RISK9

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What is IFRS9?

IFRS9 is the new standard to measure the risk of credit losses for financial instruments (Replacing IAS 39). Its implementation is mandatory as of January 1st 2018, and the major change it is introducing, is the requirement for a forward-looking approach to disclosures for increased financial transparency, and therefore stability in the Economy.

Absolutely not. There are certain changes that come into effect with IFRS 9, the most important of them being the need to test the credit quality of the entire trade credit portfolio, even for those segments that have never produced a delay in payments or a write off. This means that even “safe customers” -as considered by your corporation- expose your assets and cash inflows to credit risk -the likelihood to incur credit losses in the future (Day One Loss). For more details, see our Approach.

In our view, as “Simplified” can one characterize the example widely spread in almost all IFRS 9 resources on the internet; “Just group receivables by days of delay, calculate the historical credit losses on each category and estimate the Credit Loss Allowance”. The method itself is neither simplified nor simple, because, in our experience, a) the majority of corporations have low default portfolios – many of them have no actual / hard defaults, at least not in the last 24 months, and certainly not enough of them to estimate reliable historical CL rates and, b) an adjustment to make the historic observations looking to the future by means of applying a macroeconomic model is something that is generally not accessible to your accounting department. For more details, see our Approach.

In our experience up to now, it is relatively common among non-financial corporations to consider that this new standard affects only the Banking Sector. However, it is clear that IFRS 9 refers to Financial Instruments and their contractual future cash inflows, meaning that Trade Receivables of any non-financial business are also included.

We Are WEMETRIX, Intrasoft’s international dedicated team of Credit Risk Experts. We have developed a proprietary Platform, named RISK9®, which makes easy to import, process, verify and analyse financial information. RISK9® has a built in Model Factory, where countless parameters are being constructed, tested and evaluated, by applying a series of Econometric Models to estimate Probabilities of Default and Expected Credit Losses, both 12 month and Lifetime, integrated with a proprietary Macroeconomic Model to work on forward looking scenarios. We use Technology and Econometrics to deliver fast and with transparency our results, which will support you in producing the regulatory disclosures on a timely and cost effective manner. Our deliverable will provide all the metrics and analysis that you need in order to understand our approach and the results, have a clear insight, and of course provide valuable feedback to us. Last, but equally important, by using our RISK9® platform, you save time from unnecessary meetings, phone calls, exchanging critical data through emails etc.

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