The data set that we use spans at least 6 business cycles in each industry - this is quite a comprehensive view of potential performance in various macroeconomic conditions.
Therefore, we can match a company’s financial characteristics to profiles for
- the strongest of companies at the best of times
- the weakest of companies in the worst of times
- and everywhere in between
The system measures the extent to which the company's management is able to utilize internal strengths and external opportunities to address internal weaknesses and external threats. The models are also on a global industry basis. Therefore, while not directly an input into our models, our methodology does account for the impact of macroeconomic changes and sovereign risk since this manifests via broader monetary policies that have an effect on company’s financial statements.
The models intentionally do not include market signals (such as share price) since these are noisy and reflect risks unrelated to the focus company. For example, when Apple has a bad day we see market volatility but the risk of a counterparty probably does not change, so the rating should not. We provide a pure measurement of company specific risk.