Loss Given Default (LGD) Model Enhancement
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Case Study
Loss Given Default (LGD) Model Enhancement
A leading telecommunications provider in Kuwait, recognized for scale, innovation, and digital connectivity leadership
The business situation
- The telecom operator aimed to strengthen its provisioning framework by adopting a more scientific, data-driven approach to LGD estimation
- Differentiated recovery timelines across B2B and B2C segments needed to be incorporated into LGD assumptions
- The institution sought to progressively increase LGD rates year-on-year to reflect heightened credit risk in aged exposures
- There was a requirement to benchmark LGD calibration practices against leading telecommunications sector standards
- The client also aimed to demonstrate the impact of alternative LGD approaches with improved transparency and alignment with risk management expectations
Our team’s role
Methodology Design
Design and assessment of alternative LGD approaches for downturn estimation
Model Development
Development of segment-specific LGD methodologies with recovery timelines
Impact Analysis
Quantification of the impact of alternative LGD approaches on provisions
Stakeholder Alignment
Facilitation of workshops to align methodologies with regulatory and industry expectations
The value our team added
- Delivered regulator-aligned and benchmarked LGD methodologies
- Improved transparency in LGD assumptions and outcomes
- Enabled informed management decision-making on provisioning
Build Robust Credit Risk Models
From LGD enhancement to transparent, regulator-aligned provisioning
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