Find Connections Between Your Customers and Failed Businesses

Use Data to Anticipate the Ripples of Business Disruption

The volatile economic climate of the past few years has complicated risk management. While many companies are managing threats and opportunities effectively in this fast-changing environment, news headlines continue to spotlight those that have faltered – some with breathtaking speed and severity in key industries such as retail, healthcare, finance, and real estate.

The impacts can be far-reaching because companies don’t operate in isolation; they rely on a web of other businesses for capital, technology, and materials to help them create products, transact, and run their operations. Because these networks can provide powerful advantages, companies often shield them to prevent duplication by competitors. Companies also protect their clients’ identities to comply with security and privacy requirements and to prevent competitors from targeting key accounts. 

This means a troubled firm’s list of clients and vendors is not likely to be available or accessible. So when a bank fails, a factory closes, or an airline declares bankruptcy, how will you know whether your customers are part of their respective networks? How will you know which of your customers may experience communications, financial, or other issues as a result? 

Answers may not be readily apparent, but that doesn’t mean business owners, credit portfolio managers, and sales and marketing leaders should give up. Let’s look at what you can do to understand potential risk exposure in your customer portfolio. 

Begin Mapping the Network

The first step is obvious: Determine if you have an existing, direct relationship with the troubled company. Generally, this involves searching account records using the firm’s name and other key identifiers, such as the Dun & Bradstreet D-U-N-S® Number. If the distressed business is your customer, you can quickly connect to discuss account status and any potential changes needed to facilitate invoicing and payment. 

You can also examine its corporate hierarchy so you can begin mapping key relationships for this organization. What other businesses does it own or have some claim to, and are any of those businesses also your customers? Add these linked companies to your network map, and then search for them in your customer portfolio. Once you determine if they are also your customers, you can start gauging the exposure, criticality, and relevance of these entities to your own business operations. 

As the corporate hierarchy helps you find these relationships, you can repeat this first step — searching for the business, reviewing its unique hierarchy, and confirming if any linked companies are also your customers. This is how you can populate your network map, and how you can start to see which of your customer accounts should be prioritized for swift outreach and review. 

Expanding the Network Map

What about the companies for which you can’t find any corporate linkages? Determining if the troubled organization has ties to other customers in your portfolio becomes more difficult. For most managers, the next step is to contact customers directly — perhaps all, or perhaps by segment. (Customers already considered “high risk,” for instance, might merit the earliest communications.) 

Using calling and email programs, you can simply ask your customers if they have a relationship with the troubled entity, or if any of their subsidiaries or business units are linked to it. You can then respond to those that self-identify. While this approach is straightforward and can add vital details to your network map, it is also cumbersome and slow. 

A faster way to understand what businesses are potentially linked to a distressed firm is to review Uniform Commercial Code (UCC) filing data. The contents of the UCC filing provide a specific list of linked companies to include in your network map. By matching companies from the network map to companies in your portfolio, you’ll know which of your customers you should prioritize for prompt engagement and assessment. 

Why UCC Filing Data Is So Useful

The UCC is a set of business laws regulating financial contracts and commercial transactions across the U.S. Among other provisions, the laws govern a public claims process between debtors and secured parties. The debtor is a company that needs to borrow money or secure credit; the secured party is the vendor/provider lending the money or extending the credit.

What this means is that UCC filing data helps show you the relationships between secured parties and debtors. A secured party uses filings to create a claim on a debtor’s assets, in case the debtor is unable to pay for services/goods provided. In addition, a UCC filing may be interpreted to add risk to an unsecured creditor, because there are fewer assets to satisfy debts in case of failure. 

Originally, the process was used mostly by financial institutions. But as businesses became more mature and complex, and offerings grew more expensive, companies outside the banking industry also adopted the practice of registering claims through the UCC process.

How to Use UCC Filing Data 

To start mapping businesses that are providers/vendors for a troubled company, you can set up a search of UCC filing data in which the troubled company is a debtor. (The troubled company is the client/debtor here because it owes a loan or credit payment to a vendor/secured party.)

If you want to start mapping businesses that are clients of a troubled company, you can construct a search in which the troubled company is the secured party. (In this scenario, the troubled company is the provider/secured party that is owed a loan or credit payment from a client/debtor.)

To map the full network of clients and vendors for a distressed company, you would conduct both searches. 

While UCC filing data is beneficial, be ready for a few challenges.

1. Lack of standardization

UCC claims are recorded and stored by each Secretary of State. That means that while the process is governed by similar statutes, UCC filing data is distributed among 51 state/territory research portals with 51 different file layouts. 

2. Naming variations

The field in which a business name can be listed within the claim is free-form. This means the claim can be filed with any acceptable variations of a business’s name. 

3. Tedious comparison and reconciliation

Each Secretary of State employs a different technology. While the types of required information are similar among claims, the placement, naming, and formatting are often different. So organizing UCC filing data from multiple states can be very time-consuming. 

Get Help with Your Mapping Work

To be usable, the claim data needs to be standardized and enriched with reliable identity information. Dun & Bradstreet actively gathers and structures the UCC filings into a usable database through its public records data collection process, and then refines and maintains this information within the comprehensive Dun & Bradstreet Data Cloud.

The Data Cloud powers multiple Dun & Bradstreet analytics solutions, meaning UCC filing information can be accessed in a number of ways: 

  • Credit, risk, and finance teams can use the public records search within D&B Credit Intelligence to find UCC filings for a particular company.
  • Procurement and compliance teams can also run a public records search with D&B Risk Analytics  to view UCC filings for a particular company. 
  • With the UCC add-on pack and D&B Hoovers, sales and marketing professionals can enter a list of secured party names and search UCC filing data. 
  • Data owners who are responsible for mastering prospect, customer, or vendor databases can engage Dun & Bradstreet to license the full UCC filings structured database – or only a portion of it – as a special project or as part of a regular update to help maintain a current, relevant map of the business network.  

UCC filing data is a good source of information that can help you map the network of businesses surrounding a distressed company — a network that may include your own customers. While this public data won’t reveal all businesses that are either vendors or clients of a troubled company, it does help sales, marketing, credit, procurement, and compliance teams start to understand which of your own customers have a relationship with a troubled entity.

With this knowledge of the network, you can begin to identify customers in your portfolio that are more likely to be impacted by a distressed business. As you narrow down your portfolio to this segment, you can more effectively focus communications, staff, and resources to better understand and respond to the concerns or needs of these customers. This intelligence also helps you make timely adjustments to contracts or strategies, so you can protect your cash flow, stability, and growth. 

If you are a Dun & Bradstreet client and need assistance with UCC filing data, please contact your account representative directly. 

Not familiar with Dun & Bradstreet’s B2B data and analytical insights or our AI-driven solutions? Explore our products here.