Home Credit Ratings: Meaning & Use Essential information What does include an independent rating analysis
What does include an independent rating analysis

Any rating analysis consists in evaluating financial, non-financial factors, including evaluating internal process area, external environment and its effects on the evaluated entity.

The structure of a rating evaluation contains the following:

  • Analysis of an environment from the macroeconomic point of view
  • Analysis of the political risk in the country of evaluated entity
  • Analysis of industry, where the evaluated entity runs its business
  • Analysis of the entity

Within the macroeconomic analysis ERA provides for evaluation of the external environment status that influence business activities of the evaluated entity from the point of view of performance of economy. The political risk analysis examines the impact of government decisions on the business environment, labor market and tax and bureaucratic burden. Also assesses the stability of the government and its power within parliament.

The analysis of industry is focused on position of the given industry within the economy, defines fundamental characteristics of the industry in the given country and indicates its specificities, examines legislative framework determining its activities according to relevancy of entity. The industry is being compared even with the level of performance of this industry within the international scale.

The evaluation of a specific subject-matter of rating evaluation, i.e. an entity is divided into non-financial and financial parts. Within the non-financial part ERA provides for basic data of the entity. It examines the position of the entity, its internal structures and the level and system of management and planning processes and control mechanisms. The financial analysis evaluates the existing development of the entity as well as forecasted economic results.

What is the basis of the added value of the rating?

  • It supports a structured and independent presentation of risks of the evaluated entity.
  • It increases success of diversification of funding sources.
  • It supports presentation of investment opportunities.
  • It supports management in launching processes aimed at increasing quality.
  • It increases effectiveness of the risk management process