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guide to strengths and weakness of a ctos check

6 Reasons A CTOS Check Sometimes Isn’t Enough (And How To Fix It)

For SMEs in B2B, risk management involves a thorough understanding of a client’s risk profile.  

Sadly, it’s not very polite to ask a CEO if their company recently defaulted on bank loans. 

That’s when businesses in Malaysia turn to a Company Credit Report from CTOS Data Systems, the country’s leading credit reporting agency.

But is a CTOS Report alone sufficient? 

We’re afraid the only answer is ‘maybe’ as it depends on the level of insight required. 

In this post, we’ll try to help you decide for yourself by taking a look at:

  • What a CTOS Company Report is, 
  • The insights provided by a CTOS Company Report, and ultimately
  • The limitations of a CTOS Company Report

Let’s go!

What is a CTOS Company Credit Report?

CTOS Credit Sample Report

A CTOS Company report aggregates data from various trustworthy sources to indicate a company’s overall:

  • financial standing
  • ongoing legal proceedings, and
  • repayment habits 

In theory, this allows businesses to avoid onboarding clients with unfavourable risk profiles. 

Sources of a CTOS Company Credit Report

We mentioned that CTOS uses reliable sources, so rest assured they won’t cite Wikipedia. 

Instead, CTOS refers to various statutory bodies and government institutions, including:

  • The Companies Commission of Malaysia (SSM)
  • The Central Bank of Malaysia (CCRIS)
  • Online court listings
  • Publications and gazettes of the government
  • Malaysian Department of Insolvency (MDI)
  • Malaysian Insolvency Agency (JIMA)
  • Registrar of Societies (ROS)
  • Details provided by creditors, litigators, and trade referees

Insights from CTOS Company Credit Reports

There are presently three tiers of CTOS Company Credit reports, each more detailed than the last.

Just for example’s sake, let’s say you wanted to get a credit report on MISHU.

Here’s MISHU’s page on the CTOS website.

At the most basic tier, you get information about our company’s:

  • Latest Corporate Profile From SSM
  • Directors & Shareholders
  • Financial Highlights

At the highest tier, you get information about our company’s:

  • Latest Corporate Profile From SSM
  • Directors & Shareholders (up to five directors)
  • Financial Statement & Analysis
  • Cash Flow Statement
  • Credit Rating
  • Credit Score
  • Default Rate
  • Proposed Credit Limit
  • Active Litigation
  • Defaulter Status
  • Phone & Address Validation
  • Biz Activity Validation

Additionally, this tier of report includes several value adds:

  • Industry Outlook & Analysis
  • Credit Risk Evaluation & Recommendation

It should come as no surprise that the higher tier CTOS Company Credit Report costs significantly more than the basic one. 

Additionally, you are practically guaranteed to have access to the basic report since it only aggregates data from publicly available sources, while the higher tier reports depend on the subject of said report granting consent to have their data shared. 

Good thing we’ve got nothing to hide, so sure!

6 Limitations of a CTOS Check

As the previous section demonstrates, a CTOS report on a company offers significant insights into their financial standing and trustworthiness. 

However, it comes with certain limitations that users should be aware of.

1. Information might be outdated 

As CTOS predominantly aggregates data rather than conducting primary research, it’s possible that the data in their readily available reports do not accurately reflect a company’s current standing.

It’s for this reason that CTOS allows companies to submit requests to update their CTOS profiles, but it would be unrealistic to assume that all companies routinely do this – do you?

2. Relevant past information might be left out 

Under the Credit Reporting Agencies Act 2010, CTOS is only allowed to maintain a company’s credit records for 24 months.

A potential client could have had a very shaky past and only recently stabilised, and this won’t be reflected in the CTOS report if that past extends beyond 24 months. 

3. Limited to information from Malaysian sources

As can be seen from the list of sources cited in the previous section, CTOS exclusively aggregates data from Malaysian sources. Though credible, for certain companies with international ties or dealings, this may paint an incomplete picture of their financial status.

4. No director criminal background check

The board of directors running a company can be just as important as the company itself, and unfortunately, a typical CTOS report does not delve sufficiently deeply into a director’s records to establish their credibility.

5. No overall reputation check  

Although it’s understandable that CTOS strictly limits its data sources to highly credible bodies and individuals, there can absolutely be value in investigating the general online reputation and presence of a company, such as their social media influence, media portrayal, and public perception.

6. Lower tiers do not come with advice

As seen in the previous section, the most basic report only comes with a financial snapshot and statutory details, which, while helpful, cannot give you advice or recommendations on how to interpret the findings. 

Not every subject with a high credit rating is a good idea for long-term partnerships, and not all subjects with poor ratings should be dismissed. Context is key, and unfortunately the Company Credit Score report does lack this context.

All this is of course not to knock CTOS and the invaluable service they provide. 

At no point do they misrepresent the utility of their reports, but like all tools, it is important to understand both its strengths and weaknesses.

Leverage Experts to Overcome These Limitations

Now that we’ve discussed the limitations, let’s talk solutions: engage business consultants.

Think of it as putting a great instrument in the hands of a great musician.

siti nurhaliza
A great singer is every microphone’s best friend.

While business consultants should stick to singing in the shower, they can almost certainly provide more context based on the information provided in a CTOS report, thereby enabling you to make more informed decisions.

Furthermore, as students of business itself rather than any one industry, consultants usually have an above average knowledge of real-time industry news and trends.

Let MISHU Help With Your CTOS Check

HOBD Adrian

MISHU’s team of business consultants can assist you in obtaining a CTOS Company Credit Report, including obtaining consent from report subjects. Furthermore, we’d be more than happy to sit down with you and provide more context on the report findings to give you a clearer overall picture. Get in touch today.

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