Helping You to 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. If you choose to monitor scores, we will inform you when a customer'sDRA changes.
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: Low, Moderate, Average, Medium High, High, Very High. The higher the score, the lower the risk of default.
Using DRAs can benefit your credit management department in several ways.
|Focus on Your Critical Risks|
Use DRAs to segment your portfolio in terms of risk, which allows you to focus on your most critical risks.
|Standard Scale Worldwide|
Because Coface gathers and analyzes company information in a uniform way around the world, the DRA may be used to compare the default risk of companies regardless of their location.
|Coface follows 55 million companies around the world. Chances are, we have already identified and analyzed the companies in your portfolio.|
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 into the assessment formula 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. If a buyer is not assessed, the probability of default for the buyer will be considered as "Medium High" Risk (Score 5) until it is assessed.
DRAs as a Compliment to Credit Limits
The DRA works alongside the @rating Credit Opinion (or credit limit) 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.