Portfolio Management

Forecasting and Modeling

It is not unusual to hear managers say: "Our sales team did not meet the forecasted numbers"; or, "We feel confident about the forecasted economic growth and expect to exceed the targets we set out in our plan". In the end, however, all financial forecasts and predictions about the economy, sales, losses, and growth are simply informed guesses. We offer econometrics Forecasting and Modeling based on the historical information of your portfolios and industry benchmarks to help you minimize uncertainty in your predictions.

Stress Testing

Stress Testing is an important Risk Management tool that alerts you about the capital required to absorb losses during adverse scenarios, which may include deterioration on economic, political, or international indicators. This approach is critical to determine your risk tolerance and to develop contingency plans and risk mitigation strategies according to a set of predefined actions in response to stress conditions. Such variables are usually monitored on a quarterly basis through a dashboard.

Stress Testing is a core part of the 2nd pillar of the Basel II regulatory framework related to supervisory review, defined as the Internal Capital Adequacy Assessment Process. The model is based in the correlation of several external variables and historic portfolio performance.

Portfolio Rating

The first step towards achieving financial health is acknowledging that risks exist in all investments. The second step — and a critical one — is understanding that, even though risk cannot be eliminated, it can be reduced through proper management. Our models provide a solid grounding in risk analysis, assessment, portfolio management, and profitability.

Portfolio Rating is based on specific key metrics to determine if performance will meet sustainable outcomes in terms of losses, delinquency, profitability, and growth within the target market.

Loan Loss Reserve

Every lending business implies taking on risk. Losses and reserves are, in fact, costs associated with all financial products and are estimated during the product planning process to define adequate pricing. After the portfolio has been launched, reserves should be calculated continually to guarantee coverage of future expected losses.

We offer a variety of methodologies to calculate and monitor the expected credit losses within a future time horizon, typically a 12-month window. Several models can be implemented including the Basel approach for Expected Losses, straight rates, IAS39, or customized models according to your needs and strategies.