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Measuring your risk
The DGRRŽ 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. This sample scorecard depicts the means of scoring; click the logo to see it.
Much like a FICO score, the "digger" rating™ is a composite score based on the positive or negative impact of important factors. Click the logo to see a graph that depicts the range of scores that might be expected from a "digger" rating™.
To put it simply, the higher the score the lower the risk. Companies with a high DGRRŽ 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 DGRRŽ 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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