Credit Risk Scorecard by wda20026


Credit Risk Scorecard document sample

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									Scorecard Development
Worldwide credit market shocks have increased the urgency among financial institutions of building and enhancing
systems that accurately and consistently assess credit risk exposures. Effective internal risk rating approaches
address the questions and challenges of knowledge, data, and internal processes to help mitigate risks while
maintaining a focus on business performance.
                           〉    When should we update models and approaches to adapt to segment and market changes?
          Knowledge        〉    What are the industry best practices and innovations in credit risk assessment?
                           〉    How do we apply outcomes of risk rating systems to make better business decisions?

                           〉    How can we build quality PD and LGD measures on low default portfolios?
              Data         〉    How should we capture and assess the effectiveness of qualitative rating factors?
                           〉    Where can we obtain data to support objective external testing and validation?

                           〉    What tools are appropriate to capture, analyze, and make use of data? How do we build them?
            Process        〉    What is the appropriate way to capture and assess qualitative risk factors?
                           〉    How do we overcome internal resistance to collecting data and reviewing procedures?

Our Approach
Moody’s Analytics Risk Management Services can work with you to build internal credit risk assessment systems
and the appropriate set of supporting scorecard templates to evaluate probability of default and loss given default
across sectors. Our team provides advice on the most appropriate qualitative and quantitative rating
methodologies and builds tools that take into account your institution’s unique perspectives and risk culture.

     1. Expert Modeling Workshop
     We assemble experts and decision-makers in your            Our experts provide perspective on your existing risk management structure
     organization to build a common understanding of the        and feedback on the benefits and drawbacks of various approaches based
     institution’s approach to risk, portfolio composition,     on first-hand experience. Our collaborative process ensures that we
     challenges, risk tolerance, and priority risk factors.     understand your institution’s risk infrastructure and drives the group to
                                                                consensus on priorities.
     2. Data Collection, Review & Augmentation
     Our team creates collection tools and clarifying text to   Based on our work with over 100 financial institutions and our experience as
     facilitate the gathering of data needed to assess your     industry practitioners, our consultants have a deep understanding of internal
     exposures. We review and scrub the data, and, where        data and collection processes and the knowledge to identify outliers, patterns,
     internal information is short, we can supplement it        and errors. In addition, we can leverage Moody’s long history of default data
     from our extensive industry default databases.             collection to supplement and strengthen internal information.
     3. Statistical Analysis
     Our staff of PhD statisticians and analysts conducts       Our proven models, statistical expertise, and analytical sophistication result in
     single- and multi-factor analyses to pinpoint individual   cutting-edge analysis that is supplemented by the knowledge of our
     and combination variables that best predict default. A     consultants. They can provide insights on what works and what doesn’t,
     Qualitative Factor Performance Assessment                  knowledge of best practices, and an objective perspective to help you make
     determines the predictive power of qualitative factors     fact-based decisions that will optimize your results.
     used in your institution’s risk management processes.

                                                                  Our expertise comes from decades at the forefront of credit risk analysis
     4. Risk Modeling & Scorecard Development
     We use the results of our analyses and discussions to     We have developed hundreds of templates and models that form a
     propose model factor weights and cut-off ranges and to    foundation for our customized scorecards. Our approach applies objective
     build scorecards adapted to your needs and portfolio.     criteria to identify relevant factors and balances the interests of various parts
                                                               of your organization to create a customized solution.
     5. Validation & Calibration
     Our analysts test, calibrate, and validate models to      Our validation techniques improve the accuracy of credit risk assessments to
     ensure their accuracy and usefulness as decision-         drive more effective risk-based pricing and more efficient use of capital,
     making tools. We assess both model performance with       allowing you to maximize financial and risk performance.
     respect to discriminatory power, stability, and
                                                               Our ongoing scorecard maintenance, validation, and calibration services
     calibration; and the risk management processes and
                                                               assist with regulatory compliance and provide a routine check on the
     methodologies used to apply the models in your
                                                               effectiveness of your risk management system for ongoing enhancements.
     6. Documentation & Knowledge Transfer
     Our team builds validation procedure manuals,             Thorough documentation and routine knowledge transfer activities will
     developmental evidence, training materials, and user      increase the transparency and effectiveness of your risk strategies. Our
     guides to support both regulatory and internal            team includes former regulators and consultants that know in detail the
     knowledge transfer needs. We can also provide             information that will be required to communicate your risk strategies to
     customized, internal training sessions to develop and     external and internal constituencies. Our team of professional trainers
     enhance the risk management capabilities of your staff.   develops and delivers knowledge transfer programs matched to various skill
                                                               levels throughout your organization.

Our Commitment
Unparalleled Expertise and Thought Leadership
Professionals with practical experience as former analysts, practitioners, and regulators – backed by over 30 years of credit
risk data and a century of experience in risk assessment – provide independent evaluations and insights that reflect a true
understanding of your business, wherever you are in the world
Proven Methodologies and Data
Leading edge tools, robust and validated models, transparent frameworks, and the industry’s most comprehensive
proprietary credit risk data set drive immediate results
Comprehensive Solutions
A multidisciplinary and integrated view of risk management across the value chain creates solutions customized to your
needs, from data architecture through advanced portfolio optimization, to support more effective decision-making

Contact Us
To learn more about how Moody’s Analytics Risk Management Services can help you meet your credit risk challenge,
please contact one of our specialists or email
                    Americas:             Buck Rumely      +1.513.563.3509
                    EMEA:                 Taranpreet Kaur +44.20.7772.1585
                    Greater China:        Peter Tsang      +852.3551.3012
                    Southeast Asia: Khaliza Khalid         +65.6823.1549

                                                                 Our expertise comes from decades at the forefront of credit risk analysis

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