Analytical Credit Risk Case Studies

We’ve recently experienced some of the most extraordinary events in our lifetime, a full year of the Russia-Ukraine conflict, global monetary interventions to fight one of the most significant inflations in recent history, and a continuing threat from global COVID containment policies that continue to disrupt supply chains today.

It goes without saying that the importance of monitoring and embedding macroeconomic factors into credit risk assessments is critical.

Read the results from our recent research where we assessed the credit risk of 22 industry sectors (Corporates and Banks) in the United States and compare historical trends based on the probability of default score generated by the RiskGauge™ Model, with forecasted trends based on this score conditioned with macroeconomic scenarios.

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In the past, only large financial institutions have ventured into deploying credit risk automation and workflow systems due to the volume of resources and investments required and the need to lock down processes. However, it is not uncommon today, to meet with a corporate credit risk officer who is looking to discuss the options, benefits, and risks of automating customer onboarding and credit risk management and monitoring processes.

Read about the risks and opportunities of credit risk automation here.

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Corporate Credit Risk Macroeconomic Recovery Projections Post-COVID-19

In the U.S., continuous government stimulus payments and efficient vaccine rollouts have further revived both supply and demand for goods and services. However, although public companies began publishing financial reports for the second quarter of 2021, the results did not show the full extent of the global recovery, due to the intrinsic lag effect of financial performance.

To help navigate these transition times, we used our Macro-Scenario model to analyze how the credit risk of public and private firms in the U.S. may change under different macroeconomic projections.

Highlights include:

• The degree of economic recovery in different industries is mostly driven by the characteristics of post COVID-19 positive macroeconomic projections.
• Energy, industrial products, and construction materials, as well as retail and media industries, exhibit the best recovery over the Q1 2022 outlook when compared with the baseline scenario.
• The real estate and construction materials industries also show strong recovery and transition in credit risk.