- Rating is not and will not be sufficient. The fact that the issuer pays puts a doubt on where the loyalty of the agencies lie. Ratings are seldom good early warning indicators either but they will probably continue to serve as a standard component for any credit risk model.
- Early warning indicators.
- We cannot 100% automate risk management which requires we have to include subjective measures or gut feel if you wish.
- Black Swan[1] – expect the unexpected and develop mitigation plans.
- Good local knowledge will remain key and increase in importance.
[1] A large impact and hard to predict, and rare event. "Black Swan" theory refers only to events of large consequence and their dominant role in history. The theory was described by Nassim Nicholas Taleb in his 2007 book The Black Swan.
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