Upstart ratings agency to challenge the big three by relying on AI for risk assessment.
Sigma Ratings, a New York–based start-up is set to disrupt the risk analysis space with the addition of non-credit risk ratings focused on transparency, corruption risk and money laundering, powered by artificial intelligence (AI).
The company, which launched in July, is set to release ratings on more than 500 banks across the Middle East, Europe and Latin America. It will produce two types of ratings, one at the country level and one at the entity level, says co-founder and CEO Stuart Jones.
“The former informs the latter and both are updated on a daily basis,” he explains. “The entity-level ratings reflect things like regulatory actions, the overview of the country in which the company’s HQ is located and relevant regulatory information. The country-level risk responds to geopolitical changes and movements in credit default swaps (CDS) and includes information on the regulatory environment, perception of corruption and other factors that influence compliance risk.”
Sigma Ratings will provide entity-level ratings in two ways. The first method devises a risk rating based on publicly available information, such as annual reports, corporate websites and audited financials. The second method, which banks are expected to pay for, includes more detailed information shared by the entity, including compliance and internal policies, to produce a business integrity rating ranging from AAA to C.
Both products, as well as country-level ratings, will be in part powered by AI, which will trawl through publicly available information and also inform the actions of the rating team.
Based on the data collected so far, Latin American banks rank higher for money-laundering risks than banks in the UAE, for example. Additionally, cybersecurity is an issue for many LatAm banks, according to Sigma Ratings, leaving them exposed to cybersecurity threats.
“[Right now], it’s impossible to sit in New York and understand what another company is doing 10,000 miles away,” says Jones. “We are the intermediary [set to] change that. The world wants transparency and we are going to bring it.”