Risk Factors Influencing the Credit Rating Score

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I am delighted while getting the opportunity to work closely with leading Credit Rating Company of Bangladesh, Alpha Credit Rating which provides me with the opportunity to learn about the real life implication of any company”s management. I tried my level best to fulfill the requirement of this project by engaging my self seriously and giving my best effort to prepare this report. Working hard for this project made me able to understand the core concepts of Credit Rating’ which I think will be very useful in my professional life. Your kind acceptance and any type of appreciation would surely inspire me.

If you need any further information, I will be available at your service at any time. Sincerely yours, Mohammad Saab ID: 092-0237-030 School of Business North South University iv I P a Declaration This report has been prepared by me for Ms. Farman Frizz as to fulfill the requirement of BUS 498. This report was never submitted before in any institution. Sincerely yours, Mohammad Saab ID: 092-0237-030 School of Business North South University village Acknowledgement This internship report is an accumulation of many people’s endeavor.

Major contribution was received from the officers of the Alpha Credit Rating Ltd. As from the Credit Rating Division’ department. To prepare this internship report inconsiderable thinking & information input from various sources were involved. First of all I would like to express my Sincere & immense gratitude to my internship supervisor Farman Frizz, Senior Lecturer, Business School, North South University. I am deeply indebted to her whole hearted supervision to me during the Internship Period.

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Her valuable suggestion & guideline helped me a lot to prepare the report in a well organized manner. I am also grateful to the other officials & my friends specially Omar Speak Aimed, Animus S Saab & S bar Nina Jag ma I helped me while preparing the study by giving heir suggestions, assistance & supply of information, which were valuable to me. Their helping hand supported me to complete my report successfully. Finally, I want to give my thanks to my parent who gave special attention to me from the very beginning and during the preparation of the report & the internship program. I I Page Executive Summary This study is conducted with two principal aims, Firstly to identify the ‘factors behind choosing a credit Score’ and secondly is to theoretical and practical know how that how a trading company basically do their business through imports & distributions. Therefore it is hoped that this study would contribute to the Rating Firms for understanding of their customers’ selection indicators and developing a marketing strategy that will increase their customers and expand their business.

Basically in order to complete my Internship program for Bachelors of Business Administration Course, I had a wonderful experience working for a period of three months in The Alpha Credit Score Ltd. , starting from 1st January 2013 and finished on 30th March 2013 which will ultimately help in my future career a lot. First part of this report is based on the overview of the company which includes name, location & historical background of the company, followed by name & the characteristics of the founders after that a brief discussion of the companies mission, vision, objectives, structure, literature review and qualitative analysis.

A rating is neither an audit, nor a comment on the managers, shareholders or sponsors of the issuer or the issue. Also a rating is not a recommendation to invest, divest or hold a specific obligation, in as much as it only addresses credit risk. Rating may be changed, suspended or withdrawn as a result of changing conditions affecting the issuer and/or issue or due to unavailability of sufficient information. 1. 2 Conceptual Framework 1. 3 Credit rating agencies Credit rating agencies provide investors and debtors with vital information regarding the credit worthiness of an individual, corporation or agency.

Individual can get a credit score in order to be eligible for easy access to credit cards and other loans. Institutions can borrow more money easily from banks without having to go through lengthy evaluations from each individual lender separately. Also corporations can issue debt in the form of corporate bonds and treasuries to attract investors based on the credit ratings. In Bangladesh, there are eight credit rating agencies registered till to date. This research will help employers and employees to evaluate existing process of ratings their clients, their lacking and how they can improve.

This research ill help me to have a close look into the rating industry and understand the current situations and its future in Bangladesh. Page 1. 4 Origin of this Report This internship report on “Risk factors influencing the credit rating score used by Alpha Credit Rating Ltd” is a 3 months long internship program. The internship program which is a part of ABA program of the North South University, requires students to get themselves involved into the corporate world and prepare a report based on their respective Job or organization highlighting the problems and opportunities of that organization or Job.

As an intern at Alpha Credit Rating, I was assigned the task of working as an Assistant Rating Officer, where my Job was to rate different business”s and prepare a report based on that rating. The report has been prepared under the direction of academic supervisor Madam Farman Frizz, Senior Lecturer, School of Business, North South University. My reason behind choosing this topic is because, credit rating has become mandatory for business”s taking bank loan of 1 core or more. There is a rumor that, in future, the upcoming Basal Ill agreement may make mandatory for all banks to issue loans to business”s based on their credit eating.

For this project, I want to find out whether the factors used for rating purposes by Alpha Credit Rating Ltd. Effective enough to fully understand the overall risk of a business and the alternative factors Alpha Credit Rating Ltd. Can do to improve their quality of rating? 1. 5 Objective: Every day credit rating companies of Bangladesh tries to gather unrated clients from different banks from different branches. A bank”s client becomes eligible for credit rating when the client borrows minimum one core take as bank loan for business.

Through this research I want to find out a) What are the risk factors credit rating impasses like Alpha Rating considers before rating their clients? B) Are those risk factors effective enough to fully understand the overall risk of a business? C) What other alternatives or what more can Alpha Rating Ltd do to improve their quality of rating? Page 1. 6 Scope of this Report This report consists of four parts 0 0 0 0 The company profile of Lapidating Ltd, its mission, values and services Literature Review Qualitative analysis ( SOOT, MOST, PESTLE and BRIO) Quantitative analysis 1. Significance of the Study: the credit worthiness of an individual, corporation or agency. Individuals can get a on the credit ratings. This research will help employers and employees to evaluate existing process of rating their clients, their lacking and how they can improve. This research will help me to have a close look into the rating industry and understand the current situation and its future in Bangladesh. 1. 8 Expected Findings or Hypothesis: This research is all about whether the risk factors used by Alpha Credit Rating Ltd are significant enough to give a valid rating to their respective clients.

