Financial Risk Forecasting using IFRS 9

Do you need support to understand IFRS 9 accountancy standards and how it affects loss forecasting? Our analytics experts can help.

As of 1st January 2018, IFRS 9 accountancy standards will replace IAS 39. What does this mean for businesses when it comes to loss forecasting? How can we help to support the transition from IAS 39 to IFRS 9?

The International Financial Reporting Standard (IFRS) 9 will see businesses making significant changes to the way expected credit losses are calculated. As a specialist in loss forecasting and impairment, Experian can work with you on a consultative basis to build and deliver a comprehensive approach to the new standards.

IFRS 9 – Key Changes

Finance and credit risk teams will need to work together to forecast losses
Using a loss forecasting approach that leverages credit risk models used for managing the portfolio and embedding economics within these models
Determination of what constitutes a significant change in credit risk
A move from 12-month to lifetime losses when this has occurred
The requirement to build a forward-looking forecast of future economic conditions when identifying significant changes in credit risk and in models for expected credit losses

We can support you in anticipation of the accountancy standard change with an end to end solution covering four areas. This does vary however, from business to business, because your business is unique and our solutions can be tailored to your business requirements. Your loss forecasting methodology depends on whether you are under Advanced IRB or Standardised accounting standards, whether you have sufficient relevant historical data internally to support modelling lifetime losses and whether your lending policy or collections strategy has changed significantly in the recent past.

With experience in building models that incorporate credit risk, we can support your internal modelling teams with acquiring new skills, or support you with a fully outsourced capability.

It may be that you have a portfolio that is relatively new and has yet to build up the history required for lifetime loss forecasting. Alternatively, it could be that changes have been made to lending/collections policies that have made all, or a proportion of your historical data, inapplicable for future modelling. We can advise as to the best approaches regarding historical data.

Our economists and credit risk analysts work together to understand the relationships between lending policy and the economy, and how it affects credit risk. We provide generic bureau scores with the economic impact embedded. You can use these scores to determine changes in credit risk and include them within lifetime probability of default models.

Lifetime loss models should be re-assessed quarterly or bi-annually to keep up with changes in loss rates and changes in the economy. We can help with this and benchmark your position against your peers and against market lifetime losses.

Enables you to efficiently meet regulatory requirements
Helps you make more profitable decisions at both a strategic and tactical level
Our extensive data coverage and economic forecasts supplement your internal view to provide robust loss forecasting
In addition to providing the initial modelling, we support the implementation and on-going refresh and monitoring of expected credit loss forecasts
Allows you to quickly adapt your products and lending policies to changing market conditions through data driven insight into the resilience of your portfolio to alternative economic scenarios

Contact us and discover how we can help your business thrive

AIRB Solutions for Regulatory Compliance

Gain competitive and strategic advantage and meet CRD IV regulations using our adaptable and in depth AIRB approach.

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Stress Testing

Helps you to understand the sensitivities of your portfolios to significant economic change and the implications for provisioning, capital allocation and regulatory compliance.

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Collections Scorecards

Tools that help you to proactively segment your portfolio and manage your collections strategy enabling you to support your customers.

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Financial Risk Forecasting

Using IFRS 9

Do you need support to understand IFRS 9 accountancy standards and how it affects loss forecasting? Our analytics experts can help.

IFRS 9 – Key Changes

How we can help your business?

Modelling Expertise

Market Data

Economic Trends and Forecasts

Ongoing Evaluation of Forecast and Actual Losses

What are the benefits?

Contact us and discover how we can help your business thrive

AIRB Solutions for Regulatory Compliance

Stress Testing

Collections Scorecards