What do Welfio flags mean? Should I not invest in flagged companies?

The purpose of the Flags is to raise investors’ awareness about potential threats regardless of the result of the total Risk Score. Meaning, that there are some especially important factors that you should be aware of regardless of the Risk Score results.

Does this mean that you cannot trust our Risk Score? No, it just implies that in some cases specific Red & Orange Flags might be game-changers for an investment decision. Therefore, these factors are indicated separately so that our users would be more alert to potential threats.

For example - a Red Flag of not having financial statements according to IFRS reporting standards could be a significant factor not to make an investment in the company. Why? Well, there could be a high likelihood that the company has understated provisions, which could have a direct impact on the company’s profitability score. So, as we cannot validate the reporting numbers - there is a higher risk that financial statements do not show a true and fair view of the company’s result.

Consequently, you have to always look at our Risk Score and our Red & Orange Flags, which are conveniently placed in the Investing Guide and the lending company details view (that you can access by clicking on a particular lending company in the Investing Guide view).