What is the Financial Stress Score and what does it mean?

D&B's Financial Stress Score was designed to help you predict a business's potential for failure. It is designed to predict the likelihood that a company will obtain legal relief from creditors or cease operations without paying all creditors in full over the next 12 months. The score uses the full range of D&B information, including financials, comparative financial rations, payment trends, public filings, demographic data and more.

D&B defines a financially stressed company as one that:

· Ceased operations following assignment or bankruptcy

· Ceased operations with loss to creditors

· Voluntarily withdrew from business operation leaving unpaid obligations

· Is in receivership, reorganization, or has made an arrangement for the benefit of creditors.

Voluntary discontinuance involving no loss to creditors is not defined as financially stressed.

Like the Commercial Credit Score, the risk information is classified in three ways, from the broadest (the class) to the most specific (the numerical score.) The classifications are:

1. A "Class" of 1 - 5, which is a segmentation of the scoreable universe into five distinct risk groups where a one (1) represents businesses that have the lowest probability of financial stress, and a five (5) represents businesses with the highest probability of financial stress. This Class enables you to quickly segment new and existing accounts into risk groupings to determine appropriate marketing or credit policies.

2. A "Percentile" of 1 - 100, where a 1 represents businesses that have the highest probability of financial stress, and a 100 which represents businesses with the lowest probability of financial stress. This Percentile shows you where a company falls among businesses in the D&B information base, and is most effectively used to rank order a portfolio from highest to lowest risk of business failure.

3. A "Score" of 1,001 - 1,875, where a 1,001 represents businesses that have the highest probability of financial stress, and a 1,875 which represents businesses with the lowest probability of financial stress. This score provides a direct relationship between the score and the level of risk and enables more granular cutoffs typically used in a more automated decision-making process.

Financial Stress Score

Financial Stress Class

Financial Stress Score Range

Percentile Score Range

Failure Rate

1

1570 - 1875

95-100

0.03

2

1510 - 1569

69-94

0.09

3

1450 - 1509

34-68

0.24

4

1340 - 1449

2-33

0.84

5

1001 - 1339

1

4.70