Probability of Distress 

The PoD® is the probability that a Distress Event will occur within 1 year (1-year PoD®) or within 3 years (3-year PoD®), expressed as a percentage. A Distress Event could be failure, reconstruction, or some other event indicative of acute financial distress (for example, Chapter 11 in the US).

Where possible, Company Watch keeps records of worldwide corporate distress events occurring amongst the populations of companies for which it calculates H-Scores.

The derivation of a company’s PoD® incorporates:

• the company’s H-Score® (a measure of the extent to which it resembles previously distressed companies),
• the overall rate of distress across the full population of companies,
• the historical rate of distress at each point on the H-Score® scale,
• economic indicators such as the growth in GDP.