Customer risk management is essential for any company that’s looking to expand its customer base. Put simply, it’s a means of evaluating which people pose the highest risk to your business model so you can better support its long-term stability and success.
In order to better manage customer risk, it’s important to understand what it looks like in practice. In this section, we’ll dive into some common examples of customer risk, and then discuss some strategies for identifying those potential risks.
Customer due diligence (CDD) is the practice of performing background checks on potential customers to identify their potential risks ahead of time. In industries governed by Anti-Money Laundering (AML) and Know Your Customer (KYC) initiatives, CDD is an essential component in evaluating whether customers might be involved in illegal practices like fraud, money laundering, or the financing of terrorism.
Ultimately, CDD is the keystone of customer risk management. It uses a series of evaluations to determine whether a customer is likely to pay their bills, meet the details of the contracted agreement, or put the business at risk in any other way. More specifically, it looks at the source of a customer’s funds as well as what those funds are used for.
There are several different methods of evaluating customer risk. Depending on your needs, you may find some more suitable than others.
In the United States, lenders such as banks and mortgage companies use credit scores to evaluate a person’s ability to repay a loan. Similarly, businesses may rely on credit scores to get a sense of whether they’re dealing with a reliable, capable customer who routinely pays their bills on time. The higher a customer’s credit rating, the less risk they represent.
Credit checks are considered the most basic form of customer risk assessment. If you’re looking to get a more in-depth look at any potential customers, you’ll want to check out other options on our list as well.
A business background check takes a more in-depth look at the financial and legal history of a particular company that you’re looking to take on as a customer. Additionally, it provides more information about the business’s reputation as a whole.
You can learn more about how to run a business background check here.
A company officer background check is similar to a business background check, except it evaluates the civil, criminal, financial, or reputational risk of particular executives instead of the company as a whole. This strategy is especially useful if the potential customer is a newer business or start-up without a long financial or legal history.
For starters, companies should look to standardize business background checks for all potential customers. In the event that a business background check isn’t applicable, such as with newer companies or startups, you’ll want to have a process for executive background checks on hand as well.
Business Screen delivers a quick and easy program for conducting background checks on potential customers. Best of all, they’re totally discreet, so there’s no need to notify your contact about your plans. Results are available in as little as two days.
When it comes time to onboard a new customer, you’ll want to make sure that the terms of the contract are clearly defined. That’s especially true when it comes to setting up the terms and conditions of the payment process.
With a robust contract in place, all parties will understand what’s expected of them, as well as the consequences of failing to meet those expectations.
Companies should work to maintain an open line of communication with their customers over the course of their relationship. Not only does it allow both parties to better communicate their expectations, but also, it can help illuminate potential “red flags” associated with particular customer relationships. As such, companies are better able to anticipate and mitigate those risks down the line.
Customer risk management is never a one-and-done exercise. As businesses grow and change, so do their customers—so if you plan to maintain a relationship for more than a year, you’ll want to implement continuous monitoring. That way, you get a sense of a customer’s risk as it evolves, enabling you to effectively manage and mitigate risk exposure over time.
Fortunately, Business Screen’s Continuous Monitoring Solution is designed with this in mind. Our licensed private investigators perform routine background checks on customers, insuring that you’re able to address changing risks over time.
While there are a variety of customer risk assessments available to companies, not all of them are created equal.
At Business Screen, we’ve designed our business background check software for easy and seamless integration with your existing business practices. You can consolidate our software within your CRM via an API, making it easy to submit requests and view the results from the moment they’re ready. We can even customize our system to your process, so it’s hassle-free to get the information you need.
In fact, because we leverage technology, we’re able to offer volume discounts for customers who plan to conduct over 100 searches per year. That way, you’re able to stay up to date with all customers at little extra cost.
Not only does Business Screen have a more robust search process in place from the start—but it also lets you evaluate the backgrounds of key company officers at the same time. That way, you’ll know exactly who your customers are, and what their reputations are like. Not to mention, our continuous monitoring and review is designed to provide regular review and updates on longer-term customers.
At the end of the day, risk management should enable confident growth, not throttle it. That’s why it’s important to find a risk management strategy that doesn’t slow down your business decision-making process. Business Screen delivers results in just two days, allowing you to get back to doing what you do best. Get a price quote today.
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