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Creating an Efficient Enterprise Wide Credit Risk Management System for a Leading Energy Company

Highlights

This integrated oil and gas company needed a more automated solution that would enable teams across the enterprise to efficiently assess counterparty risks in a consistent manner.

The Client: A large multinational oil and gas company.

Users: Global credit risk teams located in three major regions.

This large, vertically integrated global oil and gas company is active in every sector of the industry, in addition to running power generation and trading businesses, and deals with hundreds of thousands of customers, trading partners, and suppliers worldwide. S&P Global Market Intelligence (“Market Intelligence”) worked with the company’s credit risk teams, which provide credit analysis to internal trading and sales groups. The company wanted to establish and formalize a system for the entire organization - a large undertaking requiring a significant level of engagement and collaboration across its global business units.

Pain Points:

The credit risk teams needed to track hundreds of thousands of counterparties, but the process was very manual and time consuming, involving many staff members. The company wanted to streamline its approach and introduce a methodology that would consistently assess creditworthiness, regardless of a counterparty’s location. It also needed an approach that would enable analysts to evaluate entire portfolios of companies versus one firm at a time. Market Intelligence was selected given its understanding of the credit risk group’s challenges, plus its extensive analytical tools and ability to handle a large, global implementation.

The Solution:
Market Intelligence suggested that the company leverage its proprietary Credit Analytics solution, which was already being used by its trading group to evaluate counterparty risk. This would provide a comprehensive evaluation system that could help the credit risk teams quickly identify issues with rated, unrated, public, and private companies, as well as understand the various factors affecting their creditworthiness.

The Credit Analytics solution included:

  • A suite of credit risk assessment tools comprising powerful quantitative models for short-, medium-, and long-term evaluations of potential default.
  • A Probability of Default (PD) Fundamental Model that includes a pre-scored universe of hundreds of thousands of companies that are updated upon receiving new company-specific or economic data. Users can generate PD values for their own portfolios and perform sensitivity analyses, scenario analyses, and stress-tests.
  • An Excel® Plug-in that supports increased interaction with the data and analytics.
  • A customized Excel template that provides a workflow model for calculating credit risk, potential exposure, and appropriate pricing.
  • An extensive and continually-growing database of private company financials that improves team efficiency and provides insight on an important universe of firms.
  • Ongoing support to enable users to leverage the solution to its fullest and enhance efficiencies. Market Intelligence held many meetings with stakeholders across the organization to understand their workflows and create a tailored solution. Country-specific credit scores were thoroughly tested for reliability and comparability across locations, and multiple training sessions were held at offices around the world.

Key Benefits:

Market Intelligence provided a methodology and toolset to evaluate counterparty credit risk to help minimize any negative impacts to the revenues of this multi-faceted company. Credit risk teams value having:

  • An efficient and easy-to-use approach for scoring portfolios of counterparties that provides broad geographic coverage for both rated and unrated public and private companies.
  • Smaller, more manageable internal teams due to efficient, standardized procedures.
  • New-found synergies and collaboration points between regional trading and credit risk teams.
  • Training and on-going support to help groups understand the range of available capabilities and continue to get the most out of the solutions.


To learn more about how we help energy companies of all sizes optimize enterprise-wide credit risk management systems, contact our team at https://www.spglobal.com/ca-og-casestudy for a personalized tour of our offerings.

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