Over the years, the concept of the wisdom of crowds has been applied to any number of predictive efforts, from sports and entertainment to economic trends. Now it has emerged as a tool for assessing the financial stability of suppliers and other supply-chain partners. The concept is embodied in a financial-risk score known as FRISK, developed by CreditRiskMonitor. Chief executive officer Jerry Flum joins us on this episode to relate how the company came to realize that the mass of data it was receiving from subscribers, credit managers and purchasing professionals could be aggregated to create predictions of business stability with 96-percent accuracy. Crowdsourcing enables the tool to accurately identify financial stress as the probability of a public company failing within 12 months. Flum identifies a flaw inherent in the perspective of individual credit experts, and explains why the crowd beats them every time. Hosted by Bob Bowman, Managing Editor of SupplyChainBrain.

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Show notes:

A paper on “Assessing Public Company Financial Risk by Crowdsourcing the Research of Credit Professionals.”

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