Credit Risk Management

Agusto & Co has developed a number of products and solutions to assist banks and other credit institutions to effectively manage credit and financial risk.

Our flagship product, the Credit Risk Model Application © (CRMA), is an automated risk rating software, which makes use of our proprietary rating models for obligors, facilities and industries. Some of the largest and most profitable Nigerian banks have benefited from our services through streamlining of credit processes and the implementation of rating systems.

The rating models available with this application include:

The Industry Rating Models: These were first developed in 1992 and modified in 2010. This model uses macroeconomic data as well as aggregated financial information on key industry players (where available).

The Corporate Rating model:This was first developed in 1992 and modified in 2010. This model requires 3 years of reliable audited financial statements. Agusto & Co. provides guidelines on how to determine reliability.

The Commercial Rating model:This was first developed in 2006 and tailored to suit the Nigerian operating environment. It provides risk ratings for companies where financial data is deemed to be less reliable, by placing greater emphasis on business fundamentals.

The Facility Rating model:This was developed in 2010, drawing from Agusto & Co.’s wealth of knowledge and expertise in this area. In computing the facility risk rating, we take the specific characteristics of the facility/transaction into account. In so doing, the rating captures the impact of the exposure at risk and loss given default; making it the ideal complement to the obligor credit risk rating.

 

Features of CRMA include that it is:

Web enabled: Centralised risk management tool, easily deployed and accessed from multiple sites by many users
Intuitive: Has an easy to use interface

Centrally Administered: Permissions for inputting data and authorizing risk reports are controlled centrally by the administrator
Able to compute Financial ratios and credit/facility ratings: Generate soft copies of financial data and credit/facility ratings

Other credit risk management solutions

In addition to the risk rating and pricing models, we have a number of other solutions available in the area of credit risk management. These include:

Portfolio analysis/Rating Validation
Portfolio analysis involves the review and analysis of a representative sample of the credit institution’s loan book using Agusto & Co’s risk rating models. Specifically, we will:

  • Review a sample set of the Bank’s loan portfolio and assign ratings to these obligors
  • Produce a two page report on each obligor in the sample
  • Analyse the loan portfolio based on ratings, classifications and adequacy of provisions

Policy and process review
The objective of this solution is to complete a full diagnostic review of the Credit institution’s financial risk management policies and procedures; in order to develop systems, processes and produce policy documents.

Portfolio planning
Here we can assist the credit institution in planning its loan portfolio in terms of:

  • Target portfolio mix :
    • By industry
    • By obligor
    • By facility type
  • Risk based pricing
  • Target weighted average risk rating for the bank 
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