How to Prepare for Credit Rating Reviews under S&P’s New Enterprise Risk Management Evaluation Criteria

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In its continuing efforts to enhance its view of a company's financial profile and to be more forward-looking and predictive in its rating approach, in November 2007, Standard & Poor's (S&P) issued for comment a proposal for how it may begin to introduce enterprise risk management (ERM) analysis into its corporate credit rating process. As contemplated in its proposal, the deterioration or improvement of a company's ERM quality would potentially drive rating and outlook changes before the consequences are apparent in published financial results. The principal objective of S&P, in evaluatingERM, is to limit the frequency and severity of events that could possibly affect ratings.

The following publication provides details about the proposed rating process and what it could mean to your business.