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Introduction to the Financial strength module Brussels - 13th of September 2013

Introduction to the Financial strength module Brussels - 13th of September 2013. Financial strength. The concept. Financial data: expanding from local scope to international BvD used to partner for local scores for years

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Introduction to the Financial strength module Brussels - 13th of September 2013

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  1. Introduction to the Financial strength module Brussels - 13th of September 2013

  2. Financial strength The concept Financial data: expanding from local scope to international BvD used to partner for local scores for years Starting from 2009: BvD decided to challenge partners/new potential partners to build models with international scope, based on harmonized presentation of data available on Orbis

  3. Financial strength Partnership 2013:already 6 different score providers Specialists in their domain Some of them recognized credit agencies Evaluating different aspects of companies strengths/weaknesses (financial score: ability to pay operating costs, reduce debt and return capital to investors, Probability of default, Environmental risk, Performance vs peers, etc.) Using different views and methodologies

  4. Financial strength Currently in BvD products More than 15 million companies immediately scored Scores available even for small or medium-sized companies Comparable results between geographies/industries Alert/monitoring in case of score change (benchmarking)

  5. Financial strength Some insights into the models

  6. modeFinance – More model • 15.5 million companies with MORE scoresin Orbis • Not mathematical black box • MORE class based on ratio analysis • Approx. 15/16 ratios used – differ from country to country – classes can be weighted differently • Country and sector specific weightings • 9 sectors – BB average • Country comparison groups calculated twice a year • Minimum of 3 ratios needed to create the score

  7. Confidence level based upon weighting of missing information • 20% is minimum confidence level • 70% and above confidence is good – below 50% is indication of need for more analysis • No banks or insurance companies rated • No score if more than 48 month history missing • Scores valid within the next 18-24 months • Recommended credit limit (not given if status not active)

  8. modeFinance– More credit limit • Credit limit is the estimation of the amount of credit possible to assign to a commercial relationship with an outlook of one year • Credit limits not available for companies with low ratings CC, C & D Classes. • Maximum credit limit is fixed at 50 million Euros

  9. P2B sold: prediction of the maturity of each company to be sold in the next 18/24 months • EDV: prediction of the potential Market Deal Value for each company to be sold • P2Go Bankrupt: prediction of the potential bankruptcies (Mutatis Mutandis) • Mutatis mutandis is a Latin phrase meaning "by changing those things which need to be changed" or more simply "the necessary changes having been made".

  10. Companies rated between 1 and 20. Scores computed relate to the following bandings

  11. 12,341,000 companies on Orbis with Vadis rating • 15,000 pieces of information taken into consideration – raw data (BvD), environment and dynamic data, web data, monitoring, Vadis algorithms, business insight, internet watchdog & BRMI (fraud, pep, sanctions, legal disputes and other related info) • Back testing completed to validate models and ratings • Bankruptcy prediction – 18-24 months from rating • Banks and insurance companies are rated as well as listed companies

  12. Falcon – Financial Strength model Eagle -

  13. Zanders Rating Methodology Financial Analysis • Turnover growth • Return on sales • Current ratio • Debtor days • Gearing • Solvency • Tangible net worth Country Risk = Counterparty Risk Rating (CRR)

  14. FALCON calculates a score per company, based on financial data from one of the BvD databases • Global scoring model • Uses BvD data • 9,920,000 companies with rating in Orbis • Scores available for Corporates but no banks or insurance companies • Based on recent financials/last year financials • Model: • 17 different industries based on NACE Rev. 2 (out of 21) • 4 variables needed to make up rating

  15. Started in 1989 as the Italian Credit Bureau for consumers and companies • Leader in Italy, with over 680 clients among banks and financial services institutions and over 90% of Italian branch offices connecting daily to CRIF’s online services. • Italian Credit Bureau: 75 million trade lines updated

  16. What do they provide BvD - • PERFORM – Financial Strength section - Orbis & Amadeus • Financial Stability score – financial health and performance of business • Qui Score - Fame (pronounced Kwi) • Insolvency rating – likelihood of insolvency over the next 12 months taking into consideration the last two years financials

  17. Developed a financial stability scoring system that allows BvD clients the ability to assess and understand the financial situation of companies. PERFORM evaluates the financial health of a company at a given point in time based on historical financial data supplied by information providers in each local market. The financial stability scoring system, PERFORM, accurately reflects company’s financial status among their peers.

  18. 13,382,000 companies with rating in Orbis • Score is between 0-1,000 • The closer to 1,000 – lower probability of becoming bad • Operational efficiency • Profitability • Capital efficiency • 3 reason codes – why a company lost points and did not receive maximum possible score: • Asset management efficiency • Financial leverage • Operational efficiency • Profitability • Short-term liquidity

  19. Financial strength • World Vest Base is a long time partner of BvD • Currently provide data for listed companies worldwide • Also provides private company data in some Asian countries (Thailand, Vietnam, Cambodia, etc.) • Recognized as credit agency in several countries

  20. Financial strength • Developed a detailed model for scoring listed companies that has been simplified to work on private company data based on financial global format • 289,000 companies scored • Medium-term score (minimum three years of historical financial data needed) • 6 grades score from A to D where A is the best

  21. Financial strength • TruCost is an environmental data experts company • The score measures the risk on company’s financials to pay for environmental damages • A confidence level indicates the accuracy of the score based on the transparency/availability of information • Hybrid approach to measuring supply chain environmental impacts between Input / Output Modelling and LCA (Life Circle analysis)

  22. Financial strength

  23. Financial strength • Population of 4,500 companies followed and monitored • Estimated score for 74.5 million companies (based on industry and region) • No score if no NAICS code available • 6 explanatory factors + peer comparison

  24. Financial strength

  25. Financial strength

  26. Financial strength BvD challengeson international environment Clear presentation of different scores, philosophies Immediate view/understanding on company’s strengths/weaknesses Allowing access to additional details and transparency of models Customization of results+data integration Score for companies without financials (based on country, size and sector)

  27. Financial strength

  28. Financial strength

  29. Financial strength Activation requests activation requests, (even for trial accounts), have to be sent together with the invoice including the detail of Financial strength module to: Sophie Karassavidis & Audrey Marchand: invoices@bvdinfo.com

  30. Financial strength Any further question on financial strength Sebastien Roels sro@bvdinfo.com +3226390553

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