Higher credit ratings linked to ERM maturity levels: RIMS

Companies with greater risk management and enterprise risk management (ERM) maturity levels are more likely to have higher credit ratings, according to RIMS ‘State of ERM Report 2008 — an in-depth study on ERM practices.’
There is a distinct correlation between companies that score higher on the RIMS Risk Maturity Model (RMM) and companies that possess higher credit ratings, the study found.
The study was based on data collected from 564 corporate risk practitioners between December 2006 and January 2008.
“The same is true of low-scoring companies that, typically, possess lower credit ratings,” according to a RIMS release. “Hence, better managed companies in terms of ERM practices benefit from better business performance.”
Of the responding organizations, 39% had formalized ERM infrastructure. These organizations scored 90% better in raw RMM index scores for all risk management competency drivers than did organizations without formalized ERM infrastructure.
The competency driver most strongly correlated with higher credit ratings is direct, extensive involvement in ERM by front-line management at all levels, the report said.
Three other competency drivers identified in the report are:
•    the degree to which risk assessments are effectively conducted by all business areas and aggregated;
•    the extent to which corporate goals and risk management issues are clearly understood at all levels; and
•    the depth to which ERM is woven into strategy and planning.