The Bureau's Ratings is a measurement of the SME's credit worthiness. The Bureau's Ratings model was developed by Dun & Bradstreet (D&B) specifically for the Malaysian SME environment.
It is based on a highly predictive Default Probability Model that calculates the likelihood that an SME will default within the next 12 months. The Default Probability Model uses statistical probabilities to classify SMEs into two risk classifications of default risk: a Probability of Default (PD) and a Percentile ranking. The PD is a percentage figure which represents the likelihood a particular SME will default during the next 12 months. The Percentile is a value which indicates where a particular SME ranks, relative to the whole SME population in Malaysia. As default rates may fluctuate over time, the percentile provides a relative measure of an SME's risk.
How is The Bureau's Ratings calculated ?
The Bureau's Ratings Model was developed using sophisticated statistical modeling techniques, formulated based on five years of historical data, collated from over 200,000 Malaysian SMEs. The modeling process assessed numerous credit attributes to establish which attributes may be used as a strong predictor of default risk. After the model was defined, weightages were built into a scoring engine in The Bureau's system. Every time a credit report enquiry is made about a particular SME, the data of that SME would be sent across to the scoring engine for the Ratings to be generated real-time.
Thus, the Ratings is dynamic and is updated each time there are new credit information available. This ensures that the SME's Ratings is always calculated based on reliable, credible and the most updated information.
Benefits of The Bureau's Ratings
The Bureau's Ratings can help financiers quickly assess a SME's credit standing; by collating key information of the company's performance and payment history to provide an overall evaluation of the SME's credit worthiness. This process is streamlined into The Bureau's system to improve the efficiency of the credit assessment.
To further increase our value proposition to members, The Bureau shall also continue to enhance and develop more sets of scorecard, as and when new information is gathered from additional data sources. With the availability of wider and broader information base, SMEs credit worthiness can now be evaluated more objectively.
Example of The Bureau's Ratings
Example: Company ABC
Probability of Default (%)
Key Influencing Factors
Age of business suggests potential lower risk
The Probability of Default (PD) indicates the SME's likelihood of default. The higher the PD percentage, the higher the probability that the company may default within the next 12 months.
Explanation: PD% for Company ABC = 18.64%
This indicates the Probability of Default (PD) for Company ABC is 18.64%.
The Percentile Value (PCTL) indicates where the SME ranks in terms of its risk of defaulting in comparison to the rest of the Malaysian SME population.
The higher the percentile value, the better the company's credit standing among all the active SMEs in Malaysia.
Explanation: PCTL for Company ABC = 40
This indicates that Company ABC ranks the same as, or better than 40 percent of the credit-active SME population in Malaysia.