At a time when traditional approaches to credit risk management have proved to be grossly inadequate, Risk Limited’s Counter Party Credit Risk Assessments are the solution to managing a critical risk component – counter party credit risk.
For managers of large portfolios these Risk Assessments are an excellent resource to support internal credit risk staff. For companies with smaller or mid-size trading portfolios, our Risk Assessments are the logical answer for effectively managing a key risk without incurring the high cost of staffing. This is the reliable, yet cost effective alternative to developing internal resources.
In addition to the risk assessments of counter parties in the client portfolios, extensive references and tools are provided on the credit portal for subscribers.
Since credit conditions are not static, monitoring credit risk of trading portfolios and counter party transactions is critical for effective risk management. In the current economic environment, market conditions can be volatile and even unstable.
Recent markets have shown that the financial strength of companies is usually not static and can in some instances change for the worse very rapidly. Monitoring of credit exposure should be increased during volatile market conditions, and key indicators should likely be reviewed weekly during normal conditions. Significant changes in indicators or negative news that suggest possible deterioration of financial health of a counter party (or sector) dictate vigilance and close watch of the counter party exposure.
In-house resources and staffing for adequate, continual monitoring can be costly. The Risk Limited Portfolio Monitoring service offers an effective alternative and comparative cost savings. The monitoring service uses the same superior analytics and breakthrough proprietary models of Risk Limited Credit Risk Assessment service.
Unfortunately, the recent financial crisis has raised concerns about the integrity and value of some credit rating agency ratings, whether for publicly-traded or privately-held companies. Security & Exchange Commission Chairman Mary Schapiro noted that investors consider ratings for decisions and, “that reliance [on agency ratings] did not serve them well over the last several years.” In the current environment, if credit rating agency assigned ratings (and upgrades/downgrades) are available, then these should be considered, but certainly should not be solely relied upon for counter party default probability assessments.
Risk Limited’s Credit Watch service provides the effective alternative as an early warning system for deterioration in the financial health of your counter parties.
Credit Line Selection Tools
In addition to making counter party risk assessments, there is often the need to apply the counter party information and develop a set of credit line limits. This should be done in the context of risk propensity, business need and upside potential. For allocating credit lines and setting credit spread pricing within trading portfolios, the issues of market price volatility and uncertainty of exposure must also be considered. Risk Limited Credit Line Selection and Allocation service provides models and support for specific client situations and counter party credit risks.
Credit Risk Management Advisory Support
Risk Limited’s Credit Portal provides you with the key tools needed to effectively manage your counter party credit risk, but there are times when advice of a credit risk management expert may be needed. The Risk Management can supply you with the expertise and experience that will make a difference for you.
During times of significant growth in trading activity and change of portfolio counter parties, times of dramatic changes in market conditions, or periods of organizational and staff changes, the access to the immediate resources from Risk Limited to supply experts who can work as an extension of your team can be very effective in increasing productivity and avoiding substantial risks during transitions.
Your Risk Limited advisory support will be provided by professionals who are very knowledgeable in risk management, as well as your industry segment. Whether short-term support or longer term, on-going advisory work, the Credit Risk Management Advisory Support services can be relied upon to meet your objectives and provide innovative solutions.