Forward looking approach in the risk assessment of companies

How to integrate a forward looking component in the risk assessment of companies into lending and credit management processes using an automated simulation tool.

The most widespread assessment systems in the world of credit and consultancy are generally based on a traditional and static approach. The so-called ratio analysis is certainly based on some useful principles, but these do not allow the dynamic aspect of risk to be considered, thus preventing us from having a comprehensive and complete view of the counterparty.

For this reason, many credit institutions have recently intensified activities to strengthen the processes and skills related to forward-looking analysis and cash flow analysis issues, since the principles underlying Basel 3 oblige them not only to consider current risk but also expected risk.