BLOG — Aug 06, 2025
Ahead of the Curve: How Early Alerts Can Detect Financial Distress Among Companies In The Gulf Cooperation Council
The Gulf Cooperation Council (GCC) region has emerged as a crucial player in global trade. Rich in natural resources, particularly oil and gas, the GCC countries have positioned themselves as leading exporters, significantly impacting the global energy market. Beyond hydrocarbons, the region is diversifying its economy, investing in sectors such as finance, tourism, and technology. Given this dynamic environment, assessing the credit risk of companies in the region is paramount to ensure informed investment decisions and to mitigate potential financial losses.
S&P Global Market Intelligence has developed a proprietary Early Warning Signals (EWS) framework designed to assist credit practitioners by providing timely alerts for the early detection of entities at genuine risk of default. This framework leverages S&P Market Intelligence’s flagship RiskGauge™ model, which combines a firm’s probability of default (PD) level and its changes over time with dynamic thresholds that reflect the economic cycle. This creates a robust early indicator of default risk. Furthermore, the EWS captures risk momentum, detecting significant signals of potential credit risk deterioration, ultimately represented in an intuitive traffic light color scale.
Figure 1 (a): EWS Summary Dashboard for GCC region
Source: S&P Global Market Intelligence as of Apr 10, 2025. For illustrative purposes only.
The summary of EWS signals for over 500 public companies in the GCC region is illustrated in Figure 1 (a) and (b). This dashboard offers users a high-level overview of the region under consideration. For instance, the donut chart indicates that 62% of companies are classified as low risk, while 30% are identified as high risk. The chart depicting the distribution of EWS signals by RiskGauge score aids the end user in making informed decisions regarding the level of risk associated with investing in a company based on its RG score. Notably, nearly all companies with RG scores ranging from b- to c display red EWS signals, while about 50% of companies with RG scores between bb- and b also show red EWS signals.
Figure 1 (b): EWS Summary Dashboard for GCC region
Source: S&P Global Market Intelligence as of Apr 10, 2025. For illustrative purposes only.
Additionally, the summary dashboard presents the distribution of EWS signals for the top five countries and top five industries based on company count, providing insights into which countries or industries are experiencing heightened stress levels. This vital information can aid investors in evaluating the risks associated with investing in companies from specific countries and industries.
Figure 2: NMC Health plc
Source: S&P Global Market Intelligence as of Apr 10, 2025. For illustrative purposes only.
To highlight the importance of the EWS tool, consider NMC Health PLC, a healthcare company that experienced significant distress in the GCC region. Established in 1975, NMC Health was a London-listed healthcare operator, primarily running hospitals in the Middle East. It entered the FTSE 100 in 2017 after rapid growth and was valued at £8.6 billion at its peak in 2018. However, in late 2019, a report was published raising questions about NMC’s financial reporting and an understatement of its debt by as much as $4 billion. In early 2020, the company fired its CEO and confirmed financial discrepancies before ultimately being forced into administration in April of that year. This distress was captured early in the EWS trend, as the color of the EWS changed from green to amber and then to red about a year before the news of the distress was made public.
This case illustrates how the EWS signal identified mounting pressure on the company nearly a year before its default –credit decisions with this information versus without this information might, indeed, have been quite different. Tools like RiskGauge provide insights into credit health, and when combined with the EWS tool, they help users differentiate between companies genuinely at risk of default and those with occasional RG score declines.
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