Credit risk

Credit Risk Management Solution of the Year: Moody’s Analytics

With the aim of improving the way its clients manage risk, stress testing, allowance for credit losses, portfolio management, risk reporting and regulatory compliance, the suite of credit risk solutions Moody’s Analytics, including the CreditEdge platform and the RiskCalc tool, helps meet industry needs and deliver actionable solutions to businesses of all sizes and types. It also ensures that the industry is up to date on environmental, social and governance matters (ESG) Considerations and implications of climate change on credit risk.

The CreditEdge platform is a highly accurate and consistent model that measures credit risk for over 40,000 public entities around the world, in addition to being supported by a database of over 11,700 defaults over 50 years. The solution combines financial statements and market intelligence in a self-sustaining credit risk predictive measure.

The RiskCalc tool, on the other hand, provides next-generation fault and recovery analysis for private companies. Paolo Persurich, Senior Director of Product Management at Moody’s Analytics, explains how “the RiskCalc solution is powered by Moody’s Analytics Data Alliance, one of the world’s largest credit data consortia. Using a variety of out-of-the-box or customizable dashboards, the solution combines quantitative assessment with qualitative factors that affect a company’s overall credit risk ”.

Moody’s Analytics credit solutions offer a comprehensive data ecosystem that helps it go beyond simply providing risk metrics. They help provide actionable information and frameworks for quick and efficient credit decisions. Persurich describes how “our credit models are built using Data Alliance, the world’s largest consortium covering more than 114 million financial statements of private commercial and industrial companies, $ 588 billion of commercial real estate in over 360 metropolitan statistical areas, over 68% of all project finance loans initiated since 1983, asset finance and agriculture ”.

Along with growing global considerations for ESG, Moody’s Analytics strives to expand and improve its credit data offering through strategic investments in leading providers of ESG data, which it makes available to its customers via its platforms. The ESG the data is also used to help develop new integrated risk assessment tools. Persurich notes that “the additional tools include a climate-adjusted expected default frequency, a filter tool to find risks and opportunities, AI-an optimized credit sentiment score and peer group analysis ”.

Over the past 12 months, Moody’s Analytics has made significant improvements to its credit risk management solution. It launched the early warning system on the CreditEdge and RiskCalc sites. It is an integrated portfolio monitoring tool, bringing together various credit risk signals on a single platform. Clients can use the produced early warning score to identify risk exposures in their commercial and industrial portfolios and take action before losses occur. The new early warning score has also been introduced, providing a measure of credit risk that can capture the probability of default, financial statements, macroeconomic and alternative data to users.

The last 12 months have also seen improvements in the methodology for expected default frequency triggers, the launch of the credit sentiment score solution, new ‘smart’ news feeds delivered in real time, financial data more integrated, among others.

Describing what its clients are looking for today, Persurich notes that the pace of changes in the economy, markets and technology has fundamentally changed the way its clients do business: “They need a Fast and comprehensive credit analysis and assessment of opportunities at your fingertips. They demanded a risk assessment for potentially any business in the world, with intuitive and easy-to-understand metrics that take into account all possible sources.

He adds that customers want metrics to cover market and financial data in addition to alternative data such as payments, public opinion and ESG. The Moody’s Analytics deployments we’ve seen this year all aim to improve its credit risk solutions to encompass each of these demands.

Moody’s Analytics highlights how it was able to seamlessly switch to remote work, both for itself and for its clients as the pandemic unfolded in early 2020. It has launched a new round of ongoing research, an expected default frequency report for businesses, which details the impact of Covid -19 on credit metrics and industry trends.

In addition to all of the work accomplished over the past 12 months, Moody’s Analytics continues to move forward and invest in the future. Persurich explains that “we are investing in the next generation of predictive analytics to help our clients prepare for the ‘next normal’ and make better credit decisions faster.”

In 2022, a single platform will be used to access public and private exhibits, dashboards and models, providing expanded coverage of 400 million public and private companies, Persurich said.