About i9 Partners

Who We Are

i9 Partners is a software-centric organisation that supports Auditors, small companies to large corporations, Co-ops, Universities, smaller Financial Institutions and Microlenders with IFRS 9 valuations and impairments.

We use best of breed software and methodologies, with content and models designed for specific industries. We combine this with key partnerships with trusted experts to provide an affordable turnkey solution. We provide valuations on most financial asset types.

Proven methodologies and rapid turnaround

Our expert Expected Credit Loss reports and proven methodologies are trusted and have passed through audit at all the large firms on more than 50 major assignments.

Our expertise is strengthened by our strategic partnership with Moody’s Analytics™, the global leader in Credit Risk tools and data for global corporations, banks and regulators, including their new post COVID-19 economic scenarios.

Our specialist team have the experience of repeat engagements and deep relationships with other credit risk professionals and auditors to make sure that we understand your unique issues and deal with them effectively.

The economies of scale from our strong client base and bulk licences of Moody’s Analytics, tools, models, and macro-economic data allow us to turn-around your calculations quickly, reliably, and affordably.

The impact of COVID-19 on IFRS 9 and ECL calculations

i9 Partners have calculated Expected Credit Losses (ECL’s) under a COVID-19-impacted economy and are seeing that there is a significant increase. The forward-looking conversion factor is increasing ECL rates by between 150% – 400%. In many instances, this increase is material to the reporting entity.

The role of macroeconomic forecasting

i9 Partners makes use of the GCorr set of macroeconomic forecasts and credit models produced by Moody’s Analytics in its conditioning. We use three scenarios – a baseline, an optimistic, and a pessimistic scenario. The scenarios are usually adjusted quarterly but are now revamped frequently to take into account the impact of COVID-19 on the economy. Three categories of factors are taken into account: 1) the likely spread of the disease through the country; 2) the direct economic impact of the pandemic and quarantining in response; and 3) the response by the government to the economic impact, including direct relief to those impacted and the measures taken to stimulate and provide liquidity to the economy.

How we calculate the conditioning factor

Conditioning is the process by which we convert the measure of risk, based on history, into a forward-looking Expected Credit Loss. The calculation of the conditioning factor will vary from asset to asset depending on the country it is located in, its industry, its expected correlation with the market (whether it is likely to be more or less volatile than the average) and the absolute level of the probability of default (PD). We have now performed these calculations for a number of clients and we are seeing that if we compare the conditioning impact on its own (assume the same Point In Time loss rate and compare the resultant ECLs by applying the pre-COVID-19 and the COVID-19-impacted macroeconomic scenarios), there are significant differences. We are seeing that the forward-looking conditioning is now generally more than doubling the Point In Time loss rate.

Impact of the rate increase will vary from asset to asset – take care!

Where your ECL is low, a significant increase in the rate may not be impactful. However, those assets with higher ECL rates may have a bigger rand value of ECL increase. Loans and guarantees must be considered carefully and a significant increase in risk will result in the asset moving to Stage 2 in terms of IFRS 9 classification, which means a move to lifetime losses. The resulting lifetime losses recognised could be material to the balance sheet. Intra-group loans and guarantees require special attention as they may result in significant losses in group companies, resulting in technical insolvencies and restricting the ability to upstream dividends. These factors should be assessed long before year-end to provide an opportunity to address.

Our Partners

CEEi supports banks, fixed income investors and corporates to manage commercial and corporate credit risk through a range of data, analytical and advisory services to assist clients to quantify and assess credit risk. CEEi was founded in 2013 following a MBO from the FirstRand Group lead by Laurence Milner, a founder of i9 Partners.

CEEi provides credit intelligence to i9 Partners’ solutions.

www.ceei.co.za

i9 Partners has a strategic partnership with Moody’s Analytics, the leading global provider of credit risk measurement tools to apply their best of class risk measurement and IFRS 9 suite of software to South African corporates. This includes benchmarking and measurement tools derived from their credit research database that includes over 1 million sets of South African financial statements.

www.moodysanalytics.com/

Be audit ready, reduce your risk and know the impact on your financials.

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Our Solutions

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Auditors

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Property Companies and REITS

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Universities and Foundations

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Microlenders

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Trading Companies

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Financial Institutions

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