Abstract
manage and mitigate credit risk, financial institutions and large companies which grant credit use several models and techniques to evaluate the financial data of their client firms. The present empirical research updates the quantitative methods to score and model the financial strength of clients. To present how to evaluate and model a powerful algorithm that provides a financial strength of a client this research uses the credit portfolio of an Oil & Gas company with diversified upstream and downstream portfolios. The mentioned portfolio includes differentiated clients from several sub-portfolios, such as wholesale markets (bunkering, jet fuel, lubricants, oil distribution or chemicals) and the retail markets (oil stations and fuel cards). This research should help companies’ Chief Risk Officers (CRO) and commercial departments to evaluate the individual credit risk analysis and the credit portfolio as a whole. The results presented are validated by micro-econometric techniques. It is also important to note that the achieved outcomes were validated by expert judgments using the financial strength method to filter out poor risk firms and individuals.
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