How the insolvency risk is calculated

The risk score is the estimated probability that an active company enters formal insolvency within the next 12 months. It is learnt from what companies looked like before they became insolvent, using official register and accounts data only.

What counts as insolvency

Bankruptcy, compulsory or creditors' voluntary liquidation, administration and receivership. Rescue procedures, such as a company voluntary arrangement or a Belgian judicial reorganisation, count as the first sign of distress but not as insolvency on their own. Solvent liquidations (for example a members' voluntary liquidation) are not insolvencies.

Measuring companies at the right time

Each insolvent company is measured at a random point 3 to 15 months before its first distress event. Anything the register records because of the insolvency, such as a liquidator's filings, therefore cannot influence the score. Active companies are measured on a random day within the last year. Accounts only count from the day they were published.

What the model looks at

• Structure: age, legal form, industry and region.
• Filing behaviour: how many accounts were filed, how old the latest accounts are, late filings and overdue accounts.
• Financials: equity and equity ratio, losses, current ratio, cash, short-term debt, return on assets, growth and employees.

Model and calibration

A gradient-boosting model is trained on the insolvencies of the last five years against a large sample of active companies. Its output is calibrated on held-out data reweighted to the real population, and shifted so that the average risk of today's active companies equals the observed annual insolvency rate. Each company page also shows the factors that push its risk up or down: how often companies in the same group became insolvent compared with the average.

Limits

The score is a statistical estimate from public data, not a credit rating or advice. It does not know about unpublished events such as a lost customer or new financing. Coverage differs by country: in the United Kingdom most small companies file a balance sheet only; in Belgium the financial data starts in 2022; in Estonia companies deleted before our data collection started are missing, so the Estonian average rate is understated.