Written by Chartis Research
With the last few years of tightening credit spreads, the case for having a strong model for predicting potential credit losses has become even more prominent. The unbeatable winner in the credit risk space is Moody’s Analytics, previous winner of the Credit Risk award two years in a row, which has now also secured the new RiskTech100 ® Credit Risk for the Banking Book award.
Ed Young, Moody's Analytics
Moody’s Analytics became a separate entity from Moody’s Investors Service in 2008 and has continued to wow the market with RiskCalc™, its global suite of models for evaluating commercial and industrial credit risk. Ed Young, Senior Director at Moody’s Analytics, says there are now more than 550 customers using RiskCalc™. “We have subject matter expertise and offer best practices in credit risk scoring. We understand our customers’ problems and deliver both quality and quantity of credit risk data to drive analytics,” he says.
As interest in credit risk is soaring, the vendor has continued to refine the models to meet changing requirements. Some of those changes derive from new accounting standards, including the Current Expected Credit Loss standard and International Financial Reporting Standard 9, and Young says these are both driving the everincreasing demand for credit risk models and loss estimation. As part of RiskCalc™, Moody’s Analytics offers off-the-shelf models, but the team is also able to develop models customized to the characteristics of customer portfolios. “It’s more important than ever to tailor risk models to your experience and monitor the performance over time, to ensure the models continue to provide accurate estimates,” he says.
To continue meeting the changing requirements for credit risk models, clients are looking for more than technology and data – particularly considering the need for tailor-made solutions. “It’s not just about tools, but our knowledge and experience as well,” says Young, who explains that Moody’s Analytics stands out for its research expertise coupled with industry-leading credit risk data and analytics.
One of the recent data enhancements has been that of data on small businesses. In June 2018, Moody’s Analytics launched its RiskCalc™ Small Business Model, which is designed to help firms evaluate the creditworthiness of small businesses by calculating a credit risk score and other related credit metrics.
Going forward, customers can also expect to see RiskCalc™ enhancements driven by the acquisition of Bureau van Dijk in 2017, the information provider that aggregates, standardizes and distributes data on more than 220 million companies. As the private company data can be used for supporting credit analysis, the acquisition is another win for Moody’s Analytics’ credit risk offering. “Last year we strategically combined these data assets, and we’re now using them to improve our credit risk solutions,” says Young.