Patrick Caragata and the trouble before the trouble

A failed company leaves an unusually tidy story behind. The warnings were there. The accounts were available. Someone ought to have noticed. In June 2002, Dr. Patrick Caragata was asking a less comfortable question about the collapse of Australia’s HIH Insurance: why had the warning signs been ignored? His company, Rapid Ratings, had submitted an analysis to the royal commission arguing that its software, applied to earlier accounts, would have identified trouble years before the collapse.

That distinction matters. A retrospective test is different from a warning delivered before an event. Caragata’s argument concerned both the machinery of detection and the habits of the people using it. He blamed “false assumptions, poor observation skills and paradigm blindness”. The last phrase has the sound of an academic label. Its everyday meaning is rather more familiar: the evidence has arrived, but it has failed to bring an invitation.

Across banking, government, software and charity work, Caragata kept returning to the interval between a developing problem and the moment everyone agreed it was a problem. His career makes an interesting case for paying attention to that interval. It also suggests that building a better measuring instrument is only the beginning. Someone still has to read it.

Before the company, there were countries

Born in Toronto, Caragata completed his doctorate at the University of Toronto in 1981. His subject brought together non-fuel minerals and Canadian foreign policy. The university’s archival record gives the thesis a telling subtitle: Negotiating from Strength and Weakness. Long before he was assessing businesses, he was examining the relationship between resources, bargaining power and the parties sitting across a negotiating table.

At Toronto-Dominion Bank, he led the country risk analysis group, covering 65 countries during his 1983–1986 tenure. The work placed him in the territory where international events become entries in a bank’s exposure calculations. He also worked on the Canadian Bankers Association committee addressing the Latin American debt crisis. Risk arrived with a passport, a political context and a very substantial balance.

In 1986, he was seconded to the Canadian government to examine investment risks associated with the Canada-US Free Trade Agreement. By June 1988, he had moved to New Zealand to become chief economist at the Ministry of Energy. The geographical leap was considerable; the intellectual distance was smaller. Resources, investment and incentives were still at the centre of the work.

There he redesigned the petroleum royalty regime. In 1991, he became chief tax policy adviser at Inland Revenue and worked on petroleum mining taxation and international tax issues. These were jobs in which apparently dry design choices had practical consequences. A royalty formula determines how an economic return is divided. A tax system changes the calculations people make before investing, reporting income or expanding a business.

His research effort at Inland Revenue eventually produced 37 working papers and a report completed in September 1997. A book followed in 1998. Software entrepreneurship was still ahead, but the working method was already visible: define a system, examine its performance, then ask whether the usual measurements tell the whole story.

The second opinion goes online

In October 1997, Caragata became managing director of McCallum Petterson Financial Diagnostics in Wellington, the predecessor business to RapidRatings. Its concerns included company performance, credit assessment and corporate turnarounds. Australian risk capital enabled the move to Brisbane in June 2001, when the RapidRatings name was adopted and the company incorporated there.

By June 2003, the business was announcing a subscription service covering New Zealand’s listed and unlisted companies. The proposed audience was broad: investors, lenders, creditors and consultants. The distinction Caragata drew was useful. The firm assessed risk; it did not tell people which shares to buy or sell. A rating could inform a decision without pretending to be the decision itself.

That leaves room for an unfashionable possibility: a business can have an appealing return and still carry an uncomfortable level of risk. Caragata wanted users to compare the two. The promise of software was consistency across companies and the ability to deliver assessments online, rather than reserve every opinion for a laborious individual process.

One commercial test came in 2004, with a five-year contract to provide an independent second opinion on Lehman Brothers equity trades. The client’s later fate gives the name an unavoidable resonance. The assignment itself was specific: an additional assessment of trades. It was an example of a customer paying to have an existing view tested, a useful purpose for an enterprise built around warnings.

Who pays for the opinion?

Caragata’s work also drew him into the argument over how the ratings business should operate. A June 2005 submission to the US Securities and Exchange Commission carried his name as managing director and CEO. That October, he met SEC staff to discuss the proposed definition of a nationally recognized statistical rating organization. Developing software had led him to a distinctly human obstacle: the rules governing entry into an established market.

In February 2007, he joined James Gellert and Douglas Cameron in acquiring the business from its Australian corporate owner and taking it to New York. Gellert became president and CEO. Caragata’s role included the models and methodologies behind the ratings, along with the programmed language used in automated reports. Even the prose explaining the numbers was part of the system’s design.

The partnership’s 2013 submission to the SEC described a subscriber-paid business using financial statements, without market inputs or analyst intervention in the rating process. It argued that proposed reforms could create additional barriers for smaller competitors. That was the company’s position in an ongoing policy debate, rooted in its own experience of trying to compete.

The payment question was especially pointed. An issuer-paid agency receives money from the organization seeking a rating. A subscriber-paid service receives money from the customer seeking an assessment. Neither arrangement removes every possible conflict. But the difference helps explain why Caragata’s challenge to the industry extended beyond the accuracy of an algorithm. The commercial arrangements around an opinion also deserved inspection.

“A 360 degree risk environment.”

Patrick Caragata · 2020

The supplier outside the spotlight

By 2020, Caragata was talking about risk as something that surrounded a business. In an interview, he described a “360 degree risk environment”. A company might be watching the customers who owed it money while overlooking the suppliers on which its own operations depended. A supplier’s financial trouble could become the buyer’s production problem.

That observation brought his work beyond the familiar audience of investors and lenders. A purchasing team also needed to understand the company across the table. Efficient inventory arrangements did not make that relationship disappear. They could make continuity of supply more consequential, and a supplier’s difficulties more expensive for everyone downstream.

It is a particularly revealing turn in Caragata’s story. His early career examined countries negotiating with multinational companies. His later business helped companies examine their counterparties. The scale changed, while the interest in dependence and exposure remained. A celebrated name, a longstanding relationship or a reassuring market price could each leave part of the picture unexamined.

RapidRatings received a $200 million strategic investment in 2022, led by Spectrum Equity alongside 22C Capital. The investment was intended to support the company’s work on supplier and other third-party risk, including access to private-company financial data. By then, the concerns that had occupied Caragata were supporting a business with institutional growth capital and a broader commercial organization around it.

A smaller charity has a balance sheet, too

The less expected chapter took place in Brisbane. Beginning in early 2013, Caragata spent three years developing Mentors for Charities, a project connected with the Rotary Club of Brisbane, where he had been a member and served on the board. His concern was that smaller charities could offer valuable services while struggling to compete for funding.

The proposed assistance was practical. Charities would describe their strengths, weaknesses, needs and opportunities. Rotary members with management experience would volunteer to review their operations and help identify improvements. Referrals from the Lord Mayor’s Charitable Trust were part of the process, as was a requirement that charities welcome the assistance.

There is something pleasingly unceremonious about that last condition. Expertise is more useful when somebody has asked it through the door. The program offered time and managerial attention, resources that do not always appear in a fundraising total. It applied a familiar concern with performance to organizations whose purpose extended beyond commercial returns.

The questions outlast the job

Caragata’s board work returned him to resources from another direction. EESTech, which works on mining and mineral-processing waste, announced his appointment in 2019 after his involvement on its advisory board since 2010. Its 2025 annual disclosure continued to list him as a director and head of its strategy and risk management committee.

On July 15, 2024, RapidRatings announced that he would retire on September 30. By that point, the business he had started in Wellington had passed through Australian incorporation, a US acquisition and years of expansion. His books included work on national resources, taxation and business early-warning systems. The subjects make a fairly coherent shelf: who has power, what incentives encourage, and what an organization’s performance reveals.

A career spent examining warnings is easily turned into a collection of predictions. Caragata’s is more interesting when viewed through the systems he helped build. Royalty rules, tax research, ratings software and a charity mentoring program each required a way to turn observation into a useful decision. The hard part was rarely the announcement that something mattered. It was establishing what to examine, and getting people to examine it while they still had choices.