The traditional approach taken by the credit bureaus with regard to business risk assessment has historically focused on analysing the financial information and payment indicators collected from lenders and trading partners.

The financial information is certainly very useful and a key component of the ORX score, however, it is not the only component. ORX has built the capability to link up a variety of disparate publicly available open data sources with UK registered companies applying Machine Learning on the data to find patterns predictive of insolvency and business closure.

Given that the credit bureau scores are based predominantly on the financial information, the credit bureaus are often unable to assess young businesses that have not yet filed financial accounts or provide a score based on the average risk of the industry pertaining to the business in question.

We demonstrate the difference between the credit bureau scores and the ORX scores using an example young business. This business operates a vegan cafe based in Kent, England in addition to a wholesale …

Did the political and economic uncertainty in the United Kingdom in 2016 and 2017 have an impact on the risk of business closures?

We decided to evaluate how the risk of business closure in the United Kingdom, as measured by the Open Risk Exchange (ORX) Probability of Business Closure, evolved over a 24 month period from January 2016 through to December 2017.

The result of our analysis is presented in the video below using maps of the United Kingdom:

Probability of Business Closure from January 2016 to December 2017

Figure 1: Probability of Business Closure from January 2016 to December 2017

The video above demonstrates how the ORX Probability of Business Closure varied across the United Kingdom over a 24 month period between January 2016 and December 2017. Note that the average of the probabilities of business closure for registered companies in a given area (as defined by ‘Postcode Area’) has been used for this analysis.

Limitations of Credit Bureaus in Assessing the Risk of New Businesses

The existing risk scoring models and products offered by the credit bureaus such as Experian, Equifax and Dun & Bradstreet do not offer a risk assessment of new businesses that have not filed any accounts.

Due to the limited input data (primarily accounts) used by these providers, they are unable to assess the risk of and score new businesses.

ORX Scores for New Businesses

Leveraging its technology to extract and analyse a wider variety of publicly available data sources linked to businesses, ORX offers scores for companies for which the credit bureaus do not.

The accuracy of the ORX model in predicting business closure and insolvency for new businesses with no financial filings was evaluated on a standalone basis.

New businesses were defined as companies that were 14 ≥ months ≥ 12 old on the 1st of November 2016 with company status ’Active’. This definition was used because companies usually take 18 months to file their first set of accounts.

The ORX …