The potential for credit risk management in the Malaysian business sector is vast. Last year alone, CTOS has introduced various innovative business solutions and the largest credit reporting agency in the country is looking at launching more innovative features this year.
WHEN Tee took over the running of their family business from his father, the reconditioned construction machinery dealer had bad debts from 21 companies. He decided to subscribe to CTOS Credit Manager to recover the debt when all their other attempts, including hiring debt collectors, failed.
With CTOS Credit Manager’s Electronic Trade References (eTR), he initiated his recovery strategy. The eTR function allows businesses to share customers’ trade information, specifically their outstanding or bad debts.
Tee followed up the move with legal demand letters to his debtors, and within three years, Tee managed to recover a total of RM40,000.
As Malaysia’s largest private credit reporting agency, CTOS collects credit information for individuals and businesses in Malaysia from a wide range of public domain and proprietary sources. CTOS eTR Service is the largest trade reference database in the country and has helped thousands of businesses recover RM250mil worth of bad debt in 2016 alone.
It is important for small and medium enterprises (SMEs) to conduct regular credit profile checks on themselves, as well as individuals and organisations they have dealings with to minimise financial risks in business transactions, says CTOS Holdings group chief executive officer Dennis Martin.
“You need to determine the financial status of concerned parties before committing to important financial decisions, be they potential customers, partners or suppliers.
“SMEs cannot afford bad debt. It affects their credit record. By staying updated on the credit profile changes of their existing customers and partners they won’t be caught off-guard,” he advises, citing statistics of how 60% of new businesses fail within the first five years. CTOS Credit Manager is a core business solution in CTOS’ credit risk management portfolio, and is widely used by the country’s banking and financial institutions, insurance companies and telecommunication companies, among others.
Supporting the due diligence process, it enables subscribers to manage and reduce credit risk in three simple steps: Evaluate, Monitor and Recover (see chart).
This method of doing background checks is a sound business practice and widely used by banks and financial institutions to verify one’s financial standing, adds Martin.
For painting product dealer T. Simon, CTOS Credit Manager not only helped his company recover bad debts, but also avoid them.
“Thanks to CTOS Credit Manager, I no longer have to worry about unnecessary risks in business. With its credible information, I now have a better overall picture of my customers’ credit profiles to make more informed decisions,” he says.
Tee agrees, “Once we were approached by a few potential clients who drove luxury vehicles and claimed to have sound financial background. But when I ran a check with CTOS, I found out that these companies were actually dormant, so I turned them away to avoid payment issues.”
With the reduction of bad debts and improved intelligence on potential customers, Tee was able to grow his company by 40%.
Over 10,000 SMEs are using CTOS Credit Manager to help them reduce business credit risk and grow their business, says Martin. To serve them better, CTOS has established branches nationwide and is providing services online and via mobile technology.
Going forward, CTOS is looking to expand the available business solutions to help SMEs grow further.
“While the credit rating report (CRA) industry has traditionally been about credit information in Malaysia, globally, it’s more about selling insight and the analytics that go with it,” Martin notes.
“It’s about understanding what people need to help their business grow. And the potential for CRAs in business in Malaysia is vast.”
Last year alone, CTOS launched various new business solutions to supplement the credit risk products available through CTOS Credit Manager, notes Martin.
One is CTOS KYC (Know Your Customer) Screening. With its customer identification and verification solution, CTOS KYC Screening allows Malaysian businesses to operate to the same global standards as other multinationals while protecting their organisation from financial crimes like money laundering.
Another is International Business Report, which provides instant access to information on 230 million companies across 200 countries to assess the risk of dealing with potential international partners, buyers or suppliers. It can help protect companies while they grow their business globally.
Then there is SME Financial Health Indicator, which is a risk rating system to evaluate the financial position of SMEs they plan to do or are doing business with in the next 12 months. It is a fast and easy way to assess potential or existing customers and business partners, as well as assign a potential credit line for the company.
Another service is CTOS ConneX, which increases transparency in the business world. The analytics tool keeps track of companies in Malaysia, Singapore and Hong Kong via market filings, reports and news releases, so that users can gain insight into companies and people in the region.
“Companies can use the CTOS ConneX to grow their business by mapping out all possible and existing connections between companies and persons in the region’s business ecosystem,” says Martin.
With CTOS ConneX, companies can significantly enhance their due diligence efficiency with automated vendor screening, conflict-of-interest checks, as well as background and ownership checks. Some companies have even used the tool to grow their business by identifying potential new clients from their existing client lists. To help companies better monitor their credit health, CTOS are looking to launch its SME Score soon, he adds.
Bill Lee, executive director of a construction material trader, says subscribing to CTOS is now a business necessity.
“In the past five years, (payment) collection has become increasingly challenging. Fraud cases involving false identity and documentation have spiked. We decided to become a CTOS subscriber because evaluating and screening customers has become an integral part of our business process,” shares Lee.
Crucially, preventing fraud from identity theft has become a challenge for individuals too.
Sales executive Rahman (not real name) was shocked when a bank notified him that his RM30,000 loan application was pending approval. It is a loan he knew nothing about, much less applied for. When Rahman probed further, he found that the application had a different home address listed.
Luckily, he was able to stop the loan before the money was disbursed to the fraudster.
While regular checks of their CTOS credit score reports can help people like Rahman detect frauds, CTOS has come up with a more comprehensive tool that protects the broader financial services sector more proactively, called CTOS ID Guard.
It is a common platform that enables the industry to collaboratively detect fraudulent credit applications using big data analytics.
“With the new solution, we can help flag the fraudulent loan or credit card applications by identifying any anomalies in the consumers’s personal data when the applications are submitted to the banks and credit providers,” Martin explains.
“It will match the details in the application to the consumer data in its solution to detect anomalies. For example, if a bank receives an application for a loan with an address that is different from their record. Or if their income and employment details are different.
“This protective feature will send a red flag to alert the bank or credit provider that something is amiss and they should check it out.”
According to the MCA’s Public Services and Complaints Bureau, the total losses incurred from identity theft cases in Malaysia amounted to RM2.82mil between 2014 and 2016. In 2016, RM1.68mil in losses were recorded.
With their new product, CTOS also wants to empower people to protect their identity by monitoring their own credit information file.
“You can put an alert on your file to let you know if someone is using your data or changing it. This way you can prevent your identity from being stolen,” he says.
CTOS’ upcoming identity theft protection feature is part of CTOS’s vision to improve Malaysians’ financial literacy and encourage them to take responsibility for their financial health.
Through education and awareness programmes, CTOS also aims to help consumers make smarter financial decisions by understanding their credit scores and knowing how to utilise them to achieve their goals, adds Martin.
“We need to let consumers and businesses know about how and why their credit health is so vital so that they don’t fall into the trap of taking up more loans than they can handle, and ending up insolvent.”
Martin believes Malaysians’ awareness of their personal financial health is growing, but we still have some way to go.
In the future, CTOS will continue to innovate and offer its customers the best solutions in market, says Martin.
“We will bring in new products and services as we see the need, so that Malaysia will have all the tools to become, and stay, financially healthy. As a Malaysian company, CTOS understands the Malaysian business culture and its needs well. With our comprehensive database and extensive customer base, consumers get a lot of advantage in using CTOS services.”
Get your FREE consultation at 03-2722 8882 or log on to www.ctoscredit.com.my/business