Table of Contents
According to TEJ data collection, the scale of listed companies had grown from 11.74 trillion to 54.63 trillion from 2000 to 2021. These groups also contain companies from the amount under 10 thousand to 23.3 thousand. The ways of upscaling are establishing new companies on their own and merging and acquisitions. In the past ten years, the amount of trades of mergers and acquisitions was over hundreds. The management turnovers caused by merging were also highly spotlighted by the market.
Listed Groups are growing with the development of Taiwan businesses. When we are interacting with enterprises, the operational risks, the reliance on other companies, or the extent of risk conducting are all gradually influencing the credit risk evaluation towards the enterprise.
TEJ started the research of group companies because of the need for “Governance”. We launched two systems in terms of “Governance” and “Group Enterprises” which are needed by graduate institutions in 2005. In 2008, we launched the “Group Observer” system to provide a standard for finance workers’ loaning. Being different from the definition of grouping companies, TEJ cited the concept of “Final Controller”. Adding the practical operations, documented the rule of group relegation. First find out which companies derive from the same group, then evaluate the risk.
TCRI Risk Evaluation Index is the indicator that TEJ started to develop the next year the company was founded. The main goal is to offer a fair, objective, and widely covered risk evaluation index when facing other companies. Throughout the 30 years, TCRI has already turned into a standard risk index used in financial companies, which was also widely used for risk controlling, post-loan management, sales development, investment management, etc. Meanwhile, we are also focusing on the development of Taiwan groups and developing the structure of inducing groups and risk evaluation modeling. The cable TV group that TEJ finished in 2016 was the start of crossing fields from individual risk evaluations to group enterprise ones. We eventually completed the Group Credit Risk Index ( GCRI ) in 2021.
The GCRI group credit risk indicator invented by TEJ is mainly composed of listed companies in Taiwan and outputs the GCRI level through 5 steps.
The output would be complete after all the processes were done. The process could be shown as follow:
The GCRI group credit risk level results of 2021 are shown below. We gave 1570 Taiwan company groups credit risk levels in total, and it was apparently a bell curve distribution, which is the same as the TCRI concept.
From the early years of Gianfranco Lanci, the CEO of Acer, using merge to expand territory, to the case of SHAN YUAN CO.LTD entering bigger companies, the risk from expanding and the attitude of the final controller are all the factors we have to focus on. GCRI uses systematic evaluation to tackle two huge issues in the field of group relegation and risk evaluation. Providing the trace of a company leaving a group daily brings immediateness and correctness. On the risk evaluation side, we start from the reliable TCRI levels, giving a risk silhouette in terms of the axis members.
GCRI is applied to bank credits and risk management. It is also a way to disperse the risks for users seeking investing opportunities. For finance group cross department corporations, GCRI provides consistent standards of group relegations and risk levels, which enables the communications between companies standardizable. Through group relegations with controlling power concepts, periodically updating the GCRI levels, and viewing changes in investing and credit risks, you can gain more information of big scale companies, which enables you to face the challenges of complicated group risks.