The automation of the rating process: a guide to the qualitative analysis
Credit score and credit rating
Credit scoring services are nothing new in 2020.
Thanks to the various solutions available, nowadays you can easily get the credit score of any company in a few minutes.
Having already developed s-peek in 2013, we were quite aware of the situation when we decided to develop oplon. Our goal was much more ambitious: create a platform capable of automation of the entire rating process, the first Rating-as-a-Service solution.
Credit score and credit rating are both creditworthiness assessments, but while the former is based on the analysis of quantitative data only and calculated by an algorithm, the rating process is more complex and includes the analyses of bank accounts and qualitative data, which are carried out by financial analysts.
To reach our goal it was therefore necessary to automate all the stages of the rating evaluation process:
- the quantitative analysis;
- the bank accounts analysis;
- qualitative analysis.
The quantitative analysis
modefinance was qualified as a Rating Agency in 2015 after the validation of the MORE methodology. MORE is a hybrid algorithm based on the integration of Data Science and Artificial Intelligence able to analyze the economic and financial situation of a company. To calculate the credit score, we embedded the MORE methodology in the platform. The balance sheet data required for the credit score can be download from the platform thanks to a direct connection with the Chambers of Commerce and to international data providers.
The bank accounts' analysis
The bank accounts' analysis is based on the examination of the reports issued by the Central Credit Register, Italian main credit bureau. Natural Language Processing algorithms automatically read the pdf files issued by the Bank of Italy and deduce the most meaningful data. Data are weighted and integrated in the assessment, while a summary generated by NLG algorithms explains the evalution.
The qualitative analysis
To automate the analysis of qualitative data, we opted for a simple but effective solution: a multiple-choice qualitative questionnaires.
The qualitative questionnaires include several questions aimed at assessing the context in which the company operates. The questions cover both micro and macroeconomic aspects and are defined during the configuration of the platform according to the user's needs.
The questionnaires, as well as the entire analysis process, can be repeated several times until final approval. In this way, financial analysts can test and identify the discriminating elements that most influence the final assessment and warrant any decision of rating overriding.
Beyond the rating
The automation of the rating process is only a feature of the Rating-as-a-Service platform; oplon is a modular solution that completely digitizes the credit risk analysis process of companies and financial intermediaries.
Other analysis tools can be included in the evaluation process, such as the forecasting module, which allows to performs budget simulation on different growth scenarios and to stress-test key variable, or the massive analysis module, which allows to simultaneously assess the credit risk of each company in a portfolio.
The modules can be included as steps to deepen the creditworthiness analysis and allow you to build a credit risk assessment process tailored to your needs.