Why we use independent risk assessment parties

Why we use independent risk assessment parties

We believe that qualitative risk assessment is a crucial risk prevention measure for investment assets on Debitum Network. Finding a balance between risk and reward is the ultimate target for most investors. You should know that not all risk scoring methods used by alternative investment platforms are created equal, and some are more advantageous than others. Debitum Network risk scoring model could be the best. Why? Spare 5 minutes of your time and find out.  

Debitum Network is the only platform to use independent risk assessors

That’s right. Debitum Network, from the very start, decided to use independent and professional third parties who do risk scoring for the borrowers and assets on our platform. Other platforms implement their own risk scoring. Thus, besides connecting borrowers to investors, they also try to do a professional risk assessment, which requires resources, databases, and knowledge of the market. We find that a generic risk scoring model is often ineffective and can often be manipulated. 

Independent risk assessors increase transparency

Investors deserve to know the real situation of the borrower before he invests. If a platform does risk scoring themselves, they can manipulate the score to their advantage. They can give better rates to worse performing companies or inflate the scores for better-performing ones. Thus, inside risk scoring may mislead investors, giving them incorrect information about the real state of a borrowing company. 

Local risk assessors know the market and their companies better

We upload assets from a borrowing company that resides in an x country. We also search for a local risk assessor who would provide a professional risk scoring for that specific company. Local risk assessors know local businesses and their specifics, and thus, they can evaluate companies applying for a loan with much better precision. It far outmatches any other generic risk scoring algorithm done by a loan originator or a P2P platform itself. 

Independent risk assessment is an additional safeguard for investors’ funds

Risk assessors have access to tax and financial databases where they can find the real financial state of a borrowing company, and thus give an adequate rating to it. Therefore, if a company is seriously over-indebted, this would be reflected in a credit score. Then, investors would be able to decide whether to invest in the loan or not.  

Ranges of credit scores on Debitum Network

Credit scores used on Debitum Network have been assigned based on a standardized probability of default of the business during the next 12 months. Debitum Network has aligned credit scores received from different risk assessors to fit in the same unified scale. The chart table below indicates the probability of default on loan based on historical events by a large number of businesses worldwide and might be inaccurate for a particular group of companies (and their loans) on Debitum Network. 

Most of the assets on Debitum Network have B, B-, or B+ ratings. We reject most of the loans below C (D-F) as these ratings indicate that the likelihood of a borrower to go broke within the next 12 months if very high. A to C ratings show that the probability of bankruptcy is very low. There have been a few assets on the platform with a score of D-E. They are placed on the platform as the borrowers pledged collateral as a guarantee, and the broker offers a buyback guarantee for the asset. Thus, the safety of investing in the assets is increased to the maximum. Refer to the statistics bar regarding historic ratings on Debitum Network. 

Want to invest in high score assets? 

Most of the assets on Debitum Network have excellent risk scores. We have selected a special one for you this week. Take a look, and if you like what you see, invest right away. Do not hesitate, as assets are funded very fast. You don’t want to stay behind. The borrowing company is engaged in the manufacturing of malt, it has been in business for more than 17 years, employs more than 60 people, and has revenues of over 13 million EUR. The purchaser is a beer manufacturer that employs more than 330 people, has revenues of over 58 million EUR, and has been in business for more than 26 years.

Disclaimer: Investments in financial products are subject to market risk and any investment should only be done with risk capital. The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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