Developing and Using Internal Ratings - an Important Tool for Evaluating the Credit Health of Your Counterparties

Please join us for a presentation and discussion regarding developing and using internal ratings. Rachel Reisenauer, Vice President of RMG Financial Consulting, will cover the benefits and uses of scoring (and point out some weaknesses too) including:

• Providing consistency across counterparties, particularly non-rated entities
• Pointing out limitations of rating agency ratings
• Cautioning against over-reliance on just the results (need to do some homework too)
• Scoring should be just one of many tools in evaluating and understanding who your counterparites are
• Mapping your score to credit limits

She will also point out various methods of credit scoring and the pieces needed in developing scoring including:

• What pieces are needed for developing scoring
• Scorecards by counterparty type (one size does not fit all)
• Layering in adjustments (beyond financial statement info), including, quantitative adjustments to financials, qualitative factors and rating agencies
• Model should have some flexibility, transparency, and be easy to use and understand
• Importance of backtesting and validation of your model

Click here for the playback.