Complexity Based Risk Rating Overcomes Weaknesses of Current Rating Methods
Conventional ratings indicate long-term Probability of Default without providing insight on actual state-of-health of underlying business. However, in a turbulent economy, it is precisely this kind of information which investors need. Traditional ratings are based on company’s historical information which is used to drive statistical models. These models are then used to predict the company’s future. In a rapidly changing global economy, models are unable to capture all the nuances of the present to furnish a credible prediction of the future. Under such circumstances it is more meaningful to speak of current state-of-health of a business rather than of its long-term probability of default. Rapidly growing complexity is the salient feature of the global economy and hence Ontonix’ assessment of a business is based on the measure of company’s complexity. More specifically, this assessment is based on the difference between the company’s current complexity and its corresponding critical value (also measured). Computations are based on standard financial statements which corporations produce. No model is forced on top of the data in this model-free approach.
Ontonix (www.ontonix.com), a privately held company, develops software and offers value-added services for complexity analysis. OntoSpace(TM), the company’s flagship product, is the world’s first complexity management system. The unique approach to complexity and its quantification establishes radically innovative means of crisis-anticipation and holistic risk-management. Ontonix offers first-of-a-kind online service which enables customers to purchase personalized Complexity-based Risk Maps(TM) and perform real-time ratings. Such maps allow verification of state-of-health of corporations, organizations, and asset portfolios.