Our Risk Models

Scoring models have been around for more than 70 years. They were first developed at the start of the ‘50s to assess customers applying for credit cards. It was only in the mid ‘60s when they were first applied to assess the risk profile of commercial companies. Corporate risk models are based on financial indexes and variables extracted from the balance sheet and profit and loss account. Different types of statistical techniques have been used to develop these models, but the most common remains the logistic regression.

Ed Altman, one of Wiserfunding co-founders, developed the first corporate model (the famous Z-Score) in 1968 and his study was published in the Journal of Finance. Since then, a large number of academics and practitioners have developed new and powerful default prediction models for corporates. Methodologies have changed and improved significantly thanks to the use of statistical software and powerful computers capable to analyse huge amount of data.

Ed and Gabriele, founders of Wiserfunding, proved in 2004 that large corporate models do not perform well when applied to small business. Bespoke small business models and variables are needed to ensure the risk profile and financial structure of small business companies is evaluated appropriately.

Since 2004, Ed and Gabriele have continued to work to improve their methodologies and know-how with regards to risk models for small business. They have developed innovative methods to aggregate and modify financial variables in order to maximise their prediction power, assessed the value of non-financial variables and built huge databases with small business financial information across different economic cycles.

Wiserfunding’s model (SME Z-Score) benefits of the significant experience and know-how built by Ed and Gabriele in the last decade. Our models are probably the most powerful ones in the market to evaluate the risk profile and financial structure of small business. Join Wiserfunding now to take full advantage of our powerful risk assessment!