Example: POD rating for a company calculates as 1.5%.
This measures the probability that a Distress Event will occur within 1 year (1-year PoD®) or within 3 years (3-year PoD®), expressed as a percentage.
A Distress Event is a failure, reconstruction, or some other event indicative of acute financial distress (for example an Administration). Company Watch tracks and keeps records of worldwide corporate Distress Events occurring among the populations of companies for which it calculates H-Scores.
The derivation of a company’s PoD® incorporates:
- The company’s H-Score® (a measure of the extent to which it resembles companies which subsequently failed)
- The overall rate of distress across the full population of companies operating in the same economic region as the company in question
- The historical rate of distress at each point on the H-Score® scale Economic indicators such as the growth in GDP