Debtor Risk Assessments
Measures the probability of a company default within a 12 month period
FOUR GOOD REASONS TO CHOOSE DEBTOR RISK ASSESSMENTS
- Segment your portfolio so you can focus on your most critical risks
- Global database of more than 145 million companies
- Same data analysis methodology used around the world
- Monitoring service alerts you to changes in the risk profile of customers.
FOCUS ON YOUR CRITICAL RISKS
The Coface Debtor Risk Assessment measures the probability that a company will default over a 12 month period, helping you determine whether a customer is an acceptable or a high risk.
The DRA uses a scale from 0 to 10, with each of the 10 grades associated with a probability of default. Each score corresponds to a category of risk.The higher the score, the lower the risk of default.
What Goes into a DRA?
Coface uses a number of data elements to assess a company's short-term probability of default.
The core of the assessment is comprised of data points from the following categories:
- Financial Ratings - Based on a company's consolidated financial figures
- Payment Incident Ratings - Derived from statistical scores
- Company Identity Data - Including company age, location, line of business, employees, court rulings, etc.
Additional inputs include:
- Financial Lines Adjustments - Taking into account the company's ulitmate parent
- Trend Behavior - Based on the history of a company's DRA
- Advanced Coface Indicators - Adjusting for external shocks to the economy according to a company's sector, size and geographic location
- Coface Senior Analysts - Who review and DRAs
The Assessment Process
Coface continually recalculates the DRAs on companies in its database. If a DRA changes, it will be updated in Cofanet, our online portfolio management tool.
Some companies might not be rated for local regulatory reasons, legal circumstances (i.e. public institutions) or due to lack of information. Each time sufficient new financial and/- or non-financial information is received, Coface will calculate a new DRA.
DRA as a complement THE CREDIT OPINION
The DRA works alongside the @rating Credit Opinion to give you a fuller picture of company health. The @rating Credit Opinion reflects a company's capacity to honor financial commitments and is proportional to the size of the company. The DRA predicts the likelihood of the company becoming insolvent, regardless of its size.
Delivering a Valuable Service
A New Zealand manufacturer of consumer electronics sells its products around the world. While the company has a sophisticated credit department with multiple assessment tools at hand, it needed a better way to segment clients according to their potential risk. Knowing that Coface extends insurance coverage on over $500 billion in receivables at any given time, and that Coface must closely monitor this risk for the sake of its own financial health, the company turned to Debtor Risk Assessments (DRAs) as a check against its own internal credit monitoring.
The manufacturer uploaded its client list into a Cofanet portfolio. All clients with a DRA below four are placed on a watch list for special monitoring. Because the manufacturer chose to monitor the DRAs, alerts are sent when a client’s assessment changes.