Credit check services are useful for decision making. They provide insight into the chances of getting your money back. It is safe to assume higher risks lower the chance of granting the money. The higher the risk, the more likely to be turned down; or so it’s thought. a 10/10 risk rating would spell a clear ‘no’ for 99.9% of applicants. Somehow however, Capita have secured a multi million pound deal with exactly that. Is this move a dangerous lay by the government? We look into the risk of ignoring the apparent ‘risk’ from Capita.
Credit checks for debtors
Assessing risk is at the heart of all business decisions. Even on small decisions, there is risk, even low risk. Lending an employed person with a good history of repayment is a low risk, but still has an element of risk. Circumstance is not always constant. Risk management therefore simply tries to inform the final decision.
It is common for creditors to employ credit checking companies to assess debtors first. At AYOM, we commonly find landlords and finance manager’s searching for validation. The reality is not that lenders want to deny a debtor, but want to feel safe in their decision.
High risk Capita
Astoundingly, Capita have been awarded a £500m even though their credit check scored very high risk. Usually high risk limits lending ability. It also limits terms of what is borrowed. Capita’s contract will allow them to run the military fire and rescue services. Looking at the broader picture, such an essential service could be argued to require much lower risk ownership?
The MoD agreed the deal after a number of scores including credit checks and a “health score”. Capita’s health score is a pitiful 3/10, labelled as “vulnerable and should be viewed with care”. The deal will see a £500 million worth spread over 10 years. Surprisingly, Serco who lost out on the deal had a lower risk rating at 8/10.
The deal will see Capita run “about 70 military fire stations worldwide”. The task ahead is huge, and with such uncertainty in the decision, questions have been raised. Should such a high risk deal go ahead? Many are unconvinced.
Unite’s national officer for MoD workers spoke to the nationa press. He said:
It is absolutely scandalous that even though the MoD’s own financial check found that awarding a contract to Capita was extremely risky, ministers thought it appropriate to award this contract.
The government has clearly learnt nothing from the Carillion fiasco. There needs to be an urgent look into how and why this contract was let to Capita.
Lower your risks with credit check services
Only time will tell if the Capita deal will result in another Carillion situation. Hopefully it will not, but, current risk scores indicate it has the potential. All decisions carry risk, and ideally a creditor will want to lower risks. The best method of making the decision is to find a credible credit check service. Many AYOM clients choose to credit check after receiving debt recovery services. No credit wants to repeatedly use debt recovery services, and credit checks are a method of prevention. With advanced software, we can provide a level of reassurance that future debtors are able to pay.
While the government is under pressure for their decision, you don’t need to be. If you have potential debtors requiring risk or credit check services, give AYOM a call. Make sure you have the knowledge needed to provide credit. Call today on 0800 130 3357 or email firstname.lastname@example.org to learn more.