rates and OOBs identified
SER rating of 7 and above:
-
-
18% of suppliers have SER
score of 7 and above
Roughly 14 out of 100
businesses are expected to
cease operations or become
inactive over the next 12
months
44% of suppliers had SER of 7
or greater prior to ceasing
operations are becoming
inactive
SER Projected Performance Table – Cumulative Score Range
SER
Rating
1-9
2-9
3-9
4-9
5-9
6-9
7-9
8-9
9
% of
Businesses in
D&B Supplier
Database
(Approx.)
100%
87%
72%
60%
47%
29%
18%
15%
3%
Projected
OOB Rate
% of OOBs
Identified
(Approx.)
5.63%
6.28%
7.15%
7.99%
9.17%
11.49%
13.59%
14.63%
21.05%
100%
97%
91%
85%
76%
59%
44%
38%
11%
When SER rank orders suppliers within a sample portfolio, it is expected that 44% of “bads” will be identified in the
riskiest 18% of the portfolio, 38% of “bads” will be identified in the riskiest 15% of the portfolio
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With the implementation of the new scoring model,
customers will see shifts in SER Rating on individual
suppliers
70%
60%
59%
Majority of the score
shifts will be by a score
class of 1 or 2
50%
40%
36%
31%
24%
30%
20%
E.g. If SER is a 4 it could move
to a 5 or 6
22%
10%
10%
7%
5%
0%
By 1
By 2
By 3
Improve
By 4
3%
2%
By 5
1%
0%
By 6
Decline
Analysis on a representative sample show that:
• ~19% of records will have same SER values
• ~60% will move to lower risk classes (eg. From SER of 5 to 4)
• ~21% will move to higher risk classes (eg. From SER of 5 to 6)
Note: Actual shifts may differ based on individual customer’s supplier portfolio
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Product Overview
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The enhanced SER Rating within Supplier Risk Manager
- Monitored US suppliers will be updated over the weekend of May 11th –
May 12th.
- Other US records will be updated within two weeks following the May
10th launch. Customers can leverage the update button on the At A
Glance Profile page to access the enhanced SER.
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The enhanced SER and Data Depth Indicator will be
shown on the ‘At A Glance’ Profile Page for US
Businesses in Supplier Risk Manager
Enhanced
SER Rating
will be
available
following
new score
launch
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Data Depth
Indicator
will link to
glossary
and provide
additional
actionable
information
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More detailed insight on the enhanced SER Rating and
Viability Rating will be shown on the Risk Profile page
within Supplier Risk Manager
Summary View of Viability Rating
Detailed View of Viability Rating
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The Data Depth Indicator will be added to the Locator
Module within Supplier Risk Manager enabling ‘Smarter
Supplier Screening’
Data Depth search criteria will also include
special categories:
H – Out of Business
I – Unable to Confirm
J – Bankruptcy
K – High Risk (Severe Risk)
L – Self Reported Duns Support Record
M – Business Deterioration (Severe Risk)
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Questions
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