RainFin’s coherent risk management protocolsAug 20, 2017 Blog risk categories , Strategic asset allocation
RainFin’s coherent risk management protocols can assist lenders on the marketplace to achieve competitive economic returns.
Best practice from a strategic asset allocation point of view has always been to diversify your investment portfolio into low, medium and high risk categories so as to balance your risk portfolio. Loans on the RainFin marketplace fall into the high risk category, as they tend to be unsecured loans to small and medium businesses. As with most things in life, they do also come with a greater return potential for the investor who is prepared to undertake the associated risk. However, RainFin takes great care to categorise the risk to the lender. RainFin’s risk mitigation, in the form of our credit policy, is a tri-factor solution which incorporates the following risk assessment inputs:
Moody’s industry and business risk assessment determines affordability and indicates a business’ probability of default. TransUnion’s credit behaviour assessment includes general commercial and credit behaviour of a business and its directors. It also allocates a SME score which is based on business information such as status, age and default information, and considers links to other businesses which the business’ directors may be associated with. A financial-ratio analysis also gets done which considers affordability, liquidity, leverage, profitability and efficiency.
A risk grade is then allocated to the loan that looks as follows:
It does not stop there. RainFin also does post-loan monitoring which enables us to proactively identify and address potential defaults. All businesses are required to submit management accounts on a monthly basis and RainFin reviews all appropriate financial ratios to identify whether these are declining.
The above mentioned protocols are designed to coherently evaluate the inherent risk in the investment opportunities presented to our investment community so that informed decisions can be taken. Through these we ensure that the chance of default is reduced, therefore making it an enticing investment opportunity with attractive returns for RainFin investors.
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Information contained herein is for information purposes only and is merely illustrative. It is not deemed as advice as defined in the Financial Advisory and Intermediary Services Act (FAIS Act).