Empirical Credit
Risk Analytics
ECM Analytics is mathematically constructed and actuarially informed to measure and thereby manage the lender’s retail loan portfolio.
Credit Expo’s primary and most popular product
ECM Analytics is Credit Expo’s primary and most popular product. It is mathematically constructed and actuarially informed to measure and thereby manage the lender’s retail loan portfolio. The new international reporting regulations, IASB 9 and FASB represent a radical shift from the Incurred Loss Model to the Expected Loss Model, for loss provisioning.
Why it is needed?
Some of the Imperatives for Analysing and Managing Credit Risk
- Safe New Lending, through analysis of risk sources
- Identification of Emerging Risk in accounts, for earlier intervention
- Measurement of Operating Performance, with verifiable League Tables for: Underwriters, Dealers, Product types, Credit Scores, Loan Maturities, Collections teams, Lawyers and Risk Cohorts (anti-fraud)
- Prioritisation of Accounts for Collections based on value at risk, not simply on balances
- Directing and empowering the Collections Teams
- A Common Language with objective measurement of credit risk for Collections, New Business and Management
- Accurate Risk Pricing based on the lender’s own experience, with pragmatic risk mitigation.
- Confident, Speedy decision making, with full audit trails
- Elimination of costly and destructive cross-subsidisation of loans
- Vastly improved Competitiveness
- Full Trend Analyses with Market Benchmarking
- Greatly enhanced Portfolio Profitability for stakeholders and securitization
Our Approach
Credit Expo’s approach to installing Empirical credit risk (ECM) in a Bank
- Initial Review of Data
- Uploading of data onto the Credit Expo software
- Portfolio Segmentation
- Calculation of Loss Forecasts and of Provisions
- Trend Analyses
- Risk Differentiation
- Reporting on Portfolio Lifetime Loss Forecasts, Performance ‘League Tables’ and Loan Risk pricing
An End-to-End Analytical System
Designed to be end-to-end, ECM covers all operational aspects
The new international reporting regulations, IASB 9 and FASB have represented a radical shift from the Incurred Loss Model to the Expected Loss Model, for loss provisioning.
ECM is a predictive expert system for measuring and managing credit risk; it is compliant with the above reporting requirements; it also addresses the traditional and serious mismatch between income and risk recognition to measure ongoing profitability accurately for P & L.
- New business acceptance
- Credit Risk pricing
- Performance Management
- Collections
- Regulatory (Expected Loss Model) loss forecasting
- Portfolio Evaluation
Key Benefits
Empirical Credit Risk Management (ECM) has been architected from the outset to include Performing with Non- Performing loans, while also providing more granular analysis. (The ECM approach has anticipated and included much of the logic and procedures (of AI)
- Reduces Loan Losses significantly by providing greater risk transparency and measuring credit risk at the account level
- Improves New Business Policy through credit risk identification and pricing
- Improves collections management by account loss forecasting and directing account collections
- IFRS and FASB reporting compliance
- Calculations are individualised and verifiable for compliance reporting
- Accurate Portfolio Loss Forecasting
- A measurement of risk especially in the Well Performing portfolio
- Performance Analysis at all levels
- A new common language for new business, collections and senior management
- Portfolio evaluation and analysis
- Facilitating securitisation for M & A work
Complimentary Consultation
We would be delighted to undertake a complimentary consultation to show you our approach and identify where we can be of assistance to your organisation in reducing credit risk.
