| Score | Label | Examples & criteria |
|---|---|---|
| 1 — Very Low | Essential / regulated | Water utilities, regulated telecoms, sovereign-backed infrastructure. Near-zero demand cyclicality, high barriers, pricing power protected by regulation. |
| 2 — Low | Stable / defensive | Staple food production, basic pharma, essential logistics, trade finance on commodities. Low cyclicality, moderate barriers to entry. |
| 3 — Med-Low | Moderate barriers | General manufacturing, agribusiness, infrastructure projects, standard trade. Some cyclicality but established players have advantages. |
| 4 — Medium | Competitive / cyclical | Energy, financial services, shipping, general chemicals. Earnings swing meaningfully through economic cycles. Entry barriers exist but are not prohibitive. |
| 5 — Med-High | Highly cyclical | Real estate development, mining, steel, construction. Revenues highly correlated to economic conditions. Weak pricing power in downturns. |
| 6 — High | Speculative / commoditised | Spot commodity trading, speculative real estate, highly competitive retail. No barriers, price-taker, earnings volatile. Survival depends on cycle timing. |
| Score | Label | What to look for |
|---|---|---|
| 1 — Dominant | Market leader | Clear #1 or #2 in market. Sets prices, not a price-taker. Diversified customers across geographies. Long-term contracts. Strong brand or IP moat. |
| 2 — Strong | Established player | Solid market position with identifiable competitive advantage — cost, relationships, or specialisation. Revenue resilient through cycles. Some customer concentration acceptable. |
| 3 — Satisfactory | Niche / adequate | Established in a niche but without strong pricing power. Customer base is reasonable. No obvious existential threat but limited ability to grow margins. |
| 4 — Fair | Limited advantage | No clear differentiation. Competes mainly on price. Top 3 customers represent >50% of revenue. Vulnerable to losing key contracts. Thin margins. |
| 5 — Weak | Structurally weak | Losing market share. Single or highly concentrated customer. No pricing power. Dependent on one geography or product. Management unable to articulate strategy. |
| 6 — Vulnerable | At risk | Business model under threat (disruption, regulation, or loss of key contract). Negative margin trend. Survival dependent on external support or restructuring. |
| Score | OECD class | Transfer & political risk |
|---|---|---|
| 1 — Minimal | OECD 0 | G7 / developed markets. No meaningful transfer risk. Full FX convertibility. Rule of law. Examples: US, Germany, Japan, Singapore, Australia. |
| 2 — Low | OECD 1–2 | Investment-grade sovereigns. Convertibility well established. Minor political risk. Examples: UAE, Saudi Arabia, Chile, Malaysia, Israel, Qatar. |
| 3 — Moderate | OECD 3 | Emerging markets with functioning institutions. Some FX risk. Occasional capital controls possible. Examples: Brazil, India, Mexico, Morocco, Vietnam. |
| 4 — Elevated | OECD 4 | Meaningful transfer risk. History of capital controls or debt restructuring. Political instability possible. Examples: Egypt, Kenya, Jordan, Colombia, South Africa. |
| 5 — High | OECD 5–6 | Significant transfer / convertibility risk. Sovereign stress or restructuring history. Examples: Turkey, Pakistan, Bangladesh, Tunisia, Ethiopia, Ghana. |
| 6 — Very High | OECD 7 | Sanctions, conflict, or sovereign default. Repatriation of funds at serious risk. Examples: Ukraine, Russia, Lebanon, Sudan, Venezuela, Afghanistan. |
| Score | Label | What to assess |
|---|---|---|
| 1 — Exemplary | Best in class | Experienced C-suite with 10+ years in sector. Clear and credible strategy. Big 4 audited 3+ years. Independent board with audit committee. ESG reporting. No related-party concerns. |
| 2 — Strong | Solid governance | Competent management with proven track record. Audited accounts. Succession plan exists. Board oversight in place. Transparent reporting. Strategy clearly articulated. |
| 3 — Adequate | Acceptable | Management capable but limited track record or thin team. Mid-tier auditor. Basic governance structures. No obvious red flags but limited comfort on succession or oversight. |
| 4 — Fair | Below standard | Owner-managed with key-man risk. Weak or no independent oversight. Management accounts only. Strategy reactive rather than proactive. Related-party transactions present but disclosed. |
| 5 — Weak | Governance concerns | Limited transparency. Undisclosed related-party dealings. No succession planning. Accounts qualified or delayed. Management unable to explain financials. Prior disputes with lenders. |
| 6 — Poor | Material risk | Serious governance failures. Fraud risk, misrepresentation, or prior defaults. Accounts unreliable. Consider whether to proceed with transaction regardless of financials. |