What is a Scorecard?
The balanced scorecard is a strategic performance management tool. It is a semi-standard structured report that managers can use to track the activities performed by employees under their control and monitor the consequences of these operations.
The credit risk scorecard is a mathematical model designed to provide quantitative estimates to show the likelihood of a customer showing certain behaviors such as loan defaults, bankruptcies, or low levels of arrears for their current or proposed credit status. Some scorecard softwares are Sisense, Office Timeline, Corporater, and ClearPoint Strategy.
Why opt for Scorecard Development with Trugo?
Trugo uses a logistic regression model to estimate a client’s creditworthiness and creates a model of a scoring function. We scale scorecards through regression coefficients; this process refers to making the scorecard match with a range of scores. Trugo predicts the performance of accounts over a period of time. We use the scorecard to determine the performance and the transition of accounts across various delinquency buckets. Our behavioral scorecards are used by banks to predict the probability of actions that could be taken by a customer and hence is a key to make decisions. We develop and validate scorecards for our risk analytical projects.
Benefits of Behavioral Scorecard
Better Management Information-
The balanced scorecard method forces organizations to design key performance indicators for various strategic objectives. This ensures that the company is measuring actual problems. Research supports this because companies that use the balanced scorecard approach tend to report a higher quality of their management data and use this information to guide management insights and strategic decisions to bring more and more benefits.
Improved Performance Reporting-
Companies that use a balanced scorecard are often better at reporting and communicating performance than organizations that do not have this structured performance management method. If a company creates meaningful management reports and dashboards to communicate performance internally and externally, it can meet the increased transparency requirements. The balanced scorecard method can help companies identify what to report. The "strategy map" template is an effective way to visualize performance, especially when the various goals and measures are communicated in a traffic light format and color-coded management dashboard.
Benefits of Credit Risk Scorecard
Reduced time for loan decisions:
Financial institutions spend a lot of money and time to verify the applicant's details. AI can be used to extract meaningful insights from unstructured alternative data sources (such as text and images) and verify the authenticity of the information provided by applicants without the need for physical investigation. This helps to significantly reduce loan or corporate credit processing time.
Check creditworthiness through smart applications:
Once the customer zeros out the credit limit, a smart credit scoring application using AI-based algorithms can help analyze customer behavior in real-time. This helps to extract relevant information and correlate it to context to verify the customer’s creditworthiness and calculate the maximum credit limit. Through reliable estimates of future cash flows and the ability to repay debt, artificial intelligence can also be used to enhance structural financing decisions.