?redit risk management is a process through which companies manage all aspects of their transactions related to business credit. It is widely used by market companies to evaluate and limit their credit risk exposure. Credit risk is the risk of losing principal or a financial reward arising from a borrower's failure to repay a loan or meet obligations. Credit risk is considered a universal factor for all companies. Below are five basic steps a company should take to manage business credits and reduce credit risks.

1. It is crucial to have a DUNS number as the first step of company's ?redit risk management. The data universal numbering system (DUNS) number is issued by businesses and the federal government to keep track of millions of companies around the world and consists of 9 digits. The application process is simple. One can apply to business credit bureaus either by phone or online. Once a credit file has been created, it is time to review it fully to understand what information it contains. Data can be updated and modified by a business owner whenever needed.

2. Meeting requirements of the credit market is all-important for any business, as this ensures a higher probability of credit approval. Most businesses will not grant credit to another company which does not have a business licence or a phone line, for instance.

3. Paying bills on time is one of the main steps business owners should take to improve their commercial credit scores (ranging on a scale from 0 to 100 with 75 or more considered an excellent rating) and contribute to a positive credit history, which will be necessarily considered by other businesses within a ?redit risk management procedure.

4. Companies should also monitor their commercial credit file and keep it updated and accurate all the time. This way they will be aware of any change in ratings before it may affect relationships with business partners, suppliers, customers and moneylenders. The business credit report often determines the amount and terms of a loan. 15-30% of all commercial losses are estimated to be due to incorrect or fraudulent data provided in the credit report. It is important that the credit file reflects one's business credit standing objectively and that a business owner is fully aware of inaccuracies and misleading data so that he or she can deal with them properly.

5. Running credit checks on partners, customers, vendors as a crucial part of ?redit risk management is another necessary step. Credit reports provide a clear complete picture of the credit status of businesses one is interested in and may help determine the amount of credit to be granted, as well as its terms and conditions. Being informed of the credit standing helps make smart business decisions. Thus, one can offer better terms to creditworthy borrowers and avoid doing business with insolvent partners.

The five business credit recommendations can help ensure that company owners can get credit when needed and, perhaps, on more favourable terms and conditions. By paying more attention to credit risk management they may ensure that they are dealing with financially reliable partners.