TOOL G3
This tool will help you create internal early warning signals on your client’s key business drivers to be included in credit proposals and decisions. Also critical questions to be asked on client contact to maintain first line of defence.
Step 1: Expected Financial Trends
Identify key underlying financial trends in future cash flow and their potential volatility.
| Cash Driver | Trend/Expectation | |
|---|---|---|
| P | Profit: Sales, Margins | |
| A | ACC | |
| C | CAPEX/ Acquisitions/Disposals | |
| E | Equity: dividends; new equity | |
| D | Debt: refinance; repayment |
Step 2: Expected Non-Financial Scenario
List the major business drivers behind the most volatile and important future financial trends identified in Step 1.
| Business Drivers | |
|---|---|
| 1 | |
| 2 |
Step 3: Potential Change in Risk Profile
What are some of the early non-financial signals that each of the business drivers identified in Step 2 would cause the expected client risk profile to deteriorate or to improve?
| Business Drivers | Non-Financial Signal | |
|---|---|---|
| 1 | ||
| 2 |
Step 4: Potential Change in Risk Profile
Establish clear, measurable internal triggers to identify the non-financial signals in Step 3.
| Triger Event | Triger Level | Monitoring Frequency | Information Source | |
|---|---|---|---|---|
Step 5: Questions for Management
Prioritise questions for management to help measure the triggers in Step 4 and/or to investigate potential signals identified in Step 3.
| Questions to Management | |
|---|---|
| 1 | |
| 2 |
