What is Forecast View? and how can it help you to steer clear of financial risk?

Craig Evans, CEO

I took over as CEO of Company Watch in 2022, and I certainly picked a busy time to do it! We are living through some of the most turbulent economic times in living memory, and, for those of us in risk management, this means facing a whole new set of challenges.?

With the pandemic still fresh in our minds, businesses were hit with a new wave of economic shocks in 2022. The war in Ukraine triggered a spike in gas prices, leading to soaring energy costs across the UK and Europe. This was compounded by record levels of inflation, leaving many consumers struggling to make ends meet.?

Like most of you, I’ve been crossing my fingers for a return to normal in 2023. But I’m sorry to say that this is looking increasingly unlikely. With experts warning the UK to brace itself for the longest and deepest recession in the G7, it seems that economic uncertainty will be a fact of life for some time to come.?

This isn’t just a problem for consumer-facing businesses. It also affects those providing B2B services. Whether you’re extending credit, underwriting insurance, or supplying any other kind of financial service, it’s harder than ever to know which companies are safe to work with.?

Basing these decisions on general trends is no longer good enough. You need to take into account every factor, both within the company and in the economy as a whole. This can seem like a daunting task, but Company Watch can help. Our Forecast View? functionality lets you simulate a range of market disruptions so that you can spot weaknesses in your portfolio before it's too late. Here’s how it works.

The H factor

We wanted to do our bit during the pandemic, so we built a tool that allowed businesses to predict the impact of COVID disruption on their customers and suppliers. This was called the COVID Forecast Score, and it provided a lifeline for many companies during a time of extreme disruption. Forecast View? takes this one step further, expanding the range of scenarios for the post-pandemic era.?

Both tools have won the Chartered Institute of Credit Management (CICM) Risk Management Award. Forecast View? in 2023 and COVID Forecast Score in 2022 - this is something we are extremely proud of at Company Watch.

? Find out more about Forecast View? - watch my webinar here

The key to both features is our H-Score?. This is an industry-leading tool for measuring the likelihood of a business failing. We analyse company finances from a range of angles to see how closely they resemble those of companies that have gone on to fail. We then give the company a score out of 100. Companies with an H-Score? of 25 or less are placed in the Warning Area, meaning that they are considered high-risk and are likely to fail.

Let it slide

We wanted Forecast View? to be accessible to everyone, no matter their level of financial expertise. Our dashboard is designed to be as intuitive as possible, giving you everything you need to get started immediately.?

Simply select a company and you will be presented with a series of sliders, each corresponding to a key metric of company finance:

• Sales revenue
• Sales costs
• Overhead costs
• The amount paid in dividends
• The value of company assets
• Stock and debtors that have been written off
• Long-term debt that has been called in?

By dragging these sliders to the left or right, customers can adjust each variable by a chosen percentage. Moving a slider will immediately alter the company’s H-Score?, giving you an instant assessment of how these changes would affect its overall financial health. By adjusting the sliders in various combinations, you can build an accurate picture of a company’s future resiliency.?

Plan for any scenario?

You can tinker with these variables to your heart’s content, but there may be times when you need quicker results. That’s why Forecast View? also comes with a range of built-in scenarios. Choosing one of these will automatically adjust all sliders to reflect the likely impact. This lets you simulate common economic shocks in order to spot the most likely risks. Pre-set scenarios include:

• Margin squeeze - This is a scenario in which costs increase but the company is unable to pass them on to consumers. This causes overall revenue to fall, even if there has been a small increase in sales.?
• Key customer insolvency - This scenario simulates the effect of an important customer going bankrupt. This may cause outstanding debts to be written off, forcing the company to absorb the loss.?
• Pent-up demand - Reopening after a disruption can lead to a surge in demand as customers rush to make up for lost time.? If demand is high enough, increased operating costs can be passed onto consumers rather than being absorbed by the company.?

Once again, running one of these scenarios will automatically adjust the company’s H-Score?. You can compare this to the industry average to see how well the company stacks up against others in its industry.??

I’ve only scratched the surface here. Forecast View? is designed to be as in-depth as you need it to be, offering everything from a quick overview to a deep dive. If you’d like to learn more, my colleague Steve Savage has produced this useful PDF.

If you’d prefer a hands-on demonstration, why not get in touch and arrange a free trial?