Category: Credit Rating Methodologies

AGILE Method for Credit Risk Assessment? Yes!

In recent years in modeFinance we have been using the Agile method (link) for our IT related projects (website, s- peek application [www.s-peek.com], etc.). The basic philosophy of the method states that to get the best results you need a step by step participation of the customer in order to build better together the final product: the philosophy with which I fully agree.

In our daily work, in modeFinance we realize platforms for assessing credit risk, tailored to specific customer needs , both for the assessment of the credit rating and the credit limit. For optimum realization of these products, customization is absolutely essential, in fact, as already explained in here, many model parameters need to be studied directly with the customer.

But what is the best way to work with end users to get the best result? Without a doubt, in the world of credit risk we use the Agile method!

In fact, as you can read on the website of eNBilab (www.enbilab.com), our partner in IT development, the basic rules of the Agile philosophy are:

  1. The user’s needs at the center.
    We design our solutions from the user interface because we think that this depends on the perception that the user of our work.
  2. We work with the client as a team
    Step by step we get in tune with our client, we try to acquire the language and proceed subsequent alterations to define the requirements and refine the result.
  3. We rely on trust
    We try to build a relationship of trust with the customer, we believe that a face to face relation is more important than a continuous and detailed documentation.
  4. Simple Solutions
    Our priority is to constantly seeking the simplest possible solutions both from an informatics point of view and from the end user’s point of view.
  5. We like open source
    We prefer open source software supported by the community to the closed and proprietary systems. We have a deep knowledge of Linux and many open source applications that usually select and evaluate for us and for our customers.
  6. The right technology.
    Ruby on Rails, Java, C # and. Net, we have developed expertise in various languages ​​and frameworks Web development and for all of our work we choose the tool that best suits needs of the end user.

Are these guidelines transportable in the way of the Credit Risk? I would say absolutely yes! In fact:

  1. Requirements of the customer at the center. Certainly, the development of a Credit Risk model, it is absolutely essential to better understand the specific definition of credit risk that the client wants to implement: each customer wants to observe particular aspects of the companies (customers and suppliers) and you have to implement the method of analysis as these needs. Businesses analysis of credit risk must adapt their methods to what the customer wants!
  2. We work with the client team. It is a fundamental: credit risk analysis platform must be developed together; the inputs (data, where we want to arrive) must be given by the customer, and companies like our customers must be from time to time interacted with to find along the ideal way.
  3. Confidence; we develop platforms for credit risk analysis where the companies with millions and billions Euro amounted monetary movements will be evaluated; so confidence is everything! How to get confidence? My opinion is that you can get confidence only discussing together piece by piece, the product, and giving the knowledge! Showing transparency with the decisions made and the technologies used increases customer confidence.
  4. Simple Solutions. In my opinion, simplicity is a key point. Always, of course, where possible, we must simplify the problem and make it understandable and solvable, both the customer and the companies analyzed. Simplicity and transparency will be the turbo of the future in the field of the credit risk analysis.
  5. Open Source: In the case of credit risk, I would say it is a negligible element I would say (at least for now, but we will see in the future!)>
  6. The right technology. Absolutely important! As written in link companies like ours must from time to time use the various technologies and methodologies to solve problems, it is no longer the period of single monolithic method. For this reason, it is imperative that companies adopt a wide variety of employees: financial analysts, engineers, quantitative analysts, statisticians, IT staff and all of them have to work together from time to time to find the best method and obviously discussing with the client.

To conclude, I would say that there are all possibilities to bring the Agile method in the world of credit risk, as we are doing it with great results, I hope that other companies will follow us in order to improve the final products that our customers use every day!

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