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It’s time to embrace Risk Management

It’s time to embrace Risk Management

by Toby Lucich on April 8, 2008

Since the advent of Sarbanes-Oxley, non-financial corporations have faced increasingly strong regulatory and compliance requirements aimed broadly at increasing transparency in their business practices. Risk management has been addressed at times, but usually as an afterthought.

All this is about to change.

In November 2007, Standard and Poor’s announced plans to introduce enterprise risk management into its credit ratings criteria for non-financial companies, a move meant to bring a level of consistency to evaluating not only the resilience and profitability of these firms, but also the quality of management.

S&P; has been evaluating ERM in the financial sector for some time; now it will apply its ERM ratings criteria to industries as diverse as airlines, pharmaceuticals and retail. While S&P; plans to tailor its proposed ERM analysis based on individual companies’ unique risks, structure and culture, all companies will be rated against four major criteria that will serve as the framework for analysis—risk management culture and governance, risk controls, emerging risk preparation and analysis of strategic management.

It’s time to embrace Risk Management

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