Validation of the Balanced Composite Risk Score (BCSR): Case Study of Alba vs. Alcoa (2019–2023)

This technical documentation validates the Balanced Composite Risk Score (BCSR) model using a comparative analysis of Aluminum Bahrain (Alba) and Alcoa over the period 2019 to 2023. The BCSR is a composite financial risk metric developed under the Alaali Financial Models Framework (AFMF), integrating adjusted interest coverage (A-ICR), debt-to-equity ratio, internal cash flow volatility (A-CFVI-Ops), and a binary distress signal derived from negative return on equity. Weights were derived from normalized standard deviations to reflect real-world variability in risk exposure, emphasizing A-ICR as the dominant risk signal. The model was validated using a threshold-based classification test (cutoff = 0.85), producing a 90% overall accuracy and 100% sensitivity. These results confirm the BCSR’s utility as an early-warning mechanism for financial instability in capital-intensive industries. The document includes the full model structure, empirical justification, year-by-year Alba vs. Alcoa scoring, and a complete classification table. Supplementary Excel data is provided for replication and audit. This work is part of the AFMF model validation series and is intended to support academic dissemination, model transparency, and further empirical testing.