Qualitative Indicators (Soft-facts) in Internal Rating Systems
Qualitative Indicators (Soft-facts) in Internal Rating Systems

Author(s): Martin Svítil
Subject(s): Business Economy / Management, Evaluation research, Accounting - Business Administration
Published by: Masarykova univerzita nakladatelství
Keywords: Rating; Risk Management; Soft-Facts; Qualitative factors;
Summary/Abstract: The article builds on last year's work, which compared internal rating systems of three banks from the German-speaking region. This year's paper deals in detail with the analysis of qualitative indicators (soft - facts), which is one of the two main components of rating systems of banking clients. The qualitative indicators (soft - facts) have different wage in the considered rating systems, although in all of them the wage is lower than 50% and / or the ability of soft-facts to change the overall rating score is limited. On the other hand, in all cases the importance of qualitative factors is significant enough to pay attention to them. The research is focused on the rating of business entities, more precisely the corporate, (especially limited liability companies or joint-stock companies). It does not deal with the rating of natural persons or non-profit organizations, municipalities etc. The procedure of collecting empirical data as well as data from relevant literature, their assessment according to the criteria of verifiability and relevance and the application of the induction method was used and a generalization of conclusions was subsequently made. The result of the research shows that two categories of qualitative indicators (soft - facts) are present in all considered rating systems: (i) quality of company’s management and / or strategy and (ii) market, where the evaluated company is present. Another regularly present qualitative indicator is (iii) accounting or related indicators like information system or audit quality. On the other hand, the use of the factor (iv) relationship with the bank (or similar) is quite different across the surveyed rating systems. The roles of members of staff in making of the rating are also mentioned.

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