Rating Market Sectors and Systems of Corporations

Systemic ratings are analyses whereby the components of a system or a market sector are analysed by taking into account their interactions. These interactions, or inter-dependencies, are determined based on information such as Balance Sheet, Cash Flow, Income Statement, Ratios, etc. In systems of hundreds or thousands of corporations there can be millions of inter-dependencies and the stability of their structure is then used to determine the capacity to withstand shocks of the entire system. 

Examples of systemic rating analyses:

  • All companies listed on a given stock exchange. For example, the system of companies listed on Wall Street comprises over 4000 companies which interact with each other.
  • The system of corporate clients of a bank. Large banks have thousands of corporate clients. The state of health of a bank is proportional to the state of health of this system.
  • The system of European banks. Our analyses provide results which take into account the network of inter-dependencies, delivering information of truly systemic nature.
  • All products of an Asset Management company. Thousands of funds and financial products can be treated as a single interacting system.
  • A system of countries or a macro-area.

Systemic analyses and ratings are of interest mainly to global institutional investors, banks, regulators and governments. 

An example of systemic analysis is illustrated below. A system of 126 companies, belonging to the metal mining sector has been analysed, by processing quarterly fundamentals of the said companies and identifying all the corresponding interactions. The horizontal line represents the resilience of the system and illustrates how a system can be much less resilient than most of its its components.

Resilience versus complexity of 126 metal mining companies. Black line indicates resilience of the system of the entire sector.

Resilience versus complexity of 126 metal mining companies. Black line indicates resilience of the system of the entire sector.

 

The fundamental results of a systemic rating analysis are:

  • Resilience and complexity of entire system
  • Resilience  and complexity measures of each component
  • Indication of components which drive the complexity of the entire system
  • Indication of components which drive the resilience of the entire system
  • Trends in all of the above
  • Better understanding of systemic risks

Analyses of systems of thousand or tens of thousands of companies are computationally very intensive and require supercomputers.

Systemic rating analysis is offered only for systems of listed companies.

In order to obtain a systemic risk analysis and rating send us a list of tickers of the companies composing the system of your interest. We shall get back to you with a quotation.