So the hypothesis is: HO: All the risk factors are enough to give a valid rating score. HI: All the risk factors are not enough to give a valid rating score. Page 1. 9 Research Methodology: The report will start with the introduction and description of credit rating companies and then about the organization I am working on. Overall the research will be based on both primary and secondary data. For the qualitative analysis I will be using, SOOT, MOST, PESTLE, and BRIO. For quantitative analysis I will collect information regarding dependent variable and independent variable from company”s files and documents.

As data analysis techniques-, testing mean, cross tabulation test, Correlation test, Regression test, etc. Whichever is necessary are going to be present in the report. For data presentation technique I will try to include frequency table, diagrams, graphs, and charts My target group will be the employees of Alpha Credit Rating Ltd and also employees from other rating companies. The primary source that I am going to use in my research paper will mainly consist of: 0 My Primary Survey: 1 . A direct survey using the questionnaires 0 My Secondary Survey: 1. Books, newspaper, magazine editorials etc. 2. Internet articles.

For this purpose, I will be using Google, Yahoo search engines 1. 10 Variables Dependent Variable 1. 2. Independent Variables Financial Risk Business / Industry Risk Rating Score ‘ 3. Management Risk 4. Bank Relationship Risk 5. Security Risk 6. Economic Risk APP a 1. 11 Sample Design: Since the research will be conducted to understand and comprehend on what grounds credit rating score dependent, I will be selecting the following: 0 Target group: All-level Employees (From Officers to Vice Presidents) 0 Age group: 20 years to 65 years 0 Gender: Both male and female 0 Experience: Both fresher”s to experienced 0 Sample Size: 85 respondents 1. 2 Data analysis & presentation techniques: My research will be based on the primary data I will be collecting. I will collect information regarding the dependent & the independent variables, which I will be including in the conceptual framework. For data analysis techniques I will use frequency table, descriptive statistics, cross tabulation, chi-square analysis, t-test, z- test, factor analysis, co-efficient, NOVA, correlation, regression, etc. And present it with graphs, tables, and figures for better understanding & clarity.

For data presentation technique I will use IBM SPAS Statistics 19. Furthermore, the report will comprise of two parts- the organizational part and the project part. In the organization part there will be a brief discussion about the organization Alpha Credit Rating. I will also work according to the organization”s highly competitive industry scenario. Additionally, in the project part I will discuss about my research result, data analysis techniques, findings, interpretations & finally the recommendations. Page 1. 13 Budget Allocation 1. 13. Time budget: The entire research program is estimated for the period of six weeks. The approximate times for completing the required tasks are illustrated below: Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Research Proposal Questionnaire Design Data Collection Data Input Data Analysis Draft Report Preparation Final Report Preparation 1. 13. 2 cost Budget The final cost of conducting the study which includes questionnaire print outs, final internship report printout, etc, to be estimated to be BET 6,000, plus a minimum 20 percent contingency fee if necessary.

Also, all the money will be afforded from my own personal finance. 1. 14 Limitations of the study: a) My lack of experience in conducting a research data might affect the quality of the research paper b) I did not find any prior research on credit rating companies of Bangladesh for help. C) Political turmoil of the country SST as a barrier as I often miss the chance of visiting my respective lecturer for consultation regarding my research. D) The report is limited for academic purpose only. 71 P a GE Chapter Two Organizational Overview 2. Over View of Alpha Credit Rating Ltd. As a result of the initiative of a few distinguished and renowned professionals of Bangladesh, Alpha Credit Rating Ltd. (Alpha Rating) was incorporated on the 24th of February 2011 with support and organizational assistance from SITCOM IT Ltd. , Axis Resources Ltd. , Equity Care Bangladesh Ltd. And TAN Equity and Investment Ltd. Its founding partners are professionals who fully understand local customs and the complexities of the social and political structure of Bangladesh”s business environment.

Lapidating has technical collaboration with Istanbul International Rating Services Inc (Titrating) who brings a wealth of experience working with national and international rating agencies, particularly in emerging markets. It is this combination of international experience and local insight which enables Lapidating to offer a unique value through its rating service- a distinct competitive advantage. Lapidating Licenses/Accreditation from Regulators 1) License from Securities & Exchange Commission 2) CIA Accreditation from Bangladesh bank 3) Accreditation from Insurance Development Regulatory Authority. . 1 Alpha Rating Ltd. Mission Alpha Rating mission is to provide independent and reliable analysis and opinion on the creditworthiness of Bangladesh obligators and the financial instruments. They have set out to bring to Bangladesh the extensive international credit rating experience of their partners to contribute to the development of the capital market by fostering a reedit rating culture among Bangladesh obligators, investors and other market participants. Page 2. 2 Alpha Rating Ltd.

Values Alpha Rating recognizes the importance and responsibility of a national rating services agency in Bangladesh and therefore attaches utmost priority to establish working standard that reflects strict observance of the following values: 0 Independence 0 Transparency 0 Integrity 0 Confidentiality 0 Professionalism Rigorous and systematic analysis.