Rethinking B2B Risk, Part 1: Is Your Organizational Structure Causing Undue Credit Risk?

August 4, 2014 Michael Foster

When extending credit to a business of any size, effective B2B credit risk management is typically a primary concern. Credit professionals have become adept at identifying many potential risks, but in the process may unintentionally blind themselves to risks that would be otherwise obvious. How does this happen? One possible answer: organizational structure.

Identifying structural flaws

For many organizations, size equals complexity, and this complexity can lead to mistakes when one hand doesn’t know what the other is doing.

If your sales and credit teams operate autonomously, for instance, it is easy for a red flag to show up for one team but not for another, which may result in closed deals that carry much higher risk. Consider also the amount of exposure your organization may face if you have multiple divisions or branches selling to the same customer with no awareness of what credit the other has extended. A lack of visibility into customer engagement across the organization often creates a disjointed customer experience and potentially results in increased financial risk. This is an infrastructural and workflow problem that can often be fixed with minimal investment.

Connecting the dots

To achieve improved B2B credit risk management, companies need to know how to connect their credit operations to sales, marketing, customer service and fulfillment. With greater connections between different parts of the company, each group can access the knowledge of others to identify potential problems before they occur.

However, this process isn’t necessarily as simple as establishing communication streams between departments — implementation is key. Information sharing between teams can potentially create confusion and stress unless clear protocols and workflows are designed with the broad organizational benefit in mind. Managers need to know what is expected of them, and they need the tools to report whatever information comes their way without making their jobs more difficult.

Reaping the benefits

The good news? You can achieve organizational connectivity and visibility without a complete overhaul of your firm’s structure. Various technologies are available to help you optimize workflows and collaboration, whatever your organizational structure, which can ultimately lead to lower costs, greater productivity, reduced risk and an enhanced customer experience.

In an age where everyone is looking for yield and good business opportunities are getting harder to find, improving your organization’s workflow is one way to help identify default risks before they occur.

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