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October 2018

Identify the risks in your private firm portfolio using Moody’s Analytics RiskCalc™ Early Warning Toolkit methodology.

This highly-informative webinar provides a practical approach for effectively monitoring your organization’s large portfolios and reducing your risk exposure.

Private firm Expected Default Frequency (EDF™) metrics are forward-looking probability of default measures that combine financial statement and equity market information into a highly-predictive measurement of standalone credit risk. The RiskCalc Early Warning Toolkit recommends tracking five EDF-related metrics associated with elevated future default risk. Learn which metrics you should be identifying and tracking to reduce your portfolio risk exposure.

Our subject matter experts discuss:

  • High-level best practices and the practical application of the Early Warning Toolkit for private firms.
  • Recent Early Warning Toolkit research enhancements including optimized EDF trigger levels, and a Deterioration Propensity Index.
  • Tools available via Moody's Analytics Excel Add-in, including customized templates and dashboards.
Related Insights
Whitepaper

Sovereign & Size-Adjusted EDF-Implied Rating Template (for Private Firms)

RiskCalc™ EDF™ (Expected Default Frequency) values and agency ratings are widely used credit risk measures. RiskCalc EDF values typically measure default risk for private companies, while agency ratings are only available for rated companies. A RiskCalc EDF value measures a company's standalone credit risk based on financial statement information, while an agency rating considers qualitative factors such as Business Profile, Financial Policy, external support, and country-related risks. Moody's Analytics new Sovereign & Size-Adjusted EDF-Implied Rating Template combines RiskCalc EDF values with additional factors to provide a rating comparable to agency ratings for private companies. The new template applies to RiskCalc EDF values across numerous geographies and regulatory environments. With the new template, users can generate a rating more comparable to an agency rating than RiskCalc EDF values or EDF-implied ratings. Analyzing data from 3,900+ companies in 60+ countries, we find that sovereign rating and total asset size, in addition to EDF value, have a statistically significant impact on an agency rating — our quantitative template incorporating these three variables reliably estimates agency ratings in a robust fashion.

December 2018 Pdf Maria Buitrago, Uliana Makarov, Dr. Janet ZhaoDr. Douglas Dwyer
Whitepaper

Identifying At-Risk Names in Your Private Firm Portfolio — RiskCalc Early Warning Toolkit

This report outlines a practical approach for using RiskCalc EDF credit measures to effectively monitor large portfolios of private firms and to proactively identify at-risk names. The RiskCalc Early Warning Toolkit Excel add-in is an easy to use, yet comprehensive tool that allows users to focus costly and scarce resources on a highly targeted selection of the most at-risk names in their portfolios. This research for private firms compliments previous research on Early Warning Toolkit for public firms. The Early Warning Toolkit identifies at-risk names within a private firm portfolio well before default, using a number of different EDF-related risk metrics.

November 2018 Pdf Ziyi Sun, Dr. Janet Zhao, Gustavo Jimenez

Moody's Analytics Webinar: Identifying At-Risk Firms in Your Private Firm Portfolio

Learn how to identity the risks in your private firm portfolio using Moody’s Analytics RiskCalc™ Early Warning Toolkit methodology.

October 04, 2018 WebPage Dr. Douglas Dwyer
Webinar-on-Demand

Identifying At-Risk Firms in Your Private Firm Portfolio

Identifying At-Risk Firms in Your Private Firm Portfolio

October 2018 Pdf Dr. Douglas Dwyer, Gustavo Jimenez, Ziyi Sun
Whitepaper

Features of a Lifetime PD Model: Evidence from Public, Private, and Rated Firms

With the new CECL and IFRS 9 requirements, we see an increased need for lifetime probability of default models. In this document, we formally investigate and summarize the term structure properties consistently seen across public, private, and rated firms. We observe that the default rate for “good” firms tends to increase over time, while the default rate for “bad” firms decreases over time, an indication of the mean-reversion effect seen with firms' default risk.

May 2018 Pdf Sajjad Beygiharchegani, Uliana Makarov, Dr. Janet ZhaoDr. Douglas Dwyer
Whitepaper

Combining Financial and Behavioral Information to Predict Defaults for Small and Medium-Sized Enterprises – A Dynamic Weighting Approach

One large challenge lenders currently face is how to combine different types of information into metrics that can support good business decisions. Currently, the banking industry uses two primary types of information — financial information and behavioral information — independently, to assess risk. Financial information includes Income Statement, Balance Sheet, Cash Flow, and Financial Ratios. Behavioral information includes spending and payment patterns, among others. Both types of information provide unique insights, but, to date, they have not been combined to generate one comprehensive risk metric for commercial use.

September 2017 Pdf Alessio Balduini, Dr. Douglas DwyerDr. Janet Zhao, Sara Gianfreda, Reeta Hemminki, Lucia Yang
Article

Combining Information to Better Assess the Credit Risk of Small Firms and Medium-Sized Enterprises

In this article, we discuss the issues associated with acquiring behavioral and financial data and transforming it into a business decision. We also present a unified modeling approach for combining the information into a credit risk assessment for both small firms and medium-sized enterprises.

July 2017 Pdf Dr. Douglas Dwyer
Article

Combining Information to Better Assess the Credit Risk of Small Firms and Medium-Sized Enterprises

In this article, we combine financial information with behavioral factors to more accurately assess credit risk for small firms and medium-sized enterprises.

July 2017 WebPage Dr. Douglas Dwyer
Article

Weekly Market Outlook: Broad Measures of Sales and Profits Are Mediocre

First-quarter 2017 revealed solid operating results for the S&P 500. Nevertheless, other broad measures of business-sector operations have been flat to lower.

June 2017 Pdf Franklin Kim, Njundu Sanneh, Yukyung Choi, Irina Baron, John Lonski, David Munves, Tomas Holinka, Katrina Ell, Xian Li, Alaistair Chan
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