Business Information

Peer to Peer Risk Assessment

The value and scale of Peer to Peer (P2P) networks is well known. There are several examples of very successful uses of this framework including Skype, Kazaa, Napster etc. The emergence of “social” software and web 2.0 infrastructures is largely based upon the core analogy of P2P. At TrustExchange, we are building the first P2P Risk Assessment Platform which will leverage this model to enable businesses to obtain a more accurate view of risk inside their operating ecosystem (customers, vendors and partners).  Our goal is to be the "waze" of business information.  

To gain a better view of what we’re up to, it may be helpful to first discuss the core idea behind P2P networks and then expand on how it applies to risk analysis.  First, the definition, from Wikipedia, of Peer to Peer networks:

Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the application. They are said to form a peer-to-peer network of nodes.”

Note the part about peers being “equally privileged, equipotent participants,” and you’ll understand the core idea behind TrustExchange's approach. We’ve noted previously how the existing b2b credit granting and credit management process is broken. And we believe these processes can be greatly improved by creating a P2P, open and transparent risk analysis platform where the data is created and maintained by the peers participating in the network.

Currently, the data used to assess the credit worthiness or viability of a given company is maintained and controlled by the large credit bureaus such as Experian and Dun and Bradstreet. These bureaus are fundamentally middle men with limited value since they don’t grant or issue credit. Businesses make the credit decisions themselves and need a better tool that is more accurate, timely and correlated to viability.

Wouldn’t it be better when analyzing the risk of a given company, if you could not only look at their payment history, but examine how they perform in all aspects of their business? A global risk assessment which takes into account how they perform as a customer, vendor and partner?

Wouldn’t it be valuable to not only look at a single company but view an entire portfolio of customer risk, vendor risk and partner risk?

This is what we are creating at TrustExchange. If you think this is valuable and have strong opinions on the issue sign up now and participate in the discussion and give your input into the development process.

Our Epiphany. Why We Started TrustExchange.

The idea for starting TrustExchange came when one of my customers (from another company) went out of business. We rarely lost customers but when when it happened it was usually due to death (bankruptcy, shut the doors) or marriage (merger or acquisition). When companies die, it’s my experience that it’s a very painful process and a little check on the company stability goes a long way. This particular incident stood out in my mind because we had taken all of the typical precautions: checked their DnB, researched their business information, built personal relationships with the executives and interacted with them frequently.

Their failing wasn’t an event but a process where their loss of business stability extended over several months, and like the famous frog in the hot water, we ended up getting burnt in the end. A $25K burning! So here is the story:

We first met CompanyX (name changed to protect the guilty) just as they had begun getting traction. They were located in Silicon Valley, had signed several marquis customers, attracted some impressive investors, moved into a nice new office and from all accounts were pretty good citizens.

During the initial phases of the sales process, they were very diligent and asked all of the right questions about our product. The management team at CompanyX was pretty impressive. Degrees from the best schools, experience at tech stalwarts and a strong handle on their market and prospects. It was a tough sales process but in the end we were victorious and awarded the deal and promptly started contract negotiations and closing process. In the end, we negotiated a $10K startup fee and $5K per month recurring fee to use our product.

Prior to granting access of our product to customers we did a few things to check a company’s stability: Dun and Bradstreet check and we asked to see their financial statements. CompanyX, like most small privately held companies, refused to disclose their financials. It was a tough call since we had limited insight into the company stability but we had a quota to meet and they had a check for $10k, so we signed the deal!

Everything seemed fine for the first six months, they paid their bills on time and were happy with the product. Then we noticed they were 10 days late. When we called to check they apologized and said they would send it out promptly…except they didn’t. Then they went 30, 60 and 90 days late yet stayed in communication with us, told us they were fund raising and would be able to pay us soon so we didn’t turn them off. Our CFO checked their credit again and all seemed fine. After the fourth month, they stopped responding to emails or taking our calls.

Finally after the fifth month, we sent someone to their office and to our horror discovered an empty office. No people, no furniture nothing but a shell. We shut them off that day.

When I called some of my CEO peers, they had the same experience and were left holding the bag too.

Key Learnings:

1. Company stability is a process and not an event.

2. Credit report data is less than adequate.

3. Bad stuff happens to good people.

4. I could have stopped the bleeding if I had discussed with my vendor peers earlier!

5. I need to monitor company stability vs. just spot checking

Company Stability is a process and not an event. So…we started TrustExchange to help businesses monitor their risk and exchange key information to increase trust in each other. If you're interested and want to learn more about how we're doing this, CONTACT US.  

Time to Trust

Businesses have outsourced Trust. Rather than rely on on their own criteria businesses use services to help the determine the trustworthiness of other businesses. Will they pay on time? Will they provide good service? Are they helping or hurting my company’s compliance?

In some cases, this is a matter of scale, especially in the consumer market. Macy’s for instance couldn’t possibly have a deep enough conversation with every customer prior to purchase to get comfortable so they outsource that process to the likes of Visa, Mastercard or American Express.

In the business to business world, companies have outsourced this function to third parties in order to determine the likelihood of another business paying their bill or providing quality service. The only problem with this, is that businesses are different. B2B transactions usually have a much higher average selling price and are usually recurring. And, most importantly, unlike the consumer market where Visa, Mastercard and Amex underwrite credit, the B2B credit bureaus don’t actually grant credit. Businesses grant credit to each other and therefore, should not outsource this core task.

By leveraging a combination of Trust and Reputation, Trust Exchange is enabling companies to gain control of this function and bring actionable data directly to the people who need it most.

Why should a credit bureau define the “worthiness” of a business? Trust is built by a company’s consistent performance and results. Trust can be discovered most accurately by the individuals closest to that business: the owners and advisors. Reputation can be discovered by observing the way a business interacts with customers, suppliers, partners and vendors. Combined, we call this the SMART CROWD!

Who better to measure and define business performance that the “smart crowd” that’s already doing business with the company. Take back Trust, and be in control of your own reputation – Trust Exchange gives you the platform to do just that.

Stay tuned to our blog for more information.  

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