Understanding the Probability of Distress (PoD®) [BETA]
Please note: The Probability of Distress (PoD®) [BETA] score is currently available in BETA.
What is the PoD®?
The Probability of Distress (PoD®) is a proprietary Company Watch score designed to predict the likelihood of a company experiencing financial distress.
It represents a significant advancement over traditional models. Unlike the H-Score®, which relies solely on publicly available financial data, the PoD® combines:
- Financial data
- Non-financial (behavioural) data
This makes the PoD® a more dynamic, responsive, and predictive risk assessment tool.
Where can I find the PoD®?
You can access the PoD® directly from the main dashboard:
Left-hand menu → Risk Assessment → PoD® [BETA]
Understanding the PoD® Profile
When viewing a company’s PoD® profile, you will see:
- Probability percentage (likelihood of distress)
- Risk band (e.g. Minimal to Critical)
- Recommended credit limit
- Recommended contract limit
Contributing Factors
Below the main PoD® chart, the Contributing Factors section highlights the key drivers behind the score.
- 🟢 Green bars – Positive impact on the score
- 🔴 Red bars – Negative impact on the score
This helps you quickly understand why a company has received its PoD® rating.
PoD® Risk Categories
The PoD® translates a company’s financial and behavioural health into clear, colour-coded risk categories:
- Minimal risk
- Low risk
- Moderate risk
- High risk
- Very high risk / Critical risk
|
Risk Category |
POD® Score Range |
Status |
Risk Description |
|
Critical Risk |
8%+ |
Critical |
Very high risk of financial and operational distress. The company is showing strong signs of instability. Immediate caution is recommended |
|
High Risk |
2.0% – 8.0% |
High |
High risk of financial distress. The company may be experiencing financial pressure or adverse external indicators. |
|
Moderate Risk |
0.5% – 2.0% |
Moderate |
Moderate risk of distress. The company appears stable but may be vulnerable to changing conditions |
|
Low Risk |
0.1% – 0.5% |
Low |
Low risk of distress. The company appears stable and likely demonstrates healthy financial and operational performance |
|
Minimal Risk |
0 – 0.1% |
Minimal |
Very low risk of distress. The company appears financially and operationally secure. |
Why is a PoD® showing as N/A?
In some cases, a PoD® cannot be calculated.
Most commonly, this occurs when a company is already distressed or lacks sufficient reliable data.
A PoD® will not be generated if:
- The company is not live
- The company has ceased trading or is dissolved
- The company is dormant
- No data is available
- No accounts have been filed for 36 months
- Negative sales are reported
- Key information is missing (e.g. incorporation date or address)
- The company is foreign and duplicated
- The company has been converted or closed
- Court notices are filed (e.g. NOIAA)
Financial Distress Index (FDI) vs PoD®
|
Financial data only |
Financial + behavioural data |
|
Corporate sector only |
Corporate + financial sectors |
|
Static financial analysis |
Dynamic risk modelling |
|
Score (0–100) mapped to % |
Direct probability % + risk bands |
Credit and Contract Limits
The PoD® is used to calculate recommended exposure limits. These should be used alongside your organisation’s risk appetite and internal policies.
Credit Limit
Represents the recommended maximum exposure on standard 30-day terms.
Maximum cap: £50m
Formula:
Credit Limit = ((Net Worth × 0.5) + (Working Capital × 0.5)) × Risk Coefficient (based on PoD®)
Contract Limit
Represents the recommended maximum value for a single contract or transaction.
Maximum cap: £200m
Formula:
Contract Limit = (Annualised Turnover ÷ 5) × Risk Coefficient (based on PoD®)
Important
For Newly Incorporated companies with limited financial history a PoD® is still generated.
A Credit Limit and Contract Limit is still calculated according to the following rules:
- The limit is calculated as Issued Capital * 0.15 * Risk Coefficient (based on PoD®)
- A maximum limit of £50,000 applies
- If the company is VAT registered:
- Minimum limit of £2,000, £5,000 or £10,000 depending on risk level
- If the company is not VAT registered:
- Minimum limit of £2,000 (for Moderate risk companies or below)
- Companies with overdue accounts receive no limit