Vendors form ERM initiative to meet S&P evaluations

Software providers offer enterprise risk management for non-financial firms

BOSTON – Increased focus on risk management and cost-benefit analysis by market participants and regulators has prompted software providers to form a joint initiative, announced at the Business Objects Influencer Summit, to meet the new Standard & Poor’s (S&P) enterprise-wide risk management (ERM) evaluations.

Rating agency S&P has announced it will include the ERM valuations within its credit rating analysis of non-financial corporations. Governance, risk and compliance (GRC) providers SAP, Deloitte, IBM Global Business Services, PricewaterhouseCoopers and Protiviti will jointly develop software and best practice framework tools. S&P has carried out ERM evaluations for financial firms since 2005, but announced in May that it will extend this to non-financial firms in a staggered process beginning in the third quarter of 2008. The rating agency says it aims to provide investors with a more accurate and reliable view of a firm’s ability to anticipate, understand and manage risk exposures.

Narina Sippy, senior vice-president of SAP's GRC business unit, says: “S&P's decision to apply ERM analysis to its corporate ratings further thrusts risk management into the spotlight, and ultimately is a good thing for companies and investors alike. With dramatic corporate events continuing to make headlines around the world – from numerous product recalls, to rogue bank trading activity, to the continued fallout from the subprime mortgage crisis – one thing is clear: executive management teams and their boards are fundamentally rethinking their focus on risk management.”