A Global Mining Company Streamlines Its Evaluation of Credit Risk

Amid complex global geopolitics and the fluctuating dynamics of supply and demand, government policies are reshaping the landscapes of rare earth supply chains. China has become the leading global player in rare earth mining and refining, leading the European Union (EU), the United States (US), and their trading partners to forge alternative supply chains that diversifies sourcing avenues and fortifies the security and sustainability of these critical minerals. Meanwhile, the Chinese government, seeking to consolidate its dominant market position and leverage its economic and geopolitical influence recently announced stricter control over rare earth minerals, ranging from mining to exports.^[1]

A credit risk team of a multinational mining company sought an efficient approach to manage through the resulting global market volatility while also staying on top of market developments that could impact the company’s receivables.

Pain Points

Multinational companies often deal with numerous customers in diverse markets, making it challenging to manage potential credit risks effectively. Monitoring customers’ ability to pay can be extremely time consuming, often depending on the existing local processes and methodologies. Any unexpected surprises can result in material financial losses and business disruption. Facing this exact environment, members of the credit risk team wanted to enhance and automate their approach to assessing creditworthiness, recognizing the diversity of counterparties in their portfolio. In particular, they wanted:

• To implement comprehensive, always-on monitoring framework for 200+ customers of varying sizes across different regions.
• An objective, quantitative measurement to evaluate the creditworthiness for a wide range of rated and unrated, public and private companies.
• An early-warning system to quickly identify any potential deterioration in a customer's credit quality.
• To increase efficiencies by streamlining credit management workflows across its global footprint.
• Flexible delivery options to easily integrate data with existing internal financial applications.

The credit risk team contacted S&P Global Market Intelligence (“Market Intelligence”) to discuss the firm’s offering.

The Solution

Market Intelligence specialists presented RiskGauge™ Desktop, a credit management tool designed to enhance the credit risk team's efficiency in assessing counterparty credit risk. The tool enables comprehensive credit assessment for more than 50 million companies globally, including small- and medium-sized enterprises (SMEs) and private companies, utilizing financial, business and market inputs to create single view of a counterparty’s risk. The tool utilizes RiskGauge, a credit score that enables the evaluation of companies of any size and powers an early-warning system that can accurately detect potential defaults.  The tool also provides access to comprehensive RiskGauge reports, enabling quick views and an analysis of the underlying drivers of a counterparty’s risk profile.

Market Intelligence credit specialists were utilized to quickly get the team up-to-speed on the tool and to support the elimination of any existing credit assessment backlogs.  For companies lacking financial data, the tool can make use of extensive datasets, benchmarks, and statistical methodologies to calculate each company's probability of default (PD). Furthermore, the tool evaluates relative company performance by benchmarking against peers across multiple risk dimensions, including business, financial, industry, and country risk.

RiskGauge Desktop helped the credit team:

Key Benefits

The credit risk team leveraged RiskGauge Desktop along with Market Intelligence’s subject matter expertise in credit risk assessment; it also took advantage of S&P Market Intelligence’s time-tested models, sector-specific experience, and technological innovation to improve the credit risk assessment process. Importantly, the company also automated a monitoring and alerting system, mitigating potentially negative revenue impacts; Members of the team enjoyed: 

• Flexible product delivery channels supporting automation and the quick integration of credit risk models into their risk management framework.
• An efficient and easy-to-use approach with broad coverage of companies and geographies, given the exposure to multiple countries and industries.
• The ability to assess SMEs with little financial data, as well as unrated entities, to pinpoint areas of potential weakness.
• Product training to help support the successful adoption of RiskGauge and provide insight on the model methodology, features, functionality and how to interpret the results.
• Additional time for customer-facing activities because the maintenance of the RiskGauge models is managed by Market Intelligence.