CARE Industry Risk Metrics (CIRM) quantifies risk associated with an industry and can effectively be used as a tool for comparison of industries for various purposes like lending, counter-party risk, fund allocation etc. CIRM assesses the risk of an industry on various critical parameters which can impact cash flow and debt servicing capabilities of the industry for the next 2–3 years. CIRM is widely used by banks & financial services companies as a credit appraisal and risk management tool. It is also being used by top consulting firms to assess the counter-party risk for key long-term, high value assignments. With the help of CIRM, the end user gets a regular update on the changing and dynamic outlook of our covered industries. At present, CARE Research covers 116 industries under CIRM including some of the very niche industries like Refractories, Power Cables, Pumps etc.
The broad parameters selected for evaluation of risk include demand, supply & competition, factors of production, government policies & regulations, and financial performance. The risks on various parameters are quantified by assigning a score to each parameter and the final risk score for the industry is derived by aggregating the scores multiplied by the respective weight-age given to each parameter. Scores on these parameters reflect the extent of positive or negative impact on and the degree of variability in cash flows. The final output is available in the form of a report comprising overview on the industry, write-ups on the risk parameters mentioned above validating the score, aggregated financial performance of the sector and business risks for assessing the risk inherent in the industry from a company perspective.
Quantification of industry risk based on CARE Research's elaborate model for scoring various qualitative and quantitative risk parameters
Relative ranking of various sectors from credit risk perspective
Independent view based on the CARE Research's in-depth expertise with a collective experience of more than 50 years in the industry shared by senior analysts and management
Encompasses outlook for a 3 year period enabling the user in taking decision relating to the industry exposure
The score is accompanied by a brief write up containing brief overview of the sector and rationales for scoring each parameter. The write up can act as a quick reference tool for middle and top management to get a good understanding of the sector and its outlook in a very concise fashion.
Periodic updation of the score to capture impact of macro and micro economic factors on industries
A more granular assessment of industries for broader sectors like Automobiles, Textiles etc broken into sub segments as each of these sub segments can have different dynamics and drivers
The industry risk is segmented into 'Structural Risks' and 'Financial Risks'.
Structural risk is sub-divided on 4 critical parameters, namely demand, supply & competition, factors of production and Government policies and regulations.
Financial Risk is sub-divided on parameters like profitability ratios, solvency ratios, liquidity ratios etc.
CARE Research attempts to quantify risks by giving a numerical score on the scale of 1 to 10, where 1 indicates High Risk and 10 indicates Low Risk. The scale can be customised to meet client requirements and specifications.
The risk scores are given to each parameter on a relative basis considering all the industries as the universe.
The risk is evaluated by CARE Research on the basis of in-depth industry knowledge and analysis, analytical acumen and interaction with the industry.