Early warning system reveals financial distress 5 months earlier than normal

BSG worked with a South African bank on a proof-of-concept to enable the bank to predict financial distress using data science, resulting in a prioritised company watch list of high risk customers. Previously the bank had taken 6 months to highlight organisations in financial distress, the BSG designed system drops that down to 1 month.

overview
  • Reduce unexpected losses across credit products in corporate and investment banking (CIB)
  • Automate manual process of identifying high risk clients
  • Transition from reactive to proactive risk management
objectives
  • Save the bank money lost as a result of customers defaulting on payments
  • Develop a tool to identify financial distress earlier and more accurately than existing credit models
  • Translate the tool’s outcomes into business terms stakeholders can understand
benefits
  • Improve the identification of risk by four to five months
  • Proactive risk management to enable the bank to assist clients by restructuring their debt
  • Time and money savings through proactive suggestions prior to a company going into distress
bsg_early-warning-system-predict-financial-distress

In a first for the bank, BSG consolidated internal and external data and fed this into a predictive analytics model to determine the probability of financial distress and learn more about their clients.

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