In order to achieve good corporate governance, the Risk Management Department developed an excel model for Risk Rating and Grading of the PASI investment portfolio for more effective risk management:
 

1. Design Risk Measurement Models:

Data is collected from PASI investments on a monthly basis to calculate the Yearly Volatility and Return.
 

2. Capital Asset Pricing Model (CAPM)

Calculation of Beta, Expected Return and Drift Rate.
 

3. Regression

Calculation of the regression analysis.
 

4. Default Probability

Default is expected to occur if the asset value is not sufficient to cover the firm's liabilities.
 

5. Conduct and Design Control Assessment

Probability of default chart.
 

6. Conduct and Design Corrective Action Plan

Rating: The credit rating has an inverse relationship with the possibility of debt default.

Grading: Based on the rating, grading is defined.
 

7. Conduct and Design Limit Framework

Risk Matrix: Defined as the return generated in terms of rating: High, Medium or Low.

Thereafter the following excel model is being developed, which provides: 

1) Risk Rating

2) Risk Grading

3) Risk Matrix for the PASI Investment portfolio