Default Risk Prevention

Default Risk Prevention Made Simpler Thru iCREDIT

Nobody likes dealing with the ramifications of default risk; not lenders, not investors and certainly not the businesses that have the duty to protect themselves and their capital partners from default risk.

The problem with default risk (commercial loans and/or equity investment default risk) is that it takes on many guises and comes in many forms, any one of which can conspire with the others to put a company into default. Default risk is most clearly understood to be the risk the business will fail to observe its obligations to counter-parties under the various contractual agreements the business must operate under on an ongoing basis. Lenders and investors face the potential for an investment loss if a default (real or alleged) is played out in litigation that could cost the lender and/or investor their entire investment. Historically, subjective measurements such as business experience, character, reputation and/or education were used as the metric to determine if the default risk exposure could be expected to be managed or not. More often that not, this has worked. The problem is that when there is a default, the resulting loss on the investment could wipe out the investors other gains and this is what has been seen to play out in the capital markets. The most common default risk exposure issues that can drive investment losses include:

  • Contract disputes with vendors.
  • Fraud.
  • Embezzlement.
  • Diversion of funds allocated for a specific business purpose for some other purpose not previously disclosed.
  • Poor funding controls.
  • Lack of financial reporting transparency as to the entire financial position or the timing of the release of these reports.
default and investment loss severity risk prevention and mitigation
iCREDIT Key Default Risk System Controls

The iCREDIT Program subscription service puts an end to these issues being materially significant risks the business, the promoters of the business, the lender and/or the investor(s) of the business have to routinely provide oversight for as a means of managing their loss risk. iCREDIT is the one tool in the post-COVID world that may make a difference in your business operations and your opportunity to obtain capital financing. Find out more by talking to us today about how iCREDIT creates potential unforeseen opportunities for your business starting on Day 1.

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