Perceived Risk Index
16 May 2022
Perceived Risk Index (PRI) is an indicator developed by Enel SpA Risk Control Unit within AFC function that reflects corporate risk perceived by financial markets.
Enel Foundation is committed to partner with primary research institutions to further deep dive on PRI and other sustainable finance indicators.
It is a forward-looking indicator since it considers three different variables with a prospective nature that reflects the premium at risk required by investors:
● Inverse Stock Price: the stock price reflects the level of investors’ trust towards the company. Thus, the lower is the stock price, the higher is the perceived risk;
● Option Implied Volatility (3 months): gives the indication of the perceived risk of the underlying asset implied in listed option prices;
● Credit Default Swap (5 years): The CDS represents a credit risk premium and thus it has a direct relationship with the company perceived probability of default.
These above mentioned three variables are market data available on public sites. 31/12/2018 is the starting point of the monitoring activity, with a baseline value of 100%.
This indicator is monitored on a regular basis for Enel and 39 other companies belonging to 6 different sectors: Electricity, Oil & Gas, Consumer Goods, Software, Technology, Automotive.
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Measuring the risk as perceived by financial markets – Sectors & Enel
In the observation period, the Perceived Risk Index shows a sharp increase in early 2020 for the pandemic outbreak, and more recently due to the energy crisis, aggravated by the conflict between Russia and Ukraine, now shows a decrease due to a first approach to manage the energy dependence from Russia.