Risk Assessment

Risk assessment is at the heart of operations within Tailwind Crowd. A thorough and correct assessment of projects will ward off fraud, reduce investments projects that end up not giving the expected return and protect investors from bearing more risk than they are willing to take through a public Risk Profile creation.

Activities within Risk Control are:

  • Reward Projects
    • Confirmation of identity of project owner
    • Analysis and approval of Reward Projects
  • Lending Projects
    • Confirmation of identity of project owner
    • Analysis and approval of Lending Projects
    • Determination of Interest Rate
    • Creation of Public Risk Profile

Each project creation will undergo a KYC check for verification of identity and be assessed for quantitative (financial) risk and qualitative (non-financial) risk. Reward Projects will have a focus on a qualitative check, while lending projects will be stronger assessed on their financial data.

Risk Profile

Tailwind Crowd uses a risk analysis for assessing projects. This is designed to help you assess the risks of a potential investment, before you decide to invest. It is important to consider that investing in loans through crowd funding puts your money at risk. Even when a company has a good risk score, it might still turn out that it defaults on the loan. A solid risk score just means the risk of this event happening is smaller. The eventual decision if/where/how to put your money at risk is in the end your own.

 

This analysis, from a reputable third party (Graydon), provides a risk category, which is presented to potential investors throughout a rating of probability of default (PD ranting). PD rating has the following categories:

 

PD-rating PD% Definition
AAA 0,00%-0,15% The probability of default is very low
AA 0,16%-0,30% The probability of default is low
A 0,31%-0,62% The probability of default is average
BBB 0,63%-1,24% The probability of default is average
BB 1,25%-2,49% The probability of default is average
B 2,50%-4,99% The probability of default is high
CCC 5,00%-9,99% The probability of default is very high
CC 10,00%-19,99% The probability of default is very high
C =20,00% The probability of default is very high
D The company is insolvent

 

The public risk profile for investors also includes other indicators to help investors to diversify their investments and find the right balance between risk and return. The indicators show the financial behavior of the borrowers (project owner) on the following areas:

 

Sales

Company sales indication and the sales growth as compared to industry median. It indicates how successful the firm is in bringing in new money through its business activities.

 

Liquidity

This indicator reflects the ability of the firm to pay of its short term debt with short term available money. If this score is low, the firm might be in trouble paying their debtors in the short term even though the overall financial situation is good.

 

Solvency

This indicator of the debt capacity of the Project owner shows the ability of the company to meet its long-term financial obligations. This of course takes into account the extra amount to be loaned through the crowd funding project.

 

Profitability

The profitability indicator shows how healthy the firm is in terms of its profitability. A profitable company will be able to earn back the value of the loan quicker then a poorly profitable company.

 

Capital structure

The capital structure compares how much debt is already in the company compared to the owned property and share capital (the carrying capacity). A firm with a good capital structure score does not have much debt yet compared to its assets.

 

Other Information

Several other information elements are also shown in the public profile. These consist of Years in operation, annual sales, number of employees and specific other information which could be of value to the specific project.

 

 

Rating of Financials

 

The rating of these financials is expressed in a very simple way. Each of the areas is scored against how the industry average is performing in these areas. Because industries greatly differ based on their business, this is the fairest and most representative way of scoring.

 

 

Each is scored with either ‘Good’, the score is similar to the median of the industry in the same area. ‘Poor’, the score is significantly worse then the industry median. ‘Very Good’, the score is a lot better then the industry median.

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