Risk rating systems: Balancing structure and judgment

Risk rating systems help financial institutions bring consistency to credit decisions, but the right balance of detail can be difficult to find. Too few pass ratings may hide meaningful differences in risk, while too many can create a false sense of precision. Scorecards can also miss how risks interact or overlook factors they were not designed to capture.

This webinar examines risk rating mistakes in framework design and maintenance, individual credit assessment, and the application of ratings. The discussion focuses on differentiation within the pass portfolio and how bankers can use judgment when a calculated score does not fully reflect a credit’s risk.

You will learn:

• How to determine the right number of pass ratings and distinguish useful granularity from false precision
• Understand why risk rating frameworks must be periodically tested, recalibrated, remodeled or replaced
• How to apply judgment when a rating score does not fully describe a credit’s overall risk