5 Use Cases Where Real-Time Risk Monitoring is Important

One of the best ways to protect your business in the long run is to consistently monitor your customers and suppliers. You need business relationships like that to run a successful business, of course, but they can also pose risks to your cash flow and reputation. Here are just a few ways real-time risk monitoring will help your business stay safe.

1. Anticipate and Avoid Bad Debt
2. Make Your Business More Agile and Responsive
3. Manage Supply Chain Risk
4. Avoid Compliance and Due Diligence Violations
5. Spot and Prevent Fraud

Almost all business operate with both short- and long-term debt: it’s just part of doing business. Debt is something we’re all familiar with. And in our research study Perils of Rising Debt and DSO, we found that 58% of businesses said their long-term debt has increased in the last 12 months. 

But bad debt is a different ballgame. These are the invoices you expect to never recover – customers who aren’t ever going to pay you back or suppliers who aren’t ever going to be able to give you the products you’ve paid for. When the economy is struggling or less secure, it can become harder for your customers and suppliers to operate in the way you expect. Our research also found that 68% of businesses have increased their bad debt reserves by up to 30% in the last 12 months: we’re seeing businesses batten down the hatches.

When you monitor your customers and suppliers in real time, you can identify issues and patterns before they can have a negative impact on your business. Picture one of your longstanding customers. They’ve typically paid you on time and you value your relationship with them – especially because they provide a major boost to your cash flow whenever their invoice is paid. You might not see the need to continually monitor a company you’ve had such a great, long-standing relationship with. But a company’s circumstances on the day you sign the contract can change dramatically a year or two down the road. Maybe, unbeknownst to you, they’ve taken on new financing or some of their long-term debt is maturing and putting a strain on their cash flow. If you aren’t monitoring all of your customers, you won’t be able to see the warning signs early enough to act.  But if you’re monitoring their risk in real time, you’ll be able to see things like a decline in revenue or an increase in their Days Beyond Terms (DBT). When you’re immediately alerted to this change, you can intervene well before their invoice is uncollectable. 

Things change quickly: think about what the world looked like five years ago compared to now. We have new technologies, new problems and new interests for your business to keep up with. And since those changes can seem to come overnight sometimes, your business needs to be agile and flexible if you want to respond to them. 

Let’s say you’re trying to grow your business: always a tough position to be in during more difficult economic times. To expand into a new market, you need to have superhuman-level knowledge of the competition in that market. Which would be fine, if you were a superhuman. 

Put down the radioactive spider: real-time risk monitoring is the real hero in this scenario. By setting up automated alerts for your customers and competition in new markets, for example, you’ll know instantly when a business’ situation changes. You can act right away, adjusting credit terms, pivoting your strategy or investigating your own internal processes without delay. 

You can only control the way your business does things. But when you work with lots of different suppliers, you’ll also be held responsible for their actions. Remember, you’re responsible for making sure every link in your supply chain is compliant with the laws in their country. 

Sometimes, it doesn’t seem fair. You do everything you can to make sure your business is on the up and up, but you could still be fined if one of your suppliers doesn’t do the same thing. Take e.l.f. Cosmetics, for example. In 2019, the beauty company had to pay nearly $1 million when they imported false eyelash kits from China. No big deal, right? Our research shows that 43% of surveyed manufacturers offshore production to China. Well, in this case, things weren’t so simple. It turns out that the Chinese manufacturers had used two.  suppliers that sourced materials from North Korea. Even though it wasn’t directly part of their supply chain, e.l.f. was still liable. 

Real-time risk monitoring tools continuously track changes in a company’s financial standing, ownership structures and regulatory flags. With up-to-the-minute data like that, your compliance teams can spot red flags early. Things like sanctions, legal disputes, or AML (anti-money laundering) concerns are immediately flagged, so you can act quickly. Remember that compliance violations aren't just about the hefty fines: it’s also about keeping your reputation clean in the eyes of regulators, customers and business partners. 

As technology improves, so do the ways scammers can take advantage of weak points in your workflows. And when you fall victim to fraud, it’s about more than monetary losses. You could lose more money through legal filings or re-structuring processes to protect yourself in the future. You could also find that your customers trust your business less, if fraud occurred as a result of a data breach. 

All in all, we think it’s pretty safe to say you want to avoid fraud at all costs. That’s why static monitoring regimes just don’t cut it. Real-time risk detection is crucial if you want to spot the subtle signs of fraud before they impact your business. For example, if a supplier was to send you an invoice with a different address than the one listed in their master contract, real-time monitoring would flag the discrepancy. You’ll be able to confirm the change before sending any money, making sure your company stays well away from a fraudulent transaction.