Today, newly founded FinTech company Scorable is launching an innovative artificial intelligence (AI) solution to analyse the credit risk of bonds.
Scorable uses multiple data sources such as financial news, business figures, market prices and credit ratings to evaluate their influence on a company's financial standing. With this strategy, Scorable’s technology picks up on key developments that have taken place in the financial industry since the 2008 financial crisis, such as, increased transparency requirements and improved data analysis methods to ensure that future crises can be predicted earlier. The company is being supported by the insurance group Talanx with its subsidiary Ampega Asset Management GmbH as an investor. Deloitte is accompanying the business as a company builder.
Philippe Padrock (Chief Financial and Operating Officer at Scorable): "Asset managers across Europe and the US manage trillions of assets and with that comes the responsibility for risk evaluation. Artificial intelligence can significantly improve daily and long-term decision making by analysing relevant data. With Scorable, we have developed a unique AI that is able to detect risks early on and warn investors in advance."
How Scorable works
Scorable’s AI system analyses data and converts it into a score that helps active asset managers assess the risk of their bond investments. What makes it special, is that within the framework of an AI-controlled analysis, quantitative and qualitative data are combined with each other. Data sources range from credit ratings and market data to business figures and daily news reports on the world's leading bond issuers. Based on this data, Scorable calculates the probability of a downgrade in the credit rating. In order to evaluate qualitative data, the application uses Natural Language Processing (NLP), which enables the analysis of text-based sources. Following an explainable AI approach, Scorable creates transparency and enables its users to track and understand the model analysis (White Boxing). This also allows users to trace the basis on which changes in the score were made at any time.
Oliver Kroll (Chief Product Officer at Scorable): "Artificial intelligence has been making its way into the financial industry and asset management for quite some time. So far, credit risk analysis has focused primarily on quantitative data and included a considerable amount of personal intuition and bias. However, financial reports and news articles contain relevant information that can play a major role in risk assessment. Through NLP, Scorable's AI is able to process text-based information and integrate it into the analysis."
Robin Jose (Chief Technology Officer at Scorable): “Scorable revolutionises Credit Risk Assessment. Our AI system goes beyond prevalent quantitative data and incorporates qualitative data into risk assessments using advanced deep learning models. Thanks to our transparent ‘explainable AI’ Asset Managers intuitively understand the rationale behind the analysis and predictions.”
Following the 2008 financial crisis, appetite for high yield bonds has significantly increased as asset managers seek better returns in light of record low interest rates. With over $ 22 trillion of assets currently managed in Europe and more than $37 in the US, managing credit risk is a daunting challenge, especially for institutional investors. Meanwhile the industry is facing increasing cost and margin pressure. Currently, the management of credit risks demands enormous capacities from experts. The challenge is to make asset management more productive, and the use of artificial intelligence will play a central role in this process.
Harry Ploemacher (Chief Executive Officer at Ampega Asset Management): "Worldwide, asset management has been on a path of steady growth for years. At the same time, we are only at the beginning of a digital shift that will significantly shape this industry. With Scorable integrating artificial intelligence, it stands at the frontline of this technological advancement and adds real value for asset managers: management of credit risks in efficient production conditions. As one of the first customers, we are making great use of this to manage our assets."
Nikolay Kolev (Partner & Managing Director at Deloitte Digital): "We are glad to be supporting Scorable's strong team with taking their idea to the next stage of development. We are dealing with a very unique technology that has the potential to change asset management internationally."