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Improve Your Ratings
Measuring your risk
The DGRR® or "digger" Rating™ is a scientific measurement of risk based on an assessment of the risk levels associated with factors of importance in a construction company. The assessment of risk level for each factor is based on analysis of the strength or weakness of the detailed systems, plans, procedures, methods, policies or safeguards that make up the factor.
Each important risk factor is associated with one of three levels of risk ranging from low to high. A factor with a low level of risk acts only as a contributor to potential business failure, while a factor with a high level of risk could be cause for business failure by itself.
Much like a FICO score, the "digger" rating™ is a composite score based on the positive or negative impact of important factors. To put it simply, the higher the score the lower the risk. Companies with a high DGRR® are proven to carry less failure risk than companies with lower scores. Although the scores are remarkably accurate, no one can predict with certainty whether or not a company may incur a business interruption, failure to perform, or total business failure.
Druml Group recommends that banks, bonding companies and insurers use a "digger" rating™ as a means of estimating the risk associated with conducting business with a construction entity. Frequently, there is more to consider in a decision to grant credit or guarantees than just the "digger" rating™. Most companies that bear risk alongside a contractor will also bring other important factors into consideration such as current and historical financial data, a current A/R and A/P aging and WIP reports corresponding to the financial data provided.
The DGRR® itself, while important, is by no means the only factor in a decision to provide credit or guarantees. It is also important to understand that various creditors and guarantors, depending on their tolerance for risk when making decisions, may view the failure risk associated with a "digger" rating™ differently. In fact, since credit providers and guarantors often consider additional information or special circumstances, some may extend credit or guarantees even if the rating is low, or decline a request if rating is high.
Nonetheless, the "digger" rating™ is a consistent rating that accurately measures risk driven by key factors. These factors consider the status of existing business and financial systems, plans, procedures, methods, safeguards and controls and serve as a powerful guide for needed improvement within a construction company.
For advice on your DGR rating™ and general risk assessment, call Druml Group today.
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