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OPINION<br />
Data Reliability<br />
Is the data in my automated credit<br />
report up-to-date?<br />
AUTHOR – Christina Massaad<br />
THE reliability and freshness<br />
of the data contained within<br />
is of fundamental importance<br />
when investing in a business<br />
credit report, especially if you<br />
are buying in bulk through<br />
a package or subscription. However, there<br />
are fundamental differences between the<br />
availability of commercial data in the developed<br />
world and that in developing countries, so it is<br />
wise to ensure you are aware of potential pitfalls<br />
when purchasing international reports.<br />
The composition of a robust business credit<br />
reports relies on five overriding factors:<br />
Firstly, the origin of the basic registration<br />
and activity data, for example: whether it<br />
has been extracted from official sources<br />
or collated from other less reliable sources<br />
such as business directories, social media or<br />
the subject’s website. Not every country has<br />
commercial registration data available online<br />
and if it is online it may be in the local language<br />
and may not be free of charge to access.<br />
Secondly, the date the data was last updated is<br />
crucial. Whether it has been updated within 24<br />
months, six months or was a fresh investigation<br />
will make a huge difference. It is advisable for<br />
the data to be as updated as possible, especially<br />
when you’re dealing with extending large<br />
amounts of credit; but registry information<br />
is usually only updated annually or even less<br />
frequently in many countries.<br />
Financial statements add great depth of<br />
knowledge to a credit report but these are not<br />
available in several countries, simply because<br />
filing of accounts is not a legal requirement.<br />
In any case, it should always be noted that<br />
accounts, even if available, are merely an<br />
assessment of the previous year or quarter.<br />
The next important factor is perhaps<br />
surprisingly the original language of the data.<br />
Misinterpretation or incorrect translation<br />
of crucial information can lead to errors in<br />
correct identification of a company, or overlook<br />
important links to other companies, directors<br />
or shareholders because of mistranslation that<br />
may affect the overall risk analysis. Correct<br />
matching of international standards such as<br />
activity codes (UKSIC/NACE) or International<br />
Financial Reporting Standards (IFRS) is essential<br />
for the data to be transferred automatically into<br />
various formats around the globe – especially<br />
important if receiving credit reports via API or<br />
CRM (system to system applications).<br />
Lastly, an informed and accurate credit<br />
opinion is a key factor which relies on all of the<br />
above.<br />
Consequently, due to the variety of factors<br />
that a reliable automated instantly available<br />
credit report should contain, we must recognise<br />
the differences in the developed world with data<br />
availability from developing countries.<br />
MIDDLE EAST<br />
In the Middle East as well as other regions there<br />
are strict limitations on non-publicly available<br />
information that can be lawfully obtained. One<br />
of the more serious barriers to data accessibility<br />
is the practice of offshore registration and freezone<br />
entities. The latter concept is evident in the<br />
Middle East, and, more specifically, the United<br />
Arab Emirates (UAE). When a company registers<br />
with free-zone authorities, they may well be<br />
seeking the higher degree of secrecy that these<br />
zones can offer. Through legal protection of<br />
ownership rights, free-zone jurisdictions uphold<br />
strict limitations increasing the difficulty to<br />
draw data on these companies. Free zones offer<br />
complete confidentiality, where beneficial<br />
owners are offered anonymity and guaranteed<br />
no disclosure of Ultimate Beneficial Owner<br />
(UBO) to local authorities. The UAE contains<br />
over 100 free trade zones, each with their own<br />
laws and jurisdictions. Free-zone companies, in<br />
this respect, parallel with offshore companies,<br />
especially in the sense that they are not subject<br />
to federal commercial law and are considered<br />
outside the country’s jurisdiction.<br />
There are other obstacles too. In Egypt, for<br />
example – home to around 100 million people<br />
and reportedly one of the fastest growing<br />
economies in the Middle East company<br />
registration data is still held on hand written<br />
paper registers or in pdf files; not even digitised<br />
let alone structured, so bringing this data online<br />
is a slow and laborious process. Obtaining<br />
copies of corporate records involves sending<br />
someone in person to find and photograph<br />
the correct page, so knowing the commercial<br />
register number or the date of incorporation in<br />
advance is mandatory.<br />
OVER EXPECTATIONS<br />
Automated data has revolutionised the business<br />
intelligence scene, providing fast, efficient and<br />
reliable data at the click of a button. However,<br />
The Recognised Standard / www.cicm.com / April <strong>2019</strong> / PAGE 24
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