# Layers, Pillars and Criteria

Steakhouse Financial's collateral risk model is organized into three layers, each containing multiple pillars and individual scoring criteria. Every criterion, pillar, and layer is rated on a scale from AA (highest quality, Prime) to C (excluded from all publicly distributed vaults).

Each Layer consists of several pillars, each of which contains multiple criteria.

The rating associated with a layer reflects the lowest rating among its pillars, as each is assessed independently and the weakest link determines the overall strength of the layer.

<figure><picture><source srcset="/files/ktBgTW5oVg4k7xqdv6EP" media="(prefers-color-scheme: dark)"><img src="/files/8Oiht3zvTrlBXRW0rArx" alt="Application of the MLRR in practice"></picture><figcaption><p>Application of the MLRR in practice</p></figcaption></figure>

## Risk Taxonomy and Layered Structure

| Layers       | Pillars            | Criteria                 |
| ------------ | ------------------ | ------------------------ |
| **Asset**    | Issuer Risk        | *Social*                 |
|              |                    | *Decentralization*       |
|              |                    | *Technical*              |
|              | Credit Risk        | *Qualitative Assessment* |
|              | Operational Risk   | *Lindy*                  |
|              |                    | *Audit Coverage*         |
|              |                    | *Economic Transparency*  |
| **Platform** | Issuer Risk        | *Social*                 |
|              |                    | *Decentralization*       |
|              |                    | *Technical*              |
|              | Operational Risk   | *Lindy*                  |
|              |                    | *Audits*                 |
|              |                    | *Economic Transparency*  |
| **Market**   | Oracle             |                          |
|              | Liquidity          |                          |
|              | Credit Enhancement | *Price Fluctuation*      |
|              |                    | *LLTV*                   |

## Rating Grades

Each Criterion, Pillar, and Layer is rated on a scale from **AA** (highest quality) to **C** (riskiest practice).

The following rating scale applies:

| Rating | Numeric Score | Type                                            |
| ------ | ------------- | ----------------------------------------------- |
| **AA** | 1             | <mark style="color:$success;">Prime</mark>      |
| **A**  | 2             | <mark style="color:$success;">Prime</mark>      |
| **BB** | 3             | <mark style="color:orange;">High Yield</mark>   |
| **B**  | 4             | <mark style="color:orange;">High Yield</mark>   |
| **CC** | 5             | <mark style="color:$danger;">Constrained</mark> |
| **C**  | 6             | <mark style="color:$info;">Excluded</mark>      |

The numeric score is used in aggregation calculations across criteria, pillars, and layers.

* **AA** and **A** assets or markets are considered Prime and are offered within the lower-risk range of Steakhouse Products.
* **BB** and **B** assets are considered High Yield and are offered in the higher-risk range of Steakhouse Products.
* **CC** assets represent higher level of risks. Exposures in these assets are only taken opportunistically, in constrained amounts, and aligned with specific objectives under strict risk monitoring.
* **C assets** carry the highest risk rating and are excluded from all publicly distributed vaults.


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