Risk Management

Valos maintains close communication with all borrowers to closely monitor their risk exposures and business profitability. This ongoing diligence ensures that the Earn Lending Product remains secure, and that only top-quality borrowers are entrusted with the assets. By consistently evaluating the financial health and risk management practices of these market makers, Valos aims to mitigate potential risks, safeguarding the assets and the returns for its users.

Our evaluation process divides risk assessment into three core categories: Operations, Financial Performance, and Risk Monitoring.

1. Operations

We conduct in-depth due diligence on each borrower, ensuring they meet the highest standards of compliance, management quality, and operational transparency. This includes thorough Know Your Customer (KYC) procedures and careful evaluation of historical borrowing behavior. By continuously engaging with borrower management teams and reviewing their business models, we ensure that all participants align with our rigorous risk criteria.

1. Financial Performance

We analyze each borrower’s financial statements to assess their liquidity, solvency, and overall profitability. Special focus is placed on key metrics such as the Interest Coverage Ratio and Current Ratio, which reveal the borrower’s ability to meet financial obligations, even during periods of market stress. Additionally, we scrutinize the quality of financials submitted, working only with borrowers who provide detailed, third-party-validated financial statements and promptly respond to our due diligence queries.

1. Risk Monitoring

Valos employs continuous risk monitoring to track each borrower’s asset liquidity, leverage, and equity positions. Firms that provide real-time visibility into their financial status are prioritized, ensuring that we always have an up-to-date view of their financial health.