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The Importance of Risk Management – Part 2

Sep 13, 2019 Red Flag Alert Updated On: August 15, 2023
The Importance of Risk Management – Part 2

In Part 1 we looked at the myriad risks faced by businesses and the importance of monitoring and managing those risks. 

In this follow-up article we’re taking a look at how Red Flag Alert is the perfect tool to manage these risks.

Red Flag Alert Helps Businesses Spot Financial Danger

Red Flag Alert data can help companies avoid financial risk in several ways.

Every business in the Red Flag Alert database is given a financial health rating that shows the level of risk associated with each business.

Companies with Gold, Silver, and Bronze ratings are those that are healthy and there is little risk associated with these businesses. As risk increases, companies are given a rating of one, two, or three red flags.

This is a huge help when deciding which businesses to work with. Your company can put in place procedures that say it will happily deal with companies given one of the top three ratings, but for businesses with one or two red flags it will require further due diligence – performed by digging into the in-depth financial data provided by Red Flag Alert’s company credit checking and insolvency scoring software. 

This helps in a huge range of scenarios – here are a few:

  • Onboarding of new customers – avoid the risk of accepting customers who are facing financial distress.
  • Monitor current customers – if any are showing signs of financial distress, you can put measures in place to manage the risk.
  • Identifying new customers – avoid customers with poor financial circumstances and save your sales team a lot of time generating leads that won’t pass credit control.
  • Supplier risk management – if suppliers fail, this can have a severe impact on your business so tracking their financial health means you’ll see problems coming.

Red Flag Alert is a Key Compliance Tool

Red Flag Alert helps companies build processes compliant with GDPR and Anti-Money Laundering regulations. This will help companies avoid the risks associated with failing compliance, which can include heavy fines.

Anti-money laundering is a subject of heavy focus for international policymakers at the moment. The intergovernmental Financial Action Task Force (FATF), and EU and UK lawmakers have been continually updating legislation, and will no doubt continue to do so.

In these evolving times it’s critical to have a close eye on your responsibilities and a process to manage them.

Red Flag Alert’s AML service helps businesses remain compliant. Our AML service was developed in conjunction with Begbies Traynor plc and GB Group plc – it’s the most comprehensive solution on the market and includes:

  • Full range of risk level checking.
  • Unbeatable match rates.
  • ID verification.
  • Enhanced due diligence.
  • Sanctions and PEPs real-time screening.
  • Monitoring alerts.
  • Simple interface.
  • Secure audit trail.

Red Flag Alert Helps You Make Better Strategic Decisions

Red Flag Alert also provides data that can help with strategic risk.

Companies that use Red Flag Alert can filter the data by industry to gain an overview of how the sector is performing. If your company is healthy, but others in the industry have low red flag ratings, you can dig into the data to see if there are potential issues you need to look out for.

Likewise, Red Flag Alert can help with identifying new competitors. A construction company based in the North East could use the data to keep track of new entrants to the market that could potentially be future competition.

If new entrants arrive, the company can watch the data to see their growth. A rapidly growing start-up may offer a big threat that will require you to take action to protect your position in the market.

Another way Red Flag Alert helps with strategic risk is by being an essential tool to perform due diligence before an acquisition. One company looking to acquire another can use the data to filter for potential targets, based on the metrics important to them.

Once the buyer has a list of targets, it can check their financial health as well as their history – details such as growth trajectory – allowing the buyer to make a more informed purchasing decision.

The data can also be used to check the record of the management team at the company to be acquired, and also to compare its performance to the competition.

Learn more about how Red Flag Alert helps your credit control function protect your business from  financial risk while remaining compliant. Why not get a free trial today? 

Published by Red Flag Alert September 13, 2019

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