EAGLE Dinner Seminar
a comprehensive view on the assessment of counterparty risk
On Thursday, 3 November, the first EAGLE Dinner Seminar - organized by Zanders and Bureau van Dijk - took place in Breukelen. This event was specifically organized for CFOs and CROs of large corporations and credit risk managers of multinational corporates. The event was a successful combination of presentations and shared experiences with colleagues in different industries.
As soon as one enters into an agreement with a counterparty, there is a risk that the counterparty might not fulfill its (future) obligations. This applies to prospects, debtors, suppliers as well as business partners (in joint ventures or similar co-operations). This calls for a consistent view on counterparty risk management.
For meaningful counterparty portfolio management, it is essential that the assessment and approval procedure is standardized throughout the corporation. Such a process should reflect a company’s business environment, express the risk appetite and embed expert knowledge of the company’s analysts. Putting together all pieces of this puzzle – including the kind of policy or framework, the business rules, which model, and what data - requires comprehensive knowledge covering various areas of expertise.
Determining the financial strength of companies requires considerable knowledge, especially of risk models and appropriate software. Moreover, such assessment requires access to a substantial amount of specific data. In close cooperation, Zanders and Bureau van Dijk have developed EAGLE, an advanced solution that integrates models, software and data into one framework that has a seamless integration with well-known financial and ERP systems such as SAP.
Sander van Tol (managing partner at Zanders), opened the event after which Mark Wessels (country manager for the Netherlands at Bureau van Dijk) gave an introduction of the EAGLE concept: the unique combination of financial data (embedded in the databases ORBIS or AMADEUS), a web-based credit platform (FACT) and the global corporate rating model EAGLE. He also described the advantages and pitfalls of using external company data or internal data in a corporate rating model. Availability, quality, and completeness of data are all essential. Next to that, structuring databases and linking databases requires specific expertise to ensure that data fields of databases from various countries correspond.
Charles Zondag (business associate at Zanders) then conceptually described the different levels of counterparty risk. As a result of the worldwide economic and financial situation, the topic of counterparty risk has gained importance. The quality of a company’s counterparty risk assessment and portfolio management impacts working capital needs of corporates and stretches to operational risks (supplier selection), bad debt provisions, the relationship with banks and tax issues related to intercompany loan pricing. Guillaume de Nijs (sales director for FACT at BvD) presented a credit risk platform for financial analysis, rating and credit application work flow. He was followed by Ruud Korff de Gidts (senior relationship manager at BvD), who demonstrated the EAGLE model by showing how two companies were rated by the model.
From Milan in Italy, Mr Venanzio Cassi, head of risk management at ENI SpA, one of the world’s largest energy companies, shared his experiences of the EAGLE global corporate rating model. ENI uses the model to rate over 70,000 companies worldwide annually. The ratings generated by the model impact both business and risk management. By linking the rating of EAGLE to a maximum outstanding per counterparty, depending on the rating, decisions are made that directly affect ENI’s sales activities. The structured approach of approval procedures based on a transparent and, according to Mr Cassi, a very efficient EAGLE model ensured acceptance by both sales and risk management.
