Corporate Credit Risk Analysis Programme

Duration: Variable day

This is an interactive workshop with copious use of exercises and case studies. In Module Two, delegates will use MS Excel to model cash flows of corporate and project examples.

The programme is designed as two separate modules each lasting one day. There will be a project exercise to complete between the modules to consolidate and expand the learning.

Course Agenda

Module One – Qualitative risk analysis

Overview of the credit analysis process

Objective: to establish the basic parameters of the credit risk principles.

Risk and return dimensions
Country and corporate risk issues
Credit default rates and risk grading
Fundamental principles of credit risk analysis
Balancing the quantitative and qualitative aspects of risk
A structured analysis framework for credit

Case Study: Understanding the principles of credit risk using a credit case example.

Current state of the credit market

Current issues regarding structured finance and credit
Review of changes in light of recent problems

Analysing business risks

Objective: to develop a general framework for assessing business risks over a wide range of company types and business sectors.

Macro-environmental risk analysis; cyclical/mature/growing
Strategic evaluation using stakeholder analysis, four gods of management, PESTI, Porter 5

Forces model

Assessing competitive position
Resource audit using 7Ms
Company/product portfolio evaluation and diversification using the product portfolio BCG matrix
Market environment analysis
Generic competitive strategies
Strategic options using Ansoff matrix
Market/product lifecycle and the four Ps of marketing
Value chain and peer group assessment
Internal operational and management assessment
Track record, attitude to risk, relationship with shareholders
Force field analysis and understanding change management issues
Combining the analysis using a SWOT matrix
Developing a qualitative analysis framework

Case Study: Identifying the business risk issues.

Module Two – Quantitative analysis

Cashflow risk evaluation

Objective: to ensure an advanced understanding of historic cash flow analysis, forecast cash flows and the importance in financial risk evaluation

The dynamic cash flow cycle in a company
Untangling the cash flow statement
Linking cash flow and historic ratios
Evaluating repayment ability on a cash flow basis
Cash flow cover ratios and repayment risk, EBITDA cover, DSCR and other metrics
Calculating cash flows when there is no cash flow statement
Understanding the cash flow statements of other countries
Cash flow and corporate capital structure
Debt versus equity decisions in the capital structure and cash flow impacts
Developing a model for cash flow projections
Cash flow sensitivity analysis – identifying the key cash flow drivers
Linking cash flow generation to strategy and investment decisions

Case Study: Analysing corporate cash flow of a credit case and modelling projections using Excel.

Corporate capital structure

Objective: to understand the corporate objectives in terms of alternative financing structures and to appreciate the equity viewpoint when assessing credit risk.