Credit Risk

Our offerings include both expert testimony and consulting support services in disputes and litigation related to credit analytics matters. We deliver expert advice on issues related to credit analysis and credit due diligence, credit assessments, analysis of credit rating parameters, and credit assessments or credit metrics. We also assist clients with consulting support and expert testimony in dispute and litigation matters related to credit underwriting due diligence, deal review and periodic monitoring, measurement, and management of credit portfolios, including loan-level portfolio workouts, restructurings, and liquidations.

In addition, we provide analytical consulting expert support and expert testimony services in relation to corporate clients’ capital structures and the impact of corporate transactions (merger and acquisitions, divestitures, recapitalizations, incremental borrowing) on the pro-forma credit quality, provisional ratings, and the associated interest cost of borrowing facilities across the liability structure.

CRA’s credit risk-model development services begin with a review of the client’s internal data, data cleansing, data analysis, and data augmentation from industry sources. Our consultants work with clients to develop credit models such as the dual-rating models, probability of default (PD), loss given default (LGD), and exposure at default (EAD) models under the Federal Reserve’s SR 11-7 guidelines and current expected credit losses (CECL) under ASU 2016-13. We help clients validate their credit models, which entails development of statistical measures (accuracy ratio, loss capture ratio) and review of use-test of the credit models in the decision-making process. CRA consultants also support clients’ model-building activities by developing internal rating scales and performing calibration of model-produced scores or outputs to more familiar PD or LGD measures.

We work with clients to review their credit models by performing an analysis of deficiencies identified in regulators’ notices of matters requiring attention (MRA) and matters requiring immediate attention (MRIA) and collaborate with clients to develop remedial action plans and regulatory preparedness support responses to MRAs and MRIAs.

CRA assists its clients in their stress testing and capital planning. Our consultants perform validation of internal and vendor credit models, analyze model use tests, review and draft policies and procedures, identify risk drivers, and translate stress scenarios into risk outcomes, as well as translate realized losses and increased risk driver-expected losses for multi-period financial projections. We also estimate stressed common equity tier 1, tier 1 and total capital ratios, tier 1 and supplementary leverage ratios, and assist with reporting of results to management.

CRA consultants support securities and investment clients’ regulatory investigative needs by analyzing and reviewing asset allocation models and algorithmic investment approaches for investment funds and alternative investment vehicles, with specific emphasis on asset allocation, portfolio construction and rebalancing, algorithmic investing, portfolio risk management, and risk and return attribution. Our client work also entails analysis of portfolio performance and risk assessment, review of compliance issues, benchmarking to best practices for investment portfolios and asset management companies. CRA’s dispute-related services include customs and practices analysis, quantification of unrealized (but-for or counterfactual) portfolio returns, and estimation of fund investors’ damages